Liquidity Mining Strategy

Product Products
18

Sorry, I didn’t have chance to finish this earlier…

Some additional considerations

Trade size

DPI is currently #14 in pool size on Uniswap v2:

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The largest pool v2 is FEI-ETH with $800 M, compared to $58 M for DPI:ETH. If we compare that to DPI, in terms of slippage, then I would say we can currently support a trades upto $200,000 with reasonable slippage / price impact (OA definition of ~1%).

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Note that @george 's analysis for DPI liquidity mining included reviewing the trade sizes:. This found that 95% of the trades were less than $75,000.

So, if we wanted a $2 m trade with < 2% slippage we would need a $250 m uniswap pool. Which I suspect would require a x5 increase in liquidity mining rewards (possibly more as I would not expect trade volume to increase x5 with a larger pool so the fees get reduced for each $ of LP).

While $250 liquidity would be a nice thing to have (“Top 5 v2 pool”, “x times bigger than the next DeFi index”, “Minimal error compared to NAV” etc), and could be expected to give AUM a boost, I think there would be a number of people arguing that it’s not the best way to spend INDEX tokens.

Rather, I would argue that anyone doing a single $2 m on chain trade for Uniswap is uninformed in DeFi best practice.

So what can we do?
I think the key for people who want to do large trades is Education:

  1. How our products work in terms of issue and redemption from the underlying.
  2. How Uniswap v2 pools work.
  3. The benefits of buying in portions over time.
  4. Use of aggregators
  5. Use of Exchange issuance
  6. Availability of OTC trades.
  7. Availability of support for people new to on-chain purchases.

We can also:

  1. Monitor trade sizes and slippage occurred (excluding arbitrage as “Slippage” = “Profit” )
  2. Encourage aggregators to incorporate exchange issuance.
  3. Calculate the point at which exchange issuance becomes economic for DPI / MVI - and then publicise this value (for a given ETH price and gas cos…).

For me the positive thing about both of these lists is that it’s something that the coop can do using our growing (non developer / engineer) contributor base. And all of them will help level up our members / customers and build our reputation.

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