Uniswap Liquidity Program v0.1

Thanks for the very solid post, and for soliciting comments and feedback before moving to a vote. I like this proposal. I’m sure I’ll have other questions, but my first is just around the work from the committee.

I believe the $150/hr compensation is a fair rate for this kind of specialized work, but I have a question on the weekly hour limit for this committee. The 30 hour/week limit per person is obviously the same limit for the UGP committee, but there are more members of this committee, and I’m curious how the amount of work stacks up. Do you believe the amount of weekly work for this program will be equivalent to something like UGP, where there’s (at least to me) more obvious human hours required week in and week out to keep the project going? My intuition would be that it might be good to have a lower cap on hours per person, or a team-wide hour cap that comes out to where we think weekly work will hit a plateau in terms of marginal utility. Curious to hear thoughts!

@HelloShreyas, I see your post above on the dashboard creation and documentation to be done, and I suppose my question is if you think that kind of work could possible add up to 5 people * 30 hours per week.

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Surprised SNX is left out here, I would think to gain the support of some members of the Synthetix community it would have been included in the mid-tail pair list.

I think many Defi users would prefer UNI incentives directed at pairs on Optimism since managing the liquidity positions becomes indiscriminately feasible. This proposal is missing that piece as well.

Overall I dont think Uniswap in particular benefits from a Committee to manage liquidity incentives, but would perhaps give it more thought if the group was diversified a little better. I’m not sure a committee made up of mainly LlamaDAO members can adequately represent the Greater DeFi Ecosystem, and the exemption of SNX among the selected Defi gov tokens is an example of that.

I have no issue with the LlamaDAO members individually, however this proposal misses the mark for me in its current form.

  • SNX Ambassador
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I don’t think this is necessary. UNI holders forgoing fees is more than enough incentive to provide liquidity on Uniswap over its competitors, not to mention the technical advantages protected by the creative licensing scheme.

Additionally, pair selection is implicitly political and opens up an opportunity for our competitors to service the “rejects.” Not to mention adding this other DAO and compensation opens up another political attack surface that could be compromised. I like Uniswap as completely neutral exchange infrastructure.

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Appreciate the feedback @jcp. We propose 30 hours/week limit for LlamaDAO, i.e. all core members of the ULP committee. (Not 30 hours/week per person.) Hopefully that clarifies things, but let me know if we should change any of the wording in the proposal here:

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.

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Oh perfect, I was misinterpreting then. Thank you for correcting me!

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Would it be beneficial to include an incentivized UNI-ETH or UNI-USD so that LP’s are encouraged to parlay their earnings into a position that does not result in offloading the uni rewards. I’m coming at this from an angle of user retention rather than anything related to price impact on the UNI token. I think the more we incentivize people to keep their uni tokens, the more we incentivize them to stay on the Uniswap platform while also increasing decentralization. Would love to hear thoughts on this.

Other thoughts:
The general defi public has yet to realize the earnings potential for v3 positions even with 0 incentives. I believe this program will do good things for introducing people to v3 positions and their unique mechanics without diluting the circulation of UNI too much. I am in favor of this proposal.

Appreciate your candid response. Most Llama members are actively part of other DAOs, it was important to us that we represent a number of different interests across the space. The committee members proposed here have shown a broad knowledge of the space, actively participate in other projects, and overall share a strong desire for the advancement of the DeFi ecosystem.

I was around for initial Uni Liquidity mining and also minted one of the first 500 v3 positions. I remember each time with excitement and trepidation and believe that a renewed liquidity mining program on v3 would not only accomplish the stated goals of bringing increased v3 liquidity, but also bring new users to the protocol.

As for the pairs mentioned, we can certainly explore the inclusion of SNX in the initial program if there is support from the Uni community for it. If it doesn’t make it in the first round it can also be part of our phased approach and be incentivized later if the Uni community deems the program to be effective

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I also was wondering why we would not have a UNI/ETH pair. I would like to see a SNX/ETH pair as well. We could have a poll if these questions need to be answered.

Regarding the statement that we don’t really need these incentives since v3 is already dominating the LP game, would it make sense that we plan to flip the v3 fee switch in addition to providing these LP incentives (after at least one layer 2 roll up is fully open)? I know we have proposal to flip the v2 fee switch, but if UNI members would like to see UNI token holders’ incentives as well as LP’s incentives fully align, a low fee v3 switch could be the answer. Without token holders and/or the treasury benefiting, we are potentially wasting some of the value for LP incentives. I would like to see the UNI community and Uniswap Labs discuss both of these topics at the next community call if possible.

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Great in-depth answer. But perhaps the question I meant to ask was:

Why LlamaDAO?

Seems like there could be a conflict of interest with everyone on this team coming from one organization. What’s to stop you all from agreeing that your $LLAMA tokens (or whatever, I’m guessing) shouldn’t be strongly incentivized over other tokens?

RE: Optimism/Arbitrum being early days. That’s exactly why I believe that any liquidity incentive programs should be targeted there. If there are new users to onboard out there, an L2 launch will be the time to attract them.

I agree that incentives should be done in L2.
what reason that slect LINK, YFI, MKR, AAVE, and COMP for the mid-pair?
Many projects will be want to participate.
Is there any way for those projects to participate in mining?

Also, how to decide whether or not to participate?

Hello, I think it is a very good idea. I think we are all aware that it is important to migrate from V1 and V2 to V3. At the moment we are competing with each other and that is good when the competition is yourself, but at the rate that the projects move, we cannot stand still.

On the other hand, after almost 10 months since the launch of UNI, the creation of this liquidity program, sure that it helps to increase the number of users who obtain these rewards and, it will increase the deposits in all the groups.

In these months a lot of work has been done and, from my point of view, very well. I think it’s a good time for this release. We are at the gates of the first year of UNI and we have to place our project in the TOP 5.

Thanks and greetings to all

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Thanks for the feedback! I’m Austin from Llama.

Llama is a collection of builders across the crypto industry with a diverse set of backgrounds. We don’t have a token and exist to be an independent voice on treasury management for protocol communities.

I agree that we should watch Uniswap adoption on L2s closely. The focus of this proposal is incentivizing liquidity migration from v2 to v3, but we should be willing to evaluate the expansion of ULP as those ecosystems mature.

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Wondering if there’s any reason ETH-DAI isn’t an incentivized pair here given it’s still a top 10 pool on Uniswap v2 in terms of both TVL & volume?

I’d personally vote for adding ETH-DAI to the list of incentivized pools on Uniswap V3 :grin:

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Hey Llama team,

Appreciate your proposal and work you have put into it, but to be precise and short, I find it utterly boring, please don’t be offender, I mean no disrespect and as I said appreciate your work, if you could allow me, I would love to explain my reasoning.

First of all lets go over what you are proposing:

First of the goals you mention is:

Immediately you follow with suggesting subsidising these pairs:

Lets look at first pair

*v3 USDC/DAI 0.05% TVL is $118m compared to v2 which only $21m (so here it seems you completely ignore the market, and forces that move it, the lower fee offers better rate for end users and increases trading volume, and hence is natural migration for efficient capital, if we compare last 24h volume its $116k on v2 vs $7.29m (x62 difference), adjust it for 6x difference in fees (0.3 vs 0.05) and 5.6x difference in volume, we get that v3 gives LP an almost x2 ROI, and im deliberately leaving out all the benefits and earnings adjustments of concentrated liquidity

Not sure there is any point of going over every pair as what you are here are proposing: is to provide you with funds for exactly this core capability of choosing what pools to incentive + some periphery tooling, like dune, etc (for the latter I suggest applying to Uniswap grants could be more suitable)

So at this point I wouldn’t even consider with voting to provide you with budget to allocate treasury funds for allocation between pools

Furthermore your suggested weekly rate, which is exactly the same as recent one requested by uniswap grants team, adds even more concerns to me, because I don’t understand how different size team, with different set of capabilities, responsibilities, challenges, etc could be cost the same

Lastly I would like to finish where I started is why I think this proposal is utterly boring, I do agree with where you guys are coming from, making a good use of treasury and really feel these two goals you have set out in your proposal:

and that’s why I completely not getting how is this experimental at all, its just basically the same old farming or what it called, that has been in the market for quite some time and personally I don’t think in your proposed suggestion solves further distributing ownership of UNI tokens or experimental, hence boring.

What I would like to see, and would gladly vote for is some innovative ideas, i got couple just while reading this thread and writing a reply:

  1. Something like with partnership with unigrants we bootstrap any project/community approved by them with liquidity for their token pairs on v3
  2. We provide UNI/ETH pools with 1m of UNI liquidity incentives, just cause they didn’t get their fees (around $30k) from the defifund dump the other day due some weird reasoning behind it
  3. make idea 1 into a proper dapp

Just to finish, as I have said I feel that I share many of the goals you have outlined here and understand where you coming from, but I simply think the proposal doesn’t solve the problem, hence I will be voting against it, if it comes to the vote, agains thanks for your effort and time!

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Thank you for the thoughtful response! I’m Austin, one of the core committee members from Llama.

This proposal is very much the beginning of the Uniswap Liquidity Program (v0.1). We want to ensure the community starts with a strong foundation and is able to adapt as we see the market response through a data-driven lens. Migrating liquidity is just one of the stated goals of our proposal. We also aim to encourage new participants to experiment with LPing and further diversify the UNI token holder base. We believe that incentivizing stablecoin pairs will be a big driver for the latter two goals.

Given the experience of the committee and the unique skill set required to implement a comprehensive liquidity program, we believe $150/hr is quite a fair rate. I’m sure most of the committee members are used to being paid much more for their work. The 30 hour aggregate weekly limit means the community will only be paying a max of $4,500 a week for all the manual effort required to help the community manage a liquidity program. Pair selection is a subjective process that cannot be easily automated: any action requires close monitoring and frequent reporting to the Uniswap community. We take this job seriously and are committed to providing weekly updates to ensure the committee is more than justifying the cost of their work.

UNI holders are already highly incentivized to expedite the migration of liquidity to v3, so we figure it will be a better use of funds to start with these pairs.

We’re happy to hear that you share the same goals as us. This proposal is just the beginning of what the Uniswap liquidity program can be. As the program evolves, there is the potential to have a process to add new pairs to this list. Uniswap is a rapidly growing protocol and we think beginning with these selected pairs will maximize our chances to grow with it.

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I believe that if we are going to start this program, we should add gitcoin (GTC) to the list of targets.
They have been incredibly instrumental in expanding DeFi and the OSS culture, and have a strong DAO.

The only utility is DAO, but if it is eligible for this program and its market capitalization expands, it will have a beneficial effect on the development of Ethereum.

This is correct for all three tokens.

The only solution I can think of is wrapping but that creates a lot of headaches and I think is detrimental to the main goal (i.e. “pools may serve as an effective alternative distribution channel for yield-generating platforms.”). Wrapping would be better for the LPs but much worse for the people swapping.

So I think the current suggested approach is best. At least for PoolTogether it will provide a meaningfully better experience vs. depositing directly (saves 100k gas). The LPs miss out on the Aave / COMP / POOL tokens but are compensated by getting the UNI tokens. And the Uniswap protocol gets to pilot demand for direct swapping into protocol tokens rather than using protocol UIs… which I think is a really good strategy for Uniswap.

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I am in support of this proposal. It makes sense to have a research based DAO to help with informing the community on key pairs to be focused on to keep Uniswap competitive with other AMM’s and itself (v1 & v2).

I few concerns I have is that the treasury has mostly been spent so far on proposals that increase supply of UNI into the market, such as: UGP winners selling UNI to market, DeFi Education Fund selling $10 million usd worth of UNI. If this proposal passes we will mostly see participants who are coming for the APY in UNI rather than an interest in governance, which again will be more selling into a fragile market.

I overall am in support of this proposal, but I do think a UI should be built to encourage more governance participation in what pools are selected for further liquidity programs (supplemented by research done by Llama DAO), and a mindful awareness that UNI token itself losses all value as a governance, and treasury if it has little value.

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See, this is the problem with liquidity mining. It’s all fun and games in the beginning when nobody knows about the protocol, we attract liquidity (of course we do, we’re giving LPs free “money”).

But then how quickly it becomes a slippery slope. Like a drug, basically. We have no choice but to keep distributing rewards and incentives because if we stop, a competitor will come in who will and liquidity is going to migrate to them. Our LPs are addicted. It’s already the case with SushiSwap and others on other chains. And more protocols will be created in the future because everything is open source and forkable and despite what we might think liquidity has very little network effects. Liquidity in DeFi is a mercenary, it will go where it’ll make the most money because there is no switching cost.

All this at the detriment, of course, of UNI holders. Case in point, the CRV token, where they are basically printing an unlimited amount of rewards just to try to keep liquidity there. As a consequence the price of CRV just keeps tanking and this despite basically CRV being completely useless outside of staking which is another artificial mechanism created to try to keep people from dumping it. Liquidity providers there are slowly realizing that they are being paid rewards in a token whose value keeps declining so they’re incentivized to sell it as soon as they receive it, which puts further sell pressure on price. It’s a vicious circle.

Liquidity mining was never anything more than a financial hack. Perhaps, in the very early days of a protocol, it has value in attracting capital. But it cannot be used all the time. When does it stop? There is no proof that liquidity mining attracts long term capital. At best, it attracts capital while rewards are running and most of that capital will flee elsewhere when the rewards stop.

We need a better strategy. We need to think long term. Liquidity mining is very short term thinking. Synthetix lives on liquidity mining and today exists as little more than a zombie protocol. They have an average of 42 trades per day over the past 30 days (!). Can you believe it? See for yourself on their stats site. The fact that they are valued at $1.8B is nothing more than financial hackery that is common in crypto (Cardano, anyone?). They have still not found product-market fit.

Uniswap, on the other hand, probably has. We don’t need financial hackery schemes. It dilutes UNI holders but most of all it dilutes the brand and arguably the brand is one of the only sustainable competitive advantages we have against up and coming protocols.

If LPs aren’t migrating organically from v2 to v3, then there’s a deeper problem that a few UNI rewards won’t solve, at least not in the long run. Perhaps they don’t want to actively manage their liquidity, which they’ll have to do in v3. Perhaps the solution then would be to create liquidity management tools to help them do that. Rewards are not the solution.

I am disappointed in this proposal. It highlights the major problem of protocol governance more generally. Short term solutions will sometimes prevail at the detriment of longer term sustainable solutions. This is not a problem we’d have if governance was in the hands of a small founding team who think about Uniswap 24/7. Arguably given the amount of votes Hayden & co control, it still is, which is a good thing, in which case what we have is simply the illusion of governance.

Food for thought.

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