[Temp Check] - Combined Liquidity Incentivization Proposal

Requests for Comment
1

Combined Liquidity Incentivation Proposal

Link to onchain vote: Tally | Uniswap Proposal

Summary

This is a joint proposal combining Gauntlet’s proposal and Gamma Strategies’ proposal. It was written with input from the Angle, Arrakis, Open Block Labs, and 0xPlasma teams; the DefiEdge and BrincX teams have reviewed and approved and will join as liquidity managers. All active liquidity management protocols are welcome to review and participate.

Broadly speaking, Gauntlet will perform the analysis to determine which pools receive how much $ARB rewards and for what duration. Angle Protocol will use its Merkl root solution to distribute those incentives to all liquidity providers, including those who provide to an LP NFT or to active liquidity managers.

Liquidity Manager Analytics

OpenBlock Labs will leverage their data intelligence platform to deliver comprehensive analytics for the liquidity management protocols participating in Uniswap’s incentive management program on Arbitrum. These analytics will offer detailed insights into the user base of each liquidity manager, assessing the distribution of their liquidity providers (LPs) and capturing important attributes regarding their behavior. The analysis will further evaluate the stickiness of these LPs, thereby gauging the effectiveness of the rewards system. Armed with this data, liquidity management protocols could tweak their parameters to increase their efficacy.

Background

For more in-depth background on each proposal, please read each individual proposal linked above.

Gauntlet has built an optimization engine which takes in both on and off-chain data to generate recommendations for incentive distributions which aims to generate long-term benefits to the incentivizing protocol. In the case of Uniswap, it will aim to choose parameters which will maximize expected future protocol benefit per $ of incentive spent. Market data used for their models include historical price trajectories, competitor data, and user level cohort data.

Angle Protocol developed Merkl which is based on an off-chain script that computes the rewards for all LPs of these pools according to specific preferences. The script aggregates onchain LP NFTs and active manager LP positions and records eligible rewards based on a uniform criteria. It then compresses this information into a Merkl root and posts on-chain allowing LPs to claim their rewards.

Why are we combining both proposals?

The proposals are complementary in that they provide the mechanism of distribution and the plan of distribution. The Angle Merkl proposal distributes rewards in a capital efficient manner that is fair and inclusive to all LPs. Gauntlet’s models determine the allocation of incentives, including pairs, amounts, and durations, all tracked through a public dashboard for live visibility into performance.

Combining proposals allows for multiple teams to be involved in the distribution of this ARB, and for the distribution to be done in a thoughtful, measured manner that will result in a more productive incentive campaign and empirical insights to inform future campaigns.

What are the next steps?

Pending the results of the Temp Check, the proposing teams will coordinate to define the relevant operational details before posting an on-chain vote that would send funds to a multisig composed of Gauntlet, Angle, Gamma, and Erin from the UF to execute the program.

Details

  • Distribution amount: 2M $ARB
  • Gauntlet Fee: 150k ARB
  • OpenBlock Fee: 15k ARB
  • Angle Merkle Fee: 3% of distributed ARB
  • Total ARB used for liquidity incentives: (2m -150k - 15k * .97) = 1,779,950
  • Liquidity Manager fees: Vary, charged to depositors
  • Duration: 8 months
10 Likes
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Joining these proposals together perfectly responds to my last comment in Gauntlet’s thread, and largely resolves the reservations I had with each of them individually.

5 Likes
3

BrincX would also like to join this proposal. I think it is better to collaborate together with the other liquidity managers.

5 Likes
4

Thank you, @BP333, for the proposal. We believe that this partnership has the potential to bring significant value to the Uniswap ecosystem, and we would be excited to contribute our expertise.

OpenBlock Labs has served as core contributors to Delta One, a protocol in the liquidity management space. Our team has garnered experience and knowledge in designing and implementing robust liquidity strategies, and we recently launched a data intelligence platform for incentive optimization. Most notably, we are currently engaging with Lido to advise on allocating their ARB incentive spend, developing data-driven models that could extend easily here.

It is crucial to recognize the importance of multiple incentive assessments in the DeFi space. Incentives play a pivotal role in attracting liquidity providers and ensuring the success of new pools. However, if managed incorrectly, these pools may struggle to achieve escape velocity, resulting in suboptimal outcomes for LPs and potentially hindering future growth.

By leveraging another perspective alongside Gauntlet’s specialized knowledge, we can provide a comprehensive and robust framework for incentive recommendations. Our goal is to ensure that incentives are designed and implemented in a manner that maximizes value for all participants, fosters sustainable growth, and minimizes potential risks.

To perform this work, we would request a grant of 15k ARB, with the potential for retroactive funding based on our performance and evaluation by the community.

1 Like
5

Just a note to flag that this Temp Check has been updated to include two more liquidity managers - BrincX and DefiEdge - and Open Block labs. It will be sent to a snapshot poll tomorrow alongside the other ARB proposals.

3 Likes
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What’s the process going forward?

7

We back this proposal, considering it unites diverse groups, each excelling in their own field. However, we would appreciate it if you could provide further clarity on the following:

  • How would you present the data and outcomes?
  • The outline of the workflow for this initiative. Which party is the leader/middleman?

Thank you :smile:

8

As ITU Blockchain Delegation Team we have decided to vote in favor of this proposal.

This proposal, backed by the collaboration of Gauntlet and Gamma Strategies in response to a May 2023 RFP, enjoys widespread support. Developed with insights from various teams including Angle, Arrakis, Open Block Labs, and 0xPlasma, and endorsed by DefiEdge and BrincX as liquidity managers, the proposal offers a promising avenue for Uniswap’s growth. Gauntlet’s analytical approach will optimally allocate $ARB rewards across pools, guided by data, while Angle Protocol’s Merkle-root solution ensures fair incentive distribution. The proposal involves sending specific amounts of ARB to different parties, with Erin Koen, BP, Matt Dobel, and Pablo Veyrat as signatories. Gauntlet’s data-driven methodology aims for efficient and long-term benefits, and Angle Protocol’s Merkle solution streamlines reward distribution. This endorsement aligns well with the proposal, combining the strengths of Gauntlet, Gamma Strategies, and various teams to enhance Uniswap’s ecosystem through a comprehensive strategy. OpenBlock Labs’ data insights add transparency and adaptability. Ultimately, supporting this proposal signifies a strong commitment to Uniswap’s advancement through a well-rounded and thoughtful approach.