[Temperature Check] Should Uniswap Distribute UNI to Liquidity Providers?

Temperature Check
#1

Authors: @monet-supply @coopahtroopa

Background:

Uniswap’s genesis liquidity incentive program ends on Nov 17. The existing program distributed 20 million UNI to LPs over 2 months, split evenly between the WBTC/ETH, USDC/ETH, USDT/ETH, and DAI/ETH pools. This works out to 2.5 million UNI per pool, per month.

Benefits of UNI distribution to LPs:

  • Ongoing incentives allows UNI to be distributed to those providing value in the form of liquidity
  • The incentivized pools are likely to remain the most liquid DEX pair on Ethereum, providing a venue to trade against ETH at virtually any size with zero slippage.
  • Reduced incentives prevents UNI from being distributed ‘too fast’, marked by all tokens being distributed before the Foundation’s four year vesting has passed.

Drawbacks of UNI distribution to LPs:

  • Ongoing incentives result in UNI largely being ‘farmed and dumped’ to earn yield. See ETH USD Yield Farm, Pickle, Harvest and Alpha.
  • Reduced incentives means UNI is distributed slower.
  • Incentivizing the same pools can be seen as choosing ‘winners’ by selecting WBTC as THE Bitcoin on Ethereum and favoring certain stablecoins over others.

Proposed new distribution:

Distribute UNI for an additional 2 months from the time this proposal is adopted and executed by governance. Distribute to the same 4 pools, but at half the rate of the genesis distribution. This works out to 1.25 million UNI per month to each of the 4 covered pools (WBTC/ETH, USDC/ETH, USDT/ETH, DAI/ETH), for a total of 5M UNI per month, or 10M UNI total over the next 2 months.

Please see the liquidity incentive governance plan document for full details and timelines.

Temperature check question:

Should Uniswap distribute UNI to liquidity providers per the specifications outlined above?

Snapshot poll

Next steps:

The snapshot poll will be live for 3 days, from 20:00 UTC on 16 Nov to 20:00 UTC on 19 Nov. If the poll passes with a minimum of 25,000 UNI in support, this proposal will move forward to the consensus check phase. Details about the Uniswap governance process can be found here.

15 Likes
[Announcement] Community Call 2 - Tuesday 24 Nov 16:00 UTC
[Consensus Check] Should Uniswap Distribute UNI to Liquidity Providers?
#2

The voting period for the temperature check Snapshot poll has now ended.

The vote has passed, with 97.18% (16.8 million UNI) in favor and 2.81% (488,000 UNI) opposed. A total of 92 addresses participated, with 68 voting in favor, 21 voting against, and 3 choosing the “abstain” option.

Full vote details can be accessed/downloaded from Snapshot.

The chart below shows address voting behavior based on their share of the poll’s total votes.

image
image752×452 8.3 KB

3 Likes
[Discussion] Uniswap Liquidity Incentive Plan
[Discussion] Uniswap Liquidity Incentive Plan
#3

Thanks for taking charge and getting this pushed through.

I much prefer this progress to stagnation. Fwiw in the future, I would like to see some distribution like 2.5M wbtc/eth, 1.25M dai/eth, 1.25M usdc/eth. I prefer the conceptual reward balance between stablecoins and wbtc. As opposed to now where stablecoin liquidity gets 3x the incentive of wbtc. But that is a discussion for Jan 2021.

#4

To align incentives and dampen the farm-and-dump behavior: more reward (say 100M UNIs) over longer period (say 2 years), possibly time-weighting the rewards exponentially (the later an LP withdraws the more yield).

1 Like
#5

For me UNI, should inspire from SUSHI, SUSHI holders stake their token and earn fees on sushiswp.

I would like to farm UNI and lock them to earn fees on all pools (similar as Curve as well)