Thanks for your take Figue. I respectfully disagree on some of your points. Interested to get your and others feedback on my counterpoints.
I see the initial early success of Uniswap to a number of factors, but most obvious is that the trading experience is simple, convenient, and many times faster than interacting with a centralized exchange. What Uniswap is not is cheap due to three main factors: Network fee, Swap fee, and Slippage.
Network fee solve: V3 is rumored to utilize rollups greatly reducing network fees, but until then, we are currently not serving customers the best we can because of high network fees. Giving a temporary micro reward will help here.
Swap fee solve: There is no current solve for the high swap rate of 0.3%, and it is a reality that centralized exchanges beat us here. For example, Binance is 0.1% and offers reducing trading fees with BNB.
Slippage solve: With the liquidity mining program and a general organic increase in transaction volume, slippage has progressively improved, and hopefully will continue to improve in the coming months. It remains to be seen if/when liquidity mining will return, but it appears that a scaled down version will happen at some point to accelerate the rate of slippage reduction on certain high value pairs. There definitely appears to be a law of diminishing returns on incentivizing liquidity, and this is why there is a lively debate of the forum on further liquidity mining, including size of program and targeted pairs.
On your point that this type of reward does not contribute to long-term usage (Compound vs. AAVE TVL), I would say that TVL does not tell the whole story on how successful a protocol is. I believe key performance metrics we need to also look at is active users (daily, weekly, monthly) and transaction volume. On these metrics there is a stark difference:
Active users (monthly): Compound (105,000) AAVE (7,000)
Transaction volume(monthly usd): Compound (7.2 billion) AAVE (2.5 billion)
On the hazard of setting a precedent, to mitigate this risk, we need to be clear about our intentions of this program up front to our customers. The goal of this is to earn loyalty to our existing and incentivize potential customers to try/choose us over other decentralized and centralized exchanges during a time when the network and protocol do not have the infrastructure complete to scale.
As far as this program creating downward pressure on price, I would say that micro rewards to our hundreds of thousands of users will create less sell pressure than large concentrated rewards to liquidity miners. If our goal is broad ownership of this community asset (and I think it is), this is the way to go.
I also believe no matter how small a user position is in UNI, they are still an owner and stakeholder in the success of the protocol, and we should encourage participation in governance from people that have even just 1 UNI. This program will create more small UNI holders and hopefully more distributed governance. We should track Gini coefficient to ensure continued decentralization of UNI token.
Finally, I think this is a great promotional marketing tool. Imagine the headline something along the lines of “In appreciation of our users, for the next 3 months we will be rewarding 1,000,000 dollars per month in UNI to our community of traders.”