Uniswap Revitalization and Growth

The next step for this discussion is to determine what chain(s) the DAO would be interested in retroactively deploying liquidity incentives to and eventually broadcasting the Onboarding Package to new chains so they know they can apply for it.

Here is a table of current support:
image

In the immediate future, I think rolling this package out to Polygon zkEVM, Scroll, and Linea would be a great start. I also want to flag that Blast will launch sometime in February. It would be great if Uniswap were there on launch day.

If delegates have other chains they would like to include in the initial polls, please message me or post them here.

For the temperature check, I have two ideas.

  1. It can be a multi-option vote. Each chain will be an option. Voters can select multiple chains. Chains that reach over >10M in votes will be considered for an onchain vote. If a delegate is against the program, they can vote against it, and an abstain option would also be available.
  2. Each chain can have a traditional temperature check with the for, against, and abstaining. The downside here is there would be multiple votes for delegates.

I’d like to post the temperature check on Thursday/Friday. If delegates prefer one of the two options or have their own idea, it would be great to get some feedback.

I overall would recommend taking the idea a bit slowly so that more community can get involved in. For example, I think you already closed the poll and 1 or 2 days is not long enough to gather more feedbacks.

I of course understand your excitement but generally would suggest giving more time overall to the discussion.

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I would also suggest maybe the new Accountability Committee members especially @AbdullahUmar (since he himself dealt with many chain onboardings) can spend a month to negotiate with chains to amplify as many of the chains actually committed to provide millions or at least significant amount of incentive to Uniswap ecosystem which they did not keep the promise. It makes sense that the community brings up the discussion and the chains themselves should also be willing to match such

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And this should of course happen before the temperature check as the chains would know their decision will impact the voting decision by the Uniswap community later. I think waiting for maybe 1 month to potentially get millions or at least chains able to match the amount the Uniswap community provide is worthwhile.

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We echo the sentiment from @Doo_StableLab here. This discussion needs more time for delegates and the community to evaluate before reaching the Temp check phase.

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There are two things we’re trying to take care of. The first aspect is finalizing the package. The second part is determining which chains we should retroactively enable incentives on. Before speaking to chains about this program, we should first finalize the package itself.

We need to determine how stringent or flexible we’ll be with the package. I’d encourage maintaining a degree of flexibility with the package parameters since this is a not a one size fits all scenario. Perhaps the initial package should give a range of guidelines, like the incentive amount a chain is eligible for lies between $250k - $1M. Getty lays out some of the parameters as follows:

Incentive amount, pools, and duration should ideally be more flexible. Each chain has a different degree of maturity, and quite often, they’re the best judges of which pools to activate and the level of incentivization required. The most probable conclusion will be incentivizing USDC, WBTC, WETH, and/or native token pools, but the final decision should be made after discussion with the target chain. Of course, if the chain wants to incentivize non-standard pools with, say, long-tail assets, we have the authority to deny such requests.

We can use different criteria to determine incentive amount and duration. One key aspect from the DAO’s side will be our perspective on how much growth the target chain will bring to Uniswap. A new chain with a lot of potential and a nascent DeFi ecosystem should receive a larger allotment and perhaps a more aggressive incentive timeline. Another aspect is a matching program. We could offer better terms to chains that would like to offer incentives or protocol owned liquidity themselves to further compound the effects of this program. These determinations, I think, should be recommended by the accountability committee to reduce the DAO’s overhead.

Potential Parameter and Chain Selection Process:

  • The accountability committee discusses the incentive parameters with the target chain
  • The committee posts its opinions on how promising incentives seem on the target chain, along with a recommended set of parameters
  • A discussion regarding the above transpires on the forum
  • The forum discussion helps finalize the parameters for the temp check
  • Upon successful temp check, we go to the onchain vote

As for the other parameters, I doubt most protocols would have issues with tooling (Merkl) & front-end (Oku), as long as we have a streamlined process for implementing these incentives, so these two parameters can be more or less fixed.

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Now, before reaching out to the target chains and advertising this program, a couple aspects around the package should be finalized.

  • Will formalizing this package require an onchain vote? What will that vote execute? Or will onchain votes only occur every time we finalize a deal with a target chain?
  • Should we predetermine a budget for this program, or is this better done on a case by case basis? Predetermining may have its benefits with negotiating a discount with Merkl.
  • Who should escrow the funds? UF, accountability committee, or someone else? We’ll need someone to take on this role whether we’re budgeting from the start or working case by case.
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I agree with the responses in this forum and the package should be informally agreed on and then reach out to L2 chains. Would Gauntlet be willing to escrow the funds as an expansion of the liquidity program it is running?

  1. Informally agreeing on the Liquidity Package:
  • Oku and Merkl ( Escrow: Gauntlet, Accountability Commitee?)

  • Flexible funding for intrested chains w/ potential matching from those chains.

  • Cost outlays (Oku, Merkl, Escrow Partner)

  1. A temperature vote takes place after contacting the different L2’s (who is point of contact to the L2’s Getty?):
  • The list of chains who were reached out to and want a package

  • How much each chain is wanting

  • How much each chain is willing to match into the package

The onchain vote would be for:

  • Approving the bulk funding for all the packages voted upon in the above temperature check

The onchain vote is to bulk approve the list of chain packages. This will minimize the amount of onchain votes, and get to the primary action of executing the proposal (i.e. Wave 1 of L2 Liquidity Campaign)

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Ditto to @AbdullahUmar’s points. We must get our ducks in a row before approaching the chains.

Also, we, delegates, need to recalibrate Uniswap’s leverage and marketability toward these new chains. A core reason that I made this topic was because Uniswap’s market position is pretty different today than what it was a year ago. It might not be realistic to request matching incentives or liquidity from some of the rising EVMs. Uniswap often goes up against local concentrated liquidity protocols or literal Uniswap v3 clones that the chain team favors.

We need to approach this Onboarding Package as an introduction of Uniswap v3 to a new chain.

  1. Contracts deployed
  2. Frontend goes live
  3. Incentives to drive initial liquidity

Let’s keep this topic to a modest Onboarding Package. Once we have established it, we can determine which chains/deployments make sense to double down on.

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Great questions.

Will formalizing this package require an onchain vote? What will that vote execute? Or will onchain votes only occur every time we finalize a deal with a target chain?

  • Yes, the formalization of this initiative will require an onchain vote since it should be coupled with one or more pilot chains. Each time a new chain is added to the Uniswap ecosystem, it would ideally include the package as well, but of course, that is up to the proposer to request.

Should we predetermine a budget for this program, or is this better done on a case by case basis? Predetermining may have its benefits with negotiating a discount with Merkl.

  • Since every new chain has to go to an on-chain vote anyway, handling it on a case-by-case basis shouldn’t increase the DAO’s workload.

Who should escrow the funds? UF, accountability committee, or someone else? We’ll need someone to take on this role, whether we’re budgeting from the start or working case by case.

I checked with the UF, but they are unable to play the escrow role here. It would be great if the accountability committee could play that role. Generally, the ops work required should be minimal.

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This is a great initiative and we are super supportive of it.

Designing the onboarding package for new/nascent chains seems rather straightforward as we’re providing incentives in the hope of gaining meaningful TVL that then grows with the ecosystem.

But for existing and new(ish) chains the decision is a bit more nuanced so we quickly dug a little deeper into Uni V3’s market share for chains with available data:

(Note we are still working on data for BSC & Linea, but given discussion is moving quickly we thought we’d post what we have thus far)

Uni V3 TVL Rank Across Deployments

While the main focus is on volume market share, having context of Uni V3’s TVL position is still an important consideration as that’s what these LM efforts are targeting.

The table below illustrates Uni V3’s TVL rank on each respective deployment (ranked by worst to best). Clearly, there are a couple of deployments that could benefit from the growth program: zkSync Era, Scroll, Moonbeam, Avalanche, and BSC.

image
Source: DefiLlama

However, as we know TVL is not the clearest indicator of volume market share due to differing smart contract configurations amongst competitors, so let’s take a look at volume market share for chains with available data.

Uni V3: DEX Monthly Trading Volume Market Share Summary Stats

When looking at the 6-month (+ Jan) volume market share of Uni V3 across available deployments vary considerably.

Key takeaways:

  • It’s very dominant on Celo (TVL: Rank 1) and Optimism (TVL Rank: 2).
  • While still dominant on Arbitrum (TVL: Rank 1) market share is starting to decrease.
  • Polygon (TVL: Rank 1) has seen nice market share growth over the past 6 months and is now in a strong position.
  • This is also true for Base (TVL: Rank 2) as we’ve seen a nice climb in market share. Note, Uni V3 still remains the dominant DEX on Base despite a smaller market share value. Volume market share is just more equally disbursed.
  • For zkSync Era (TVL: Rank 12) and Avalanche (TVL: Rank 7), Uni V3 has a very low market share.


Source: DefiLlama

(Missing chains: Moonbeam, Linea, Scroll, Rootstock, Boba)

Thus, we think it’s important for the DAO to assess the benefits of a growth packages for zkSync Era and Avalanche based on each chain’s activity and future prospects. Furthermore, it could be valuable to provide Base with a growth package despite being the dominant DEX to ensure we can solidify Uni V3’s position.

We’ve also included some charts below for individual chains to illustrate Uni V3’s volume market share amongst top competitors:

Celo:

Polygon:

zkSync Era:

Avalanche:

Optimism:

Base:

Arbitrum:

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Amazing post! Thank you

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Thank you for providing this TVL and volume overview @WintermuteGovernance!

Off the bat, there are a couple of chains worth circling back to regarding this program. The accountability committee will get started with this process as soon as the incentive package is finalized. But from the data above, and after skimming DeFiLlama a bit further, it seems like Base, zkSync, Scroll, Linea, Polygon zkEVM, and Avalanche are decent contenders from a growth perspective.

  • Base: we currently have decent marketshare, and incentives have a high likelihood of further propelling Uniswap dominance
  • Scroll: Uniswap is the 8th most dominant DEX, which really shouldn’t be the case. Uniswap’s brand is enough to propel it to at least second place behind Ambient if we introduce incentives.
  • Linea: nascent and ripe for disruption
  • Polygon zkEVM: on Polygon (original), there’s been a battle between Quickswap and Uniswap, and Uniswap is currently ahead. Today, by TVL, Quickswap leads on the zkEVM–no reason why Uniswap can’t compete with Quickswap here as well
  • Avalanche: Trader Joe is a formidable competitor. There is also just a natural gravitation towards the chain’s native DEX. Market share may be tough to capture here, but since Avalanche has been in the limelight as of late, Uniswap could try and make a play on capturing more of the ecosystem’s volume going forward with incentives. Plus, the Avax deployment is on the Uni Labs front-end, which could help attract users more easily.

This is just food for thought. First priority should be finalizing the incentive package.

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Also @Getty, from a marketing perspective, it’s going to be important to account for how effective incentives will be considering we are routing new protocol front-end interactions via Oku.

If someone wants to visit Trader Joe, they use traderjoexyz.com. If someone wants to visit Quickswap, they use quickswap.exchange. Etc. Same with Uniswap. The different Oku domain will make this task more difficult, but hopefully consumers recognize Oku and Uniswap as one in the same. Certainly not an easy task, and Oku has gained a lot more mindshare lately. Wish Labs would help out somehow, but probably too much to ask for.

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Great point. Thankfully, we’ve done a good job establishing Oku as a Uniswap v3 frontend on new chains at this point, and we have a robust marketing strategy that we can apply for each of these.

It would be good to loop in the UF on these to see where they can lend a hand in marketing new chains and helping drive growth.

After looking at the available voting systems on Snapshot, I think our best course of action is to make individual polls for each chain. The downside is delegates will have a series of polls to participate in, but the upside is delegates can better demonstrate their opinion.

Each vote will follow the same format and contain the following.

  • Is Merkl already live, or will it be live soon? Yes/No. If not, then the proposal will include Merkl.
  • Is Oku already live, or will it be live soon? Yes/No. If not, then the proposal will include Oku.
  • Incentives will be directed toward ETH-USDC 0.30%, WBTC-USDC 0.30%, and USDC-USDT 0.01%, and a fourth local pool. These are subject to change until the onchain is posted.
  • Incentives will be distributed over three months.
  • Escrow (pending confirmation) will be the Accountability Committee.

The voting options.

  • $250k
  • $500k
  • $750k
  • $1m
  • Abstain
  • Against

As long as the total number of votes cast for the funding options is over >10M the temperature check will be considered met. If there isn’t a clear winner for which level of incentives the chain should receive, a discussion can be had before the onchain proposal.

Here are the chains we’ll make polls for (that are also live or going live very soon)(in no particular order). If anyone wants to add something, feel free to comment here.

  1. Linea
  2. Scroll
  3. Polygon zkEVM
  4. zkSync
  5. Blast
  6. Base
  7. Taiko
  8. Moonbeam
  9. BSC
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Another point that comes to mind is whether paying out incentives in UNI makes the most sense. We’d need to bridge UNI to the destination chain and either bootstrap a market for it or expect liquidity providers to accept it as a reward. That might be fine, but perhaps we should consider trading the UNI for ETH, then bridging ETH, and using that for incentives. Open to discussion.

The above proposal format seems like the right direction forward from a voting perspective. Let’s reach out to a couple of the deployments next week to see if we can onboard like 2 chains for piloting this program.

As for what asset incentives should be paid out in:
It’ll likely be too taxing for the DAO to create a market for the UNI token from scratch on multiple chains. The best bet is to probably have the escrow entity swap the UNI for either a stablecoin or ethereum. That asset would then be bridged to the destination chain. I would also assume that LPs simply prefer getting paid in a more reliable and liquid token, so it could further help incentivize liquidity.

Selling millions of dollars of UNI tokens may raise alarms for certain stakeholders—just something to keep in mind. Another option is collaborating more closely with the destination chain to conduct a swap between the DAO’s UNI tokens and the other chain’s native token from its treasury. This way, there may not be immediate sell pressure for the UNI token, the target chain’s treasury can be further diversified, and if they choose, the destination chain can become a participant in the UNI DAO. Our allotment of the destination chain’s native token can be used to incentivize the Uniswap pools. This scenario seems rather idealistic, especially with new chains. It would probably work best with an L2 like Arbitrum or Optimism, so for the most part, it’s best to stick with stables/ethereum.

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I feel fairly strongly that the incentives should be paid in UNI tokens. One exception could be if the treasury swap is done – but almost none of the chains in Getty’s list have a native token. (I’d add Mantle to the list, by the way!)

Reasons:

  • popularizes the UNI token as a multichain token, available for trading on most chains where Uniswap is deployed. (UNI liquidity pools should appear without the DAO’s involvement, as long as there’s demand for them)
  • somewhat aligns LP interests with UNI tokenholder interests
  • reduces the upfront sell pressure on the tokenholders, and helps to create a new set of tokenholders
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Great to see community discussion to align objectives, thanks for posting and setting up the approach Getty! The questions you pose are all important to ensuring funded programs are structured properly. We faced similar challenges and decisions for the ARB LM program that we are currently working on with the DAO, and we have found valuable insights that could benefit this initiative.

As we understand it and similar to above community sentiments, three key questions to think about when considering leveraging liquidity mining for this purpose are:

  1. Which Optimization Metrics should the DAO focus on? :
    • Should the DAO’s focus be on capturing market share, increasing volume, or enhancing LP revenue?
  2. Which Chains or Ecosystems should the DAO target? :
    • What makes a chain a more or less promising candidate? How should these “scores” of suitability affect their corresponding budgets? We need criteria to identify suitable chains for liquidity mining initiatives.
    • It is valuable to see Wintermute’s comment around TVL and market share ranking to inform this decision.
  3. How should the Selection of Pools for Incentivization be decided? :
    • How should rewards be allocated within chain deployments among the selection of pools? Strategically, it’s wise to incentivize “blue-chip” pools, as they can be considered to have a higher likelihood of sustainability over time, but what about native token pools to the chains selected for deployment? Blue chip pools typically require more substantial incentive allocations for meaningful and sustained growth, as they have more competition and a naturally higher liquidity depth.

From our experience, without alignment on definitions of success, due diligence on the environment where funds are deployed, and constant monitoring and optimization of the rewards allocations, liquidity mining programs can incur significant decreases in spend efficiency. Blue chip pools have higher variations in elasticity to rewards, requiring special attention and data insights per deployment. Is the community willing to spend more on these pools to capture market share? This could also be included in the vote.

Gauntlet’s Findings

In our latest liquidity mining work on Uniswap Arbitrum, we found that liquidity incentives are especially useful in bootstrapping liquidity and/or reviving pools with previously little to no activity, whereas large, blue-chip pools require more incentive capital to order for meaningful effects on market share, volume and LP revenue to be observed. Liquidity mining seems more effective on chains where Uniswap is still gaining a foothold, as shown by the stronger results on Arbitrum compared to Ethereum. This insight is particularly relevant to your plan of expanding Uniswap on emerging chains.

It’s important to strategically distribute these incentives. The goal should be to enhance the baseline activity of a pool sustainably, rather than merely creating a temporary spike in market share that dissipates once the incentives are withdrawn. The key is to ensure that improvements in price execution (as a result of increased liquidity) are maintained even after the removal of these incentives, thereby supporting a lasting increase in market share as more traders will be drawn to the destination with the best price execution.

We’ve detailed the performance of our liquidity mining program on Arbitrum in our midpoint retro report, which will be published on Monday. This report also includes insights on our methodology for future pool selection and other strategic considerations. For those interested in learning more on the key findings and how it relates to optimal allocation decisions, we will post it to the forums and follow up on this thread. For this current ARB program, it is too early to confidently assert the lasting impact (‘stickiness’) of the incentives, however, once these rewards are diminished or ceased, we are eager to share these findings with the community.

Incentive Budgets and Ongoing Optimization

When it comes to allocating the budget for incentives, it’s crucial to base our decisions on the projected ROI (with respect to the primary objective function of this initiative). If the DAO agrees to extend rewards across various emerging chains, we should thoughtfully consider how to distribute the budget. For instance, should we allocate $300K for a Base rewards program and $200K for Binance Smart Chain? The key factors driving these decisions should include potential growth, chain-specific dynamics, and community engagement levels. Furthermore, what is the community’s approach to ongoing optimization efforts? We have observed that incentivized pools respond in a variety of ways, and require detailed monitoring to institute possible pivots in funding.

All to say there’s a trade off between speed via standards and efficacy enabled by optimization. We are keen to hear community feedback on the above thoughts and questions!

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