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!