Proposed: IIP-96: MVI Liquidity Migration to Uniswap v3 with Staking

Governance Proposal
1

Status: Proposed
Author: @overanalyser and @Matthew_Graham
Created: 16th October 2021

Simple Summary

After INDEX incentives on Uniswap MVI-ETH came to an end, very little liquidity migrated across to Uniswap V3. We now have a very small MVI:ETH Uniswap V3 pool, ~$880K TVL and ~$4.5M on Uniswap V2.

To encourage LP’s to migrate MVI:ETH liquidity from Uniswap V2 to V3, we propose deploying a V3 staking contract and offering INDEX incentives to encourage Liquidity Providers (LP) to migrate from V2 to V3.

This proposal will allocate 2,400 INDEX over a 30 day period to those who stake their Uniswap V3 LP token into our staking contract.

Abstract

Use a new Uniswap v3 staking contract and add 2,400 INDEX to be used over 30 days. Start date TBC, but anticipated ~25th October to allow LP’s time to migrate.

Motivation

$MVI launched with a 90 liquidity mining campaign targeting $5 M Liquidity in the Uniswap V2 pool. This campaign was largely successful and to this day around $4.5M remains in the Uniswap V2 pool and 84% of this liquidity resides in Index Coop’s V2 staking contract.

Currently, there is $880K of TVL in the Uniswap MVI:ETH pool and we would like to consolidate all the MVI-ETH liquidity into a single pool. This means we need the incentives holders to unstaked there V2 MVI:ETH LP token, withdraw MVI and ETH liquidity from V3, deposit MVI:ETH into Uniswap V3 MVI:ETH pool and then stake the V3 MVI:ETH LP token in Index Coop’s staking contract.

With MVI incentives coming to Beta Finance, there is increased urgency to migrate liquidity from Uniswap V2 to Uniswap V3. The Uniswap V3 price feed is used by Beta Finance and thus having deeper liquidity within the MVI:ETH Uniswap V3 pool reduces the risk of listing MVI on their platform. Given Beta Finance will be offering 10% APR to lenders in the form of BETA tokens, there is a chance LPs on Uniswap V2 remove their liquidity and deposit their MVI to earn BETA tokens. By offering a higher yield to Uniswap V3 LPs who stake their MVI:ETH token into Index Coop’s staking contract, we hope LPs are not encouraged to leave the pool when Beta Finance lists MVI. This means the APR for providing liquidity needs to be sufficient to retain the liquidity.

When BETA rewards are offered targeting a $3M pool size, the initial APR will be really high. Hopefully this will create an environment whereby market participants are incentivized to mint or issue fresh MVI (N$F) and deposit MVI into Beta Finance’s lending pool. We expect the liquidity deposited into the Index Coop V3 staking contract to be sticky as 84% of the Uniswap V2 LPs are still staked in Index Coop’s V2 staking contract. Similarly, we expect the same to be true for those who deposit MVI into Beta Finance’s lending pool.

Calculations

Pool MVI:ETH
Decentralized Exchange Uniswap V3
Target Pool Size $5M
Target APR 20%
Duration 30 days
INDEX Price $35
QTY INDEX 2,400
Distribution 80 INDEX/day
Total USD Cost 84,000
Daily USD Cost 2,800

A $5M pool is a little smaller than the $4.5M pool on V2 plus $0.88M pool on V3 (total $5.38M) which has the effect of only decreasing the APR from 20% to 19% over the same 30 day period. A more significant factor is that the pool will initially have a really high APR due to the INDEX incentives and there being little TVL in the pool. It is a lot more lucrative to stake the Uniswap V3 LP token early.

Success Criteria

Increase the size of the Uniswap MVI:ETH V3 pool to $5M which enables a 11 ETH, ~$43K, trade to incur 2% slippage or 4.6 ETH, ~$17.9K, trade at 1% slippage. The pool SALE:ETH is $5M in size and was used to provide the figures mentioned above.

Specification

  • Use a uniswap v3 staking contract to encourage migration of liquidity to Uniswap V3 MVI:ETH (0.3% fee).
  • 2,400 INDEX to be rewarded over 30 days starting ~28th October 2021.
  • LP’s will need to take action to receive the rewards.

Voting

FOR:

DO provide 2,400 INDEX over 30 days to those who stake the Uniswap v3 MVI:ETH LP token.

AGAINST

DO NOT provide 2,400 INDEX over 30 days to those who stake the Uniswap v3 MVI:ETH LP token.

Copyright

Copyright and related rights waived via CC0.

10 Likes
2

strongly support, moving MVI to V3 will allow us to use UniV3 oracles, unlocking many integrations across DeFi since a chainlink oracle is currently out of the question, migration is completely worth the cost.

4 Likes
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Hi @mel.eth @sixtykeys

Can we please request an IIP number and to schedule a Snapshot vote for Wednesday 20th October ?

Thank you in advance.

1 Like
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Hi @Matthew_Graham -

IIP-96 has been assigned to this proposal; pending no further edits, snapshot voting will be queued for Wednesday, 20 October 2021.

cc: @sixtykeys @overanalyser

2 Likes
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Index Improvement Proposal No. 96 (IIP-96) will go live for voting on 20 October 2021 at 18:00 UTC until 23 October 2021 at 18:00 UTC. Please vote here; as always the transaction is gas-free!

1 Like
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Confirming that this IIP has passed with 325.3k INDEX (96.79%) voting FOR :white_check_mark:
Snapshot here

3 Likes
7

Just noting here that EWG is starting the technical implementation of this IIP.

4 Likes
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Hi All,

I have asked @edwardk and EWG to pause work on the v3 staking contract for MVI.

We still need to migrate liquidity from v2 to v3 as we currently have liquidity split over 2 pools (i.c sushiswap on polygon) with v2 currently the deepest.

v2 v3 polygon
AUM ($ m) $5.5 $1.0 $1.0
24 h vol ($ M) $1.2 $1.0 $0.1
0.5% trade size ($) $14,000 $9,500 $3,000

The reasons for the delay are a combination of:

  1. Beta finance vault is delayed, so some time pressure has eased.
  2. The v3 staking contract has some unusual behaviour which gives a poor LP experience (rewards drop overt time)
  3. Reports that the v3 staking contract can be gamed by more active LP’s.
  4. A belief that a automated liquidity manager will provide benefits for INDEXcoop (liquidity is managed closer to the price) and LP’s (no need to claim rewards, or reposition).
  5. The lower gas cost to LP’s is expected to make any liquidity both more effective, and more sticky.

@jdcook and @Matthew_Graham are currently working with VISR (@bp333 ) to set up a $MVI:ETH vault. Once this is up and running, we are intending to propose an IIP to:

  1. cancel this IIP.
  2. [potentially] assign similar INDEX rewards to encourage LP migration.

I apologise for the delay in communicating this change in strategy.

@DarkForestCapital, @verto0912 and @oneski22 for info.

5 Likes
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@Matthew_Graham @overanalyser

The GovOps WG is seeking to provide and confirm clarity around the execution of this IIP.

The current status of this IIP is: PASSED: Implementation not started

The IIP you propose would seek to cancel this IIP and start new course of action, resulting in the following possible outcomes:
FOR (the new IIP): Cancel IIP-96 and implement the new IIP.
AGAINST: Implement IIP-96 as passed

Confirming that the intention should the forthcoming IIP fail is to move forward with IIP-96. If the intention is to cancel IIP-96 either way, I would suggest a dedicated cancelation IIP be put forth for that purpose.

cc: @sixtykeys @Lavi @Mringz

1 Like