IIP-52 MVI Liquidity mining - July 2021

Those all seem important. Which one of those would be the highest impact to answer first?

The idea of PWG being empowered with a budget to do LM with and then held against it sounds right.

I think PWG needs to answer all of them and then, will probably find itself stuck with TWG requesting permission from Set Labs to let Working Groups manage large sums of capital.

We’re getting a lot of different requests from a lot of different places. In order to make progress with you here, I’m trying to identify what the best place to start is.

Note: we are digressing from the aim of this IIP…

My (personal) understanding is that PWG mandate has evolved over time, at the moment I would say that it is two fold:

  1. Maintain sufficient liquidity to allow trades upto a size where exchange issue becomes cost effective (e.g. for MVI, trades upto 5 ETH have less than 1% price impact, above 5 ETH Exchange issuance is cheaper than market buy).
  2. Maintain market dominating liquidity for the product.

This is intended to ensure we have good products, and good trader experience and so support the coops north star. However, it does not mean that PWG should be driving growth.

#1 is more about the user experience and we can look at analysis to measure it.
#2 has some overlap with BD and growth as we can debate whether we want 5% more than our competitors, or 300%. But at a minimum we want more.

Until now we have been using liquidity mining xy = k AMMs (uniswap v2) as the only tool, but in the future I see more ways becoming available:

  1. the current Uniswap v2 staking contracts
  2. Uniswap v3 staking contracts (with or without 3rd party automation).
  3. Direct liquidity provision from the coop treasury on Uni v3.

The last one is potentially the most interesting if we can work out the details. My understanding is that $200,000 provided at +/- 10% bounds will result in 1% price impact for $10,000 trades. So, if exchange issuance becomes < 1$ at $10,000 we have achieved the price impact goal.

The coop gets the price impact, but also the divergence loss.

The problems appear when the pair price moves by more than 10% and we have to unstake, exchange issue / redeem and restake using a multi sig.


There was a lot of discussion towards the end of this IIP, which is great and I think will be helpful as we move into the next iteration of liquidity management after this IIP. I just wanted to make it clear that I am FOR this proposal, and look forward to work with @overanalyser, @verto0912 and others on the next iteration!

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I will vote FOR

I think IC will utilize V3 more as an LP for all the indices soon. Great job for everyone who is digging in V3.

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