Continue liquidity mining DPI:ETH for a further 30 days (current staking contract term) with a reduced issuance of 12,758 INDEX over 30 days (a 25% reduction compared to June 2021).
This is expected to result in further migration of on-chain liquidity (and trade volume) to Uniswap v3 and a reduction in the Uniswap v2 pool size.
Replenish the current staking contract for DPI:ETH Uniswap v2 LP tokens with 12,758 INDEX so that the current campaign is extended for a further 30 days.
IIP-28 in April created a 90 day liquidity mining campaign for DPI targeting a $55 M pool on Uniswap V2. This used the existing staking contract with three 30 day periods and is due to end in ~10th July.
While the $ value of liquidity has dropped to ~$30 M during the recent bear market, this campaign was largely successful in maintaining a market dominating liquidity pool and allowing large trades with minimal price impact.
In May 2021, Uniswap V3 launched on L1 and a DPI:ETH pool has formed which allows more concentrated liquidity. As a consequence, the INDEXcoop research into Uniswap v3 has identified an opportunity to reduce costs on the coop by encouraging liquidity and trading volume to migrate to uniswap v3.
By making a cut in INDEX rewards, we are expecting LP’s to either migrate to Uni v3, or to withdraw from providing liquidity for DPI. With less liquidity in v2, we expect more trade volume of v3 which should further encourage migration of liquidity.
There is considerable support within the INDEXcoop community for a complete stop in INDEX rewards for the uni v2 pool at the end of the current campaign and so accelerating the migration to v3:
This proposal for a reduced reward issuance is intended to maintain some liquidity (~$20 M) supported by trade and INDEX rewards for the next 30 days. This is intended to allow time for:
- Uni v7 automated LP strategies to be developed and deployed.
- Further analysis tools and understanding of for uni v3 liquidity to be developed (by the coop and the DeFi community)
- INDEXcoop.com and TokenSets.com buy flows to switch to v3
- 3rd party interfaces to migrate to v3
- 3rd party liquidation bots to include v3 liquidity
- 3rd party lending markets (Cream, Rari, AAVE) to integrate v3 liquidity into their assessments.
- Issue and redemption arbitrage bots to migrate.
Another key consideration is maintaining DPI’s position as the most liquid (in both market depth and total $ value of liquidity) on the market.
Please see here for some more discussion around DPI liquidity.
Them main L1 liquidity is located:
|27jun21||Unit||Sushi||Uni v2||Uni v3|
|14 day average trade||Million $||0.17||1.61||0.20|
|14 day average fee||$||432||4,828||594|
|Annualised average fee income||%||5.5%||5.9%||10.5%|
|LM incentives (current)||%||12.9%||12.1%||0%|
|DPI in pool||# DPI||6651||69,204||7,620|
|ETH in pool||ETH||793||8,221||232|
|DPI in pool||$ M USD||$1.4||$14.8||$1.6|
|ETH in pool||$ M USD||$1.4||$15.0||$0.4|
|Sell ETH for 1% price impact||ETH||8||58.5||9.6|
|Buy ETH for 1% price impact||ETH||8||58.0||11.8|
|Sell ETH for 2% price impact||ETH||16.3||143.0||25.8|
|Buy ETH for 2% price impact||ETH||15.9||140.0||24.0|
Extend the current LM campaign for DPI:ETH Uniswap pair for 30-days using the existing contract for an additional 12,758 INDEX (~425 per day).
No action would be necessary for existing liquidity providers.
- Extend the mining incentives for the DPI set according to the parameters above.
- Allow the incentives from DPI liquidity to stop at the end of the current campaign (~10 July 2021).