Uniswap Liquidity Program v0.1

Authors: @itzler, @HelloShreyas, @verto0912


This proposal outlines a framework for establishing a liquidity incentives program (Uniswap Liquidity Program, ULP) with the goals of: accelerating the migration of liquidity to Uniswap v3; encouraging new market participants to experiment with liquidity provision, and further distributing ownership of UNI tokens.

We propose the program start with an initial maximum budget of 1.650m UNI, to be allocated as liquidity incentives across two quarters. Continuation of the program will require an additional governance vote. Upon renewal of the program, each of the three initiatives can be broken out into separate proposals.

The program will aim to bootstrap liquidity across three different initiatives:

  • Stablecoin pairs
  • Mid-tail pairs (e.g DeFi governance tokens)
  • Deposit receipt tokens (i.e. cTokens, aTokens)

Similarly to the Uniswap Grants Program (UGP), pair selection is a subjective process that cannot be easily automated: any action requires close monitoring and frequent reporting to the Uniswap community. To this end, we propose a discretionary committee of 8 members — 5 core members from LlamaDAO to actively lead & manage the committee, as well 3 members for oversight. Find LlamaDAO’s full proposal & management plan detailed here.

The committee structure allows for incentives to be allocated efficiently across many pairs without requiring a full governance vote on each pair selection. However, Uniswap governance retains ultimate oversight by granting a budget on a bi-quarterly basis.

We hope that the Uniswap community will suggest additional application questions throughout the proposal process.

Purpose & Background:

While Uniswap v3 has quickly emerged as the market leading DEX, we believe that it has yet to reach its full potential. In particular, large amounts of liquidity remain locked in Uniswap v2, and a majority of v2 LPs have yet to migrate over the v3.

Liquidity incentive programs have seen varying degrees of success. In Uniswap’s case, the initial liquidity incentive program between September—November 2020 was met with considerable interest:

  • Protocol liquidity quickly increased from ~$750M in the week preceding the program to ~$3B at peak.
  • The number of individual addresses holding more than 0 LP tokens increased by ~75% from ~33,500 to ~59,000.
  • The unique UNI token holder base grew by 14% over the course of 2 months.

A contributing factor here is that Uniswap v2 has an organic user-base, which drives organic swap yields to LPs.

We expect and hope that a liquidity incentives program on Uniswap v3 would succeed in increasing wider LP participation, liquidity across sought-after pairs, UNI distribution, and swap volume. Importantly, due to v3’s Concentrated Liquidity feature, Uniswap governance can afford to pay significantly lower reward rates than previous liquidity mining programs to achieve similar market depth.

Quarterly Budget:

  • Max quarterly budget of up to 820,039 UNI across all initiatives to start
  • In addition to the quarterly budget, LlamaDAO (core committee members) is to be collectively compensated at a rate of $150 per hour up to 30 hours a week. Each month, oversight members will be responsible for calculating exchange rate from UNI to USD and appropriate payouts (estimated at ~2917 UNI per quarter), with payments being made in UNI.
  • Oversight members will be compensated at a rate of 300 UNI per quarter.

Pair Selection Committee:

  • 5 core committee members, composed of LlamaDAO team members for the first term, as well as 3 oversight committee members.
  • Each committee has a term of 2 quarters (6 months) after which the program and members need to be renewed by UNI governance.
  • Committee functions as a 5 of 6 multi-sig, with 3 members of LlamaDAO and 3 members from the oversight committee.
  • Committee to share a weekly report detailing the decision making process (using a standard template) and periodic updates detailing the successes and failures of the program.

Committee Members:

Committee member criteria include:

  • Credibly neutral — need to avoid any sense of conflict of interest
  • Ability to evaluate fundamental strengths of projects and their place in the ecosystem
  • Data driven — capable of assessing quantitative merits/growth signals

Committee members must recuse themselves from any ULP decision related to a project they hold an investment in or are otherwise related to.

Core Committee Members (LlamaDAO):

  1. AG: project management and evaluation
  2. Shreyas Hariharan: project management, coordinate with Uniswap governance and stakeholders
  3. Mason: project management, create progress reports on ULP, coordinate with projects
  4. Austin Green: technical and security expertise
  5. Kiba Gateaux: technical and governance expertise (DAO tooling, admin keys, multisig wallets)

Oversight Committee Members:

  1. Eva Beylin, Graph Protocol
  2. Jon Itzler, Variant Fund
  3. Arr00, Core Compound community contributor


UNI is distributed to LPs that provide in-range liquidity, with those that concentrate their liquidity closer to the market price (i.e. higher virtual liquidity) receiving larger allocations.

Initial Proposed Reward Distribution Across Initiatives:

Stablecoin pairs:

We suggest an initial stablecoin/stablecoin liquidity mining program over the course of the next three months conservatively targeting $250m in each of the following pools:

  • USDC/DAI [0.05% fee tier]
  • USDC/USDT [0.05% fee tier]
  • DAI/USDT [0.05% fee tier]

A reward rate of 2% APY feels like an appropriate target for stablecoin/stablecoin pools as v3 stablecoin/stablecoin pools are already generating organic yields in-line with money market protocols.

Based on a 30D moving average UNI price of $20.06, the committee would distribute 741.82 UNI per day to each of the three pools listed above for a total of 186,939 UNI across all three pools over the next quarter.

Mid-tail pairs

We suggest an initial mid-tail pair liquidity mining program over the course of the next quarter. We are conservatively targeting $100m in each of the following pools:

  • LINK/ETH [0.30% fee tier]
  • YFI/ETH [0.30% fee tier]
  • MKR/ETH [0.30% fee tier]
  • AAVE/ETH [0.30% fee tier]
  • COMP/ETH [0.30% fee tier]

A reward rate of 10% APY feels appropriate for mid-tail pair pools. Compared to stablecoin/stablecoin pools, LPs in mid-tail pairs must bear more price risk.

Based on the 30D moving average UNI price of $20.06, 1,483.64 UNI per day to each of the five pools listed above for a total of 623,130.61 UNI across all five pools over the next quarter.

Deposit Receipt Tokens (DRT)

We suggest an initial DRT liquidity mining program over the course of the next quarter. Due to Uniswap’s brand recognition and gas optimized contracts, deeply liquid DRT pools may serve as an effective alternative distribution channel for yield-generating platforms. We are conservatively targeting $10m in each of the following pools:

  • DAI/cDAI [0.05% fee tier] [Compound]
  • USDC/aUSDC [0.05% fee tier] [Aave]
  • ETH/wstETH [0.05% fee tier] [Lido]
  • USDC/PcUSDC [0.05% fee tier] [PoolTogether]

As with stablecoin/stablecoin pools, LPs in DRT pairs take on minimal price risk. Additionally, they earn passive yield by maintaining inventories of yield-bearing assets. A reward rate of 2% feels appropriate.

Based on the 30D moving average UNI price of $20.06, the committee would distribute 29.67 UNI per day to each of the four pools listed above for a total of 9,970.09 UNI across all four pools over the next quarter.


We recommend the establishment of a Uniswap Liquidity Program (ULP), which will actively incentivize liquidity across three strategic categories:

  1. Stablecoin/stablecoin pairs
  2. Mid-tail pairs
  3. Depositary receipt pairs

ULP will exist as a 8-person committee with 5 core members, where core committee members are tasked with closely monitoring ongoing programs and frequently updating the Uniswap community via regular written reports. The 3 oversight members are responsible for monitoring the core committee and multisig signing.

We believe that the targeted nature of ULP’s proposals coupled with Uniswap’s organic user base will help achieve various objectives: wider LP participation, more liquidity across sought-after pairs, further UNI distribution, and increasing swap volume.

Next Steps:

We want the establishment of ULP to be a community-driven process. We actively seek questions and feedback from the Uniswap community over the next 5 days and hope to incorporate relevant points. After this, we will post this proposal for a vote on Snapshot before an on-chain vote.


Thanks for making this! Would it perhaps be a better idea to wait until Optimism is ready for higher capacity & instant withdrawal options are available/liquid, then launch a program like this on there?


@uba.eth I think extending the program to include Optimism is an excellent idea, and definitely one of the directions we’re hoping to include as the program evolves.

Like you mention, the Optimism ecosystem is quite young, so I agree it’s best to let it & Uniswap on Optimism grow naturally before adding liquidity incentives.

In the meantime, we think the proposal is great opportunity to help build Uniswap V3 adoption & liquidity on L1, which remains quite important even as Uniswap extends to L2.


Right now we are competing with ourselves between v2 and v3, and we have control over both. I’d rather see the v2 fee switch get turned on first to move people then go from there.

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Why is LlamaDAO getting 5 users paid $4500/week for this? No mention of arbitrum or optimism?


Thank you for this good proposal.

It’s about time that the massive Uni treasury is effectively put to use. I personally hope this proposal will soon be further adjusted, voted on and be implemented - incl. varying incentives for Optimism experimentation.

A few comments

In our opinion, a liquidity mining campaign for a DEX should mainly achieve

  • additional swap volume vs. competition (focus especially on trades routed towards Uniswap, not directly on Uniswap)

  • knowledge increase (e.g. experiment with 2-6 week incentive cycles)

  • Marketing exposure (e.g. co-campaigns with DeFi protocols, Optimism, etc.)

Encouragement of new token buyers and LPs was well done at the start and is an effective way to bootstrap a network. At this stage, there are better options to broaden the investor base and to educate newcomers about LPing (Guides, Videos, Test Environment/Competition). In fact, the liquidity mining campaign on majors will rather lead to more concentration since pros will farm with disproportionally more funds than newcomers. The LP base will broaden with 3rd party projects offering automated LP vaults - another interesting option for Uni treasury investment.

Agreed, these target pairs are most interesting for V3. I am especially curious on cToken and aToken liquidity and opening up more use cases - is a collaboration with Compound/Aave being discussed?

Targeting $100m in each of the DeFi-ETH pools seems excessive. I have serious doubts about swaps requiring such deep liquidity pools but would be happy proven otherwise.

Commitee setup looks very strong and compensation fair. I do believe long-term investors from Paradigm and core developers should also have a seat at the table as they have most certainly thought a lot about important pairs and pair incentivization.

Again, thanks for the good proposal.


@A1igator v2 fee switch can be a separate proposal if you think there’s a good case to be made to the community for it.

What really is the problem with organic user-growth?

V2 LPs enjoy ease-of-use, compounding interest w/o claiming withdrawals, flashswaps etc.
V3 LPs enjoy concentrated liquidity, scarcer liquidity leading to a higher proportion of swap fees accrued, optimism support.

I’m quite doubtful that the size of proposed UNI distributed would achieve to accelerate the migration of liquidity to V3. Selective pair liquidity mining is not a fair approach to other token pairs left in the dust. V2 liquidity for mid-tail pairs not mentioned will most likely remain to stay locked in V2 without UNI incentives.

Has there been studies on the migration of liquidity from other DeFi projects? Could there be a hybrid bridge of connecting V2 liquidity to V3? Could we simulate the ease-of-use of V2 by allowing a user to select an approximate [0,∞] range on V3?


So, I would say that the point of the proposal is not necessarily to incentivise adoption but to incentivise migration. More V3 liquidity will unlock better user experience through much lower price impact. I would say that automated LP strategies, if they are good, would actually benefit from the program.

We will also monitor things like “additional swap volume vs. competition” using Dune and can adjust the parameters of the program based on the data.

Would agree that $100mm might be too deep. The goal is to use analytics as much as possible to support the parameters and decision making here. If we see that the pool is not getting utilised up to its potential, we can consider adjusting the rewards and targeting a smaller pool. I am tempted to try and get deeper pools and see if they attract different kinds of trades / unlock different user behaviours.

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So yet another proposal which introduces more dilution for the UNI token holders? Tell me, how would this proposal benefit the token holders? It is the prevailing opinion that the initial farming of the UNI token was a net negative for the holders in general. We saw the price of the UNI token drop significantly while the farmers farmed and then dumped the token and moved on. Who´s to say it wont happen again??

The only effective migration from V2 to V3 is by turning on the fee switch on V2.

This whole proposal feels incredibly redundant to be honest.

The proposal is in the works. We are just waiting for Optimism to roll out

Hi, yeah good points on what the right model is. I’m Michael from Llama, working on dashboards for tracking the liquidity program.

Our primary motivation for migrating liquidity to v3 is that concentrated liquidity should provide better pricing for swappers, which leads to a better swapper experience. While I definitely agree that there’s a set of users (including me) who would prefer a “set it and forget it” LP model, there’s a challenge of how to balance the best LP experience with the best swapper experience. We’ll be monitoring performance of incentivized pairs to learn if these incentives are creating a better swapper experience or not.

For “set it and forget it” options, LPs could provide an ~infinite range on v3 today, but that might not generate reasonable revenue or improve the swapper experience. They could also explore automated managers, who should be able to both generate fees and provide better trade pricing. We’d hope that anyone building to improve the LP experience should benefit from the extra incentives.

On mid-tail pairs, we started with what we (subjectively) perceived to have a high impact for v3, rather than incentivizing every mid-tail pair, but definitely let us know if you have suggested additions. Also, it’s worth noting that this is the initial program, so it could expand over time if the community sees enough benefit to.


I have three questions.

Is there any point in doing liquidity mining in L1 instead of L2 at now?
What is the point of doing this prior to the V2 rate switch?
What is the deciding process for determining the menu for liquidity mining?
(of cource, everyone, every project will want to participate).

Excited for this! I know when UNI liquidity mining started was the first time I ever LP’ed in a meaningful way. I think it’s a very important thing to introduce users to what LP’ing is and how it works.

One piece of feedback:

The stated goals of the program are:

  1. migration of liquidity to v3, 2. new market participants to experiment with LPing, 3. further distribution of UNI ownership.

Those are great but I think another very important goal is supporting the Ethereum ecosystem. Providing liquidity incentives to token pairs naturally does this but I think it should be made an explicit goal.

This may be out of scope but longer term I think there should be an additional category of “ecosystem growth”. Ideal candidates for this would be promising token projects built on Ethereum but not yet trading on any Cexs. The issue is placement in this program could become highly political but I think Uniswap being active in supporting early stage projects would mean a lot to those communities – you never forget your first supporters!

tl;dr liquidity mining is a big win to the whole community and that should be an explicit goal / narrative of the program.


I’m not certain, but I’m assuming holding cTokens, aTokens, and plTokens in a Uniswap v3 pool will forfeit any of the underlying protocol’s liquidity incentives. How can we solve for this?

I saw the same hourly rate for the reinstating UGP v0.2 post. Is this hourly rate based on some source for the the going rate for developers? I’m mainly curious.

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@Ruzhyo.eth Our compensation is $150 an hour for a maximum of 30 hours a week. Note that compensation may be less than 30 hours a week based on the work involved. We will make our timesheet public for Uniswap’s governance to view.

$150 an hour is reasonable compensation given the specialization involved in DeFi liquidity programs. For comparison, the Uniswap Grants committee proposes a compensation of $150 an hour.

30 hours a week is a fair estimate for the work involved. This what we will work on:

  • Manage incoming and outgoing communication with projects
  • Coordinate with outside counsel to determine token eligibility where needed
  • Create publicly visible dashboards summarizing current status of the ULP and report back to Uniswap governance periodically on the progress and effectiveness of ULP
  • Consistently work with the community to help Uniswap stay up-to-date with the latest regulations and help them think through the benefits and risks of incentivizing new pairs
  • Create public Dune Analytics dashboards to evaluate the effectiveness of the liquidity program; update the community and make changes to the program based on the data (see specific dashboards under the “monitoring and analytics” section below)
  • Sign and execute on multisig transactions

We are focused on creating a gold standard for Uniswap’s liquidity program as well as liquidity incentives across the DeFi ecosystem. We will actively monitor ULP and make adjustments to the program based on the data we track.

These are the Dune Analytics dashboards that we will create (subject to some change based on ULP evolves):

  • Is incentivizing v3 liquidity providing a better trader experience on v3?
    • Swap Performance: Share of trades where v3 has the best price (DEX aggregators as a proxy), and price impact trends for incentivized pairs.
    • Benchmark Growth: Share of trades and trading volume for incentivized pairs on v3 vs v2 and other DEXs
  • Is the liquidity program creating deeper v3 liquidity versus v2?
    • Liquidity Depth: Monitor total TVL and in-range liquidity for incentivized pairs, and volume of active LPs.
    • New v3 Liquidity: Track v2 liquidity migration to v3 in incentivized pairs, and compare new liquidity going to v3 vs v2.
    • LP Retention: Track how many users are LPing, how many are new vs returning LPs, and LP cohort retention.
  • Do we have the right rewards structure in place? What can we learn?
    • UNI Reward Structure: Change in TVL and in-range liquidity by UNI incentive tier.
    • External Rewards: Change in TVL and in-range liquidity for pairs with multiple incentives (i.e. native token liquidity mining, staking), and/or incentives on other DEXs.

Re. Optimism: it is definitely something worth considering but it is early days. We will monitor how Optimism evolves and potentially adjust the liquidity program to incorporate L2s in the future.


100% agree that ecosystem growth, & more particularly, focusing on protocols/tokens that serve as public goods to Ethereum is a key goal (+ proposal’s stated goals could be updated to better reflect this). We aimed to select the starting set of pairs with this in mind.

As the program evolves, it has the potential to add an additional mandate of incentivizing emerging public goods that fall within the initiatives - new stablecoins, additional receipt tokens, etc. Considering & proposing pairs like these to select as additions would be part of Llama’s mandate.

We made the decision to start the proposal out with limited scope on this particular set & let it prove success first, but the flexibility of the committee structure means that this idea could definitely be within scope over the longer term.

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@DCinvestor stated my concerns clearly in the Reinstating UGP v0.2 discussion:
" Thanks for this. I mostly estimated the maximum costs because I think that this is a good best practice for any kind of fund disbursement, and is a practice we should try to formalize (e.g., estimate expected and maximum costs).

I think it’s reasonable, though would like to see some review of accrued hourly labor from Ken, with a tally of hours spent by participant ultimately published. The goal is not to find a “gotcha,” but to promote a culture of maximum transparency. "
Reinstating UGP v0.2 with existing funds

Since this is a DAO and we don’t have a full-time employee overseeing over your team’s hours and budgeting, it will be important to provide transparency.

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We will provide full transparency on the hours worked. We will also build a dashboard to track the progress and effectiveness of ULP, share operational spending of the program, provide periodic updates on the governance forum, and be relatively responsive to feedback.

In fact, we strongly considered @DCinvestor’s points mentioned here and incorporated them as much as we could - especially having defined deliverables, shared input on the roadmap, and regular reports on progress and spending.