Liquidity plans for August

All,

Thanks to all who joined the Liquidity call earlier.

I started with a summary of my research from the forum:

The slides are here:

I tried to record it, but may have failed :roll_eyes:

At the end of the meeting we agreed on the following strategy for the coop products (effective from 13th Augus2021):

The Plan

Product Pool Plan INDEX tokens $ cost IIP
ETH2-FLI v2 or v3 Unincentivised 0 0 n/a
BTC2-FLI Sushiswap Onsen rewards 0 0 n/a
BED v3 Direct provision 0 [Contributor rewards] n/a
DPI v2 Rewards expire 13th Aug 0 0 n/a
DPI v3 15 day v3 Staking contract Late August 2,000 $50,000 @overanalyser
DPI Polygon LM on Sushiswap 1,000 $25,000 @overanalyser @oneski22
MVI v2 Repeat unchanged 3,278 $82,000 @overanalyser
Total 6,286 $157,000

The Schedule

  1. Hopefully the meeting contributors can add some more context to this post. :grin:
  2. Draft IIP’s on the forum 30th July 2021
  3. snapshots w/c 2nd August.
  4. Engineering works
  5. Communication with community and LP’s
  6. The current MVI:ETH and DPI:ETH liquidity mining rewards end ~13th August.

We do have one external dependency: Ideally, the Polygon liquidity mining would be managed by Sushiswap so they can add $SUSHI rewards as AUM increases. This is an assumption at this time…

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Overall, I would say that there was:

DPI

  • A strong consensus to stop v2 rewards.
  • v3 staking was seen as a tool to help migration to v3 as a one off.
  • polygon, BD have worked hard to secure a number of deal around polygon which are reliant on hitting >$1 m liquidity. *This LM is also planned to be a one off to kick start the polygon opportunities.

MVI Lots of discussions:

  • boost LM to grow AUM,
  • do we try to boost MVI onto polygon?
  • Migrate to v3 in August
  • risks of splitting liquidity
  • Ability of MVI LP’s
  • Sushiswap Trident

In the end it was agreed to maintain MVI rewards unchanged for another and monitor the DPI transfer to v3.


Personally, I think migrating DPI to v3 is lower risk as there are already 4 L1 pools in use and v3 is established.

MVI migration is a higher risk as we only have $5 m total liquidity. In addition, MVI LM costs are significantly lower so it’s less painful to be cautious.

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[Cross posted for visibility]
OK, this is a little embarrising :roll_eyes:

While digging into this data I realised that the v3 trade UI didn’t really make sense, so after consulting with a few people (Thanks to @jdcook @afromac and especially @Deep :pray:) I think I have a better idea of what they are showing.

The Error

Basically, I’ve mixed up cost to the trade and the price impact :roll_eyes:

Cost of trade includes LP fees & Price impact is what happens to the underlying pool. Market behaviour and arbitrage are related to the price impact (and ignore the LP fees).

Both are important!:

  • Cost to trades is what traders typically care about.
  • Price impact / depth influences when arbitrage becomes effective which then leads how close we trade to the Net asset value (NAV)

For all the manually collected data I’ve been taking the % value from the UI as price impact.

V2 and Sushi
For v2, I’ve been taking the “Gold %” as price impact
image

While I should have been looking at the little (I)
image

This shows that the trade value I’ve been using for 1% is actually 0.7% price impact and 0.3% fee to the LP’s.

Likewise, the sushi interface shows a % value that matches the change in $ values (i.e. it includes the LP/sushi fees).

This means that for both pools, all my 1% data is effectively 0.7% price impact. i.e. the pools allow trades ~30% larger to generate a 1% price impact.

v3
v3 is doing something similar, but it’s not always = to the LP fee:
image
vs
image

and
image
vs
image

Same 1% cost to the trader, but 0.67% vs 0.73% price impact.

Overall, the end result is similar: the v3 pool allows trades ~30% larger than I’ve recorded for 1% price impact.

Balancer
Balancer actually displayed the “Price impact”. However, recently looking at the $ values sold and received it’s 2% different (for a 0.5% fee pool).

image

So, compared to the other pools, I’m assuming that the balancer trade size is correct for the reported 1% price impact. However, Balancer is still somewhat of a mystery for me (and including wBTC in the pool means it’s never been a perfect comparison).

Impact on analysis
I don’t think that this makes a huge amount of difference. For most pools, the error has been similar (~30% underestimation of the depth) and it means we actually have more depth than I thought (When we are looking for deep pools)

In addition, the trade volume ratio between pools gives a second source of data on the markets activity.

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The video from the call can be found here:

https://drive.google.com/drive/u/0/folders/1xNUU0GdchSnVt3DklXqkz8aymTQ0Hmhf

Rough times:
00:00 Dylan on v3 Contract work
05:00 OA overview of liqudity
05:00 ETH2-FLI
06:00 BTC2-FLI
06:40 BED
08:45 MVI
12:20 DPI
27:30 Polygon
36:20 v3
37:00 Delegated liquidity management
38:00 Next steps

1:05:00 DPI conclusion
1:31:42 MVI wrap up
1:34:00 Wrap up

Finally, I would like to thank everyone for their contributions during the call :pray:

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