Short version up front: Should we dedicate 7,500,000 RLY to test out the soon to launch Uniswap v3 liquidity mining program for a two month trial?
Background:
Since the Uniswap V3 launch we have been watching the performance and surrounding ecosystem to see if it makes sense to move some of the liquidity mining rewards over to a new V3 pool. We have seen a couple RLY<->ETH pools be created and used for a short period of time but none have stuck around; the assumption being that most LPs are staying with the v2 pool for the rewards.
The Uniswap team is wrapping up the interface now which will pair with the official staking contract which is already deployed on mainnet. As the launch and development on the Uniswap side is wrapping up we have the opportunity to be one of the first to test out the new program.
Some public posts on the development and launch of the staking project:
Supported by unigrants:
Adoption as an official Uniswap project:
Contract launch to mainnet announcement:
The 7,500,000 number over 2 months is approximately the same as the rewards currently awarded to the Uniswap v2 RLY/ETH. If an initial test is successful, we could look into options to support the Uniswap v3 RLY/ETH pair from the 350MM RLY allocated for liquidity incentives on an ongoing basis with an appropriate weight relative to the other incentivized pools.
Super cool. So you’re suggesting 7.5M that will get doled out as additional liquidity mining rewards on top of the existing UniV2 and Balancer DEX rewards for 2 months, and then we assess the data to divvy up the existing rewards after that?
When I read quickly the first time, I thought you were suggesting we put 7.5M into the V3 contract ourselves. I’m assuming that’s not the case now that I read again, but just verifying.
Yep, sorry for the confusion. This 7,500,000 would be for additional rewards on a new pool. I am not proposing we add liquidity to a v3 pool ourselves.
I believe that Rally is in a unique position to prove out if the capital efficiency offered by v3 can be more valuable to communities than the simplicity offered by v2. So, a big thank you to @BLT for this proposal and for your work contributing to the smart contracts that make it possible.
It was great chatting with you earlier and thank you for your permission to share some of our meeting notes here based on the questions we explored with a few additional insights. Please add on or clarify/correct as needed!
1.Duration: The two month trial is designed to allow enough time to gather data on the performance of the v3 pool relative to v2. Additionally, it gives the community time to develop a follow-up proposal on how to proceed with our mainnet liquidity mining programs, or at least the Uniswap ones (ie. consolidate to v2 or v3, or perhaps even run both with some modification to emissions rate). We want to allow LPs time to plan and create a smooth transition without compromising our overall Uniswap Liquidity.
2.7.5MM RLY: To attract liquidity to v3 and learn as much as we can from this, it makes sense to offer the same incentives that we have on v2, and should be far less disruptive to TVL on Uniswap. I think we should expect to attract a great deal of attention and liquidity to RLY given the APYs.
I see a similarity here with the huge support behind the approved side chain initiative to increase the rewards there. An important distinction here is that this program is limited in duration to two months and LPs are very likely to see an increase in their APY even if they stay put in their v2 position.
3. Pool Fee : BLT shared that some on-chain analysis showed that while many of the first contracts deployed to v3 chose the 1% fee model, ETH to alt coin pools that offer .3% have outperformed those, attracting more trading and liquidity. Also, in keeping with the desire for parity between our v2 and v3 offerings, we suggest keeping the pool fees the same at .3%.
4. LP risks and challenges of v3: This is where I think it’s essential that we go above and beyond to educate RLY holders on the 101 of providing liquidity in v3. It’s new and it’s challenging for experienced LPs. I don’t want anyone to get wrecked! The articles that the core team put out in the Fall of 2020 did an excellent job of introducing folks on how to become a uniswap LP. I would love to see a Q&A session and invite a couple folks with deep knowledge on v3 to answer questions from the community, and share good resources that have been developed. Perhaps some of our Rally Advisors can help on this front? Or friends from Delphi Digital.
Conclusion: Just as Rally has been attracting new users to crypto for the first time, and engaging them in real use cases with Creators and social tokens, I think we have an amazing opportunity here to uncover the truth in the promise of v3 for token pairs beyond stablecoins. If we are right here, the Rally community and larger defi community benefits. If we are wrong, I think we still both benefit from the learning! I think it’s well worth exploring this even if we don’t move forward on it. I’m up for giving this a shot and encourage folks to weigh in on the proposal. I look forward to hearing more thoughts from the community on this!
I would be extremely interested in helping to test out a V3 liquidity pool. I have a lot of experience with V2 uni LP and have been becoming literate with V3 LP. Let me know if any final decisions are made in terms of creating a V3 pool because I will gladly contribute.
I think given the two weeks of silence on this thread and the latest proposal re: Rally decentralization that it may be best to table this initiative and revisit in September. Additionally, with network protocols and rewards falling under the jurisdiction of the $RLY network association under that proposal, it’s unclear if launching a v3 test would even be voted by $RLY holders through the DAO, or if it would be determined by the leadership there.
Either way, the Decentralization discussion should take precedence right now, and hopefully we can revisit this great initiative soon enough! Also - launching in a window where we expect less $RLY volatility could be beneficial to the experiment.
Update on where we stand now. It is still on my radar and something I will be pushing for. Sadly, Uniswap still has not deployed the interface (some other teams are getting impatient and deploying their own interfaces)
With Uniswap not being ready and @Grand’s suggestion that the dust should settle on the decentralization changes I’m in favor of continuing to wait and we can pick this back up in a few weeks.
Thanks @BLT I spoke with one of our market makers who is very active in DeFi and they said they would be happy to help in any way they can when we’re ready. Agree though, that the timing doesn’t feel ideal quite yet.