I think we are all coming to terms as to what Uniswap v3 means for users, LP’s and the coop. I certainly missed some of the implications when I posted the above.
Standard xy=K (Uniswap v2, Sushiswap, Bancor) pools are simple, you can model trades and liquidity using a simple spreadsheet. For one thing price slippage is directly proportional to the AUM. Double a pool size, and the trade size required to hit a % slippage is doubled.
v3 is a totally different beast. Say we have 3 LP’s each with $10 M in a ETH:DAI pool
- full spread: (v2) between 0.01 to infinite DAI to ETH.
- Tight limits 100% DAI above $2,500 and 100% ETH below $2,000
- Tight limits 100% DAI above $5,000 and 100% ETH below $4,000
At $2,250 You have focused liquidity from $10,000 #2 and standard (v2) liquidity from #1. So this is much better for trades than a standard (v2) pool containing $30,000,000
At $3,000 pools #2 and #3 are irreverent, they are either 100% ETH or 100% DAI. So the pool slippage is the same as $10 M in Uniswap v (Even thought we have $30,000,000 in the v3 pool).
So what does this mean for coop / and MVI:ETH pool?
I think there are a few thing required for v3 to work:
- Automated v3 LP contracts, so the liquidity can sit close to market price to capture the trade volume without constant gas / attention.
- Staking contracts based on #1 to let us pull liquidity into the range.
- Analysis / visualization tools so people can get a feel for v3 liquidity / behaviour / slippage.
- Education around the fact that v3 is different and £10M v3 pool MAY be better than $50 M (v2 or v3)
- Education around the best time to use exchange issuance
Most of this is a priority for DeFi in general, so tools will be built in the coming weeks. Some will become areas that the coop needs to spend some time on it.
However, I think that in a few weeks /months we should be at a position where the inherent capital efficiencies of v3, mean that a smaller pool ($2,000,000 for MVI ?) can provide trade size without slippage to bridge the gap to exchange issuance. A smaller pool, means that the fee income is larger, so there is a chance that it becomes self sustaining .
Then, the coop, can look at other ways to use capital (INDEX tokens) to grow AUM. (This could be Liquidity mining uni v3 / sushi / Balancer / L2, or none liquidity mining initiatives)
Note: one case where exchange issuance is not this answer could be collateral liquidations - maybe we need a bounty for a liquidation bot that utalises the redemption contracts.