We should stop talking about Uniswap Liquidity

I bet that caught you eye :slight_smile:, particularly as I’m heavily involved in thinking about the DPI product and maintaining AUV and liquidity.

Why has the coop been focused $30 M Uniswap liquidity?

We want $DPI to be massive, 100’s of Millions AUV.

Held by everyone; small, large, companies, family offices and DAO’s.

The biggest immediate impact on growing AUV, are the small % of massive holders. 10 DAOs buying 3,350 $DPI like YAM (which has gone from $250 K to $394 k). Purchase as much as 250 individuals buying $10 k.

In order to make DPI holding attractive to large entities we have been targeting $30 M in UNISWAP to allow large trades with minimal slippage. See LemonadeAlpha’s spreadsheet here - Note most of the massive trades were made by AlphaLabs Farm.

This makes sense. Large purchases need to know that they can buy and sell with known costs and minimal slippage.

However, Uniswap is not the only game in town for on chain exchange, and not even the only DEX within DPI!

Loopring has just launched a ETH:DPI pool and is planning liquidity mining the L2 pools.

Balancer has pools that contain DPI, ( I don’t see DPI on the Balancer swap interface ). I believe that Balancer is providing BAL to any all pools on balancer.

Sushi did $SUSHI LP mining for 2 weeks in November and reached ~$1 M ETH:DPI, This has stopped so liquidity has moved to incentivised pools.

Sushi are now moving forward with Onsen with 58 pairs available for liquidity mining using Sushi and are asking project to apply / provide additional incentives.

Linkswap have a Link:DPI pool, which is providing YFL tokens as rewards.

The Current market shares (19dec20):

So, where am I going with this?

Rather than talking about Uniswap, we should be talking about TOTAL DPI LIQUIDITY on DEX’s. It’s that simple. So instead of $30 M of Uniswap liquidity, we should say “$15 M of DPI liquidity”.

We should encourage use of all the different DEX’s, particularly those inside DPI (Uniswap, Loopring and Balancer) and we should make the different options available to the market.

  • DEX’s and DEX agregators for the secondary markets (I know that concourse are about to launch Slingshot, so that could be a good integration for DEX aggregation. )
  • Direct issue and redeem from the 10 underlying tokens
  • Direct purchase from ETH via the 10 underlying tokens.

The first is best for smaller orders (< $10,000 ?)
The second is good for people who hold lots of DeFI tokens.
The third is best for large purchases where the gas costs of 11 swaps + issue is smaller than the impact of slippage.

We need to make sure that larger purchases are directed towards the low slippage methods of purchasing.

Note: A single large liquidity pool for DPI also helps arbitrage / vault liquidators. However, as these are purely profit seeking market participants. I would expect that those who can utilise multiple liquidity pools would have a cost advantage over the others.

@LemonadeAlpha @DarkForestCapital @Etienne I would welcome your thoughts.

I propose the following road map:

  1. Uniswap ETH:DPI Mining will continue until 7th Jan
  2. We do a further set of LP mining Uniswap ETH:PDI from the 7th Jan until 48 hours before LP token staking for DPI intrinisc productivity. However, I think we should reduce the rewards further and consider a lower target pool size (say $ 8,000,000 DPI ?)
  3. In parallel with the main Uniswap LP mining in Jan we start Liquidity mining on Loopring to help grow the L2 ecosystem. My intention would be a much smaller L2 pool. Maybe only $250,000 of DPI? (so 5% of the INDEX used for Uniswap).
  4. Februaries Uniswap Mining should only be lock in as part of the DPI intrinsic productivity work (IIP coming soon)
  5. In March we should do zero Uniswap mining. However, we could consider being a partner to Sushi rewards (particularly if Sushi are added to DPI - I think that the first eligible date would be early March).


Some actions:

  1. Drop the “U word” and start taking about $DPI liquidity - Action: ALL
  2. The Dune dashboard needs to look at all liquidity pools
  3. We need to have all three purchase options publicised and we need to educate the market
  4. We need DEX aggregators to be looking at all the DPI liquidity pools
  5. All three purchase options should be visible on both the token sets and coop websites.
  6. Both the coop and set websites should point to an aggregator rather than pushing all volume to Uniswap.

Repeat after me " We want high DPI liquidity on multiple platforms "


It’s really hard for me to see the point of activating liquidity along other pools outside of Uniswap. I don’t understand what the advantage of adding liquidity on LoopRing or Balancer would be. Who uses those tools? Is the effect of 2 $5M pools on Balancer and Uniswap the same as just $10M on Uniswap? Why do we need to help grow the L2 DEX ecosystem?

I think we must start with the user and work backwards to the technology.

I agree though with the perspective that we need to find a way to reduce rewards for DPI and use things like exchange issuance as the primary ways by which whales are able to get access to the product. The dev team is working on this.

1.5% per month is totally unsustainable. It will also be important to understand the reality of DPI’s usage and adoption.

" We want high DPI liquidity on multiple platforms " - would be good to see more why this is important. “[W]e should make the different options available to the market” - this needs more reasons as to why.


I would agree with @puniaviision here. One reason for shifting liquidity to other platforms that is worth considering, in my opinion, is reducing INDEX distributions by taking advantage of rewards of other platforms.

Take Balancer, for example. These are all the pools that contain DPI. The first one has $1 mil in liquidity (although only 2 LPs) and yields 22% through BAL rewards. 22% is roughly in line with the INDEX liquidity mining. We can do 10% on top with INDEX rewards, which will significantly reduce the amount of INDEX that’s being distributed DPI holders. We can also create a pool ourselves, ETH/DPI or ETH/DPI/INDEX, for instance.

@overanalyser you need to put the contract address for DPI on balancer exchange.

At the same time, I’m not sure if reducing INDEX distributions should be something we do at this point. I think it’s important to distribute ownership widely among the community at the initial stage. If we do go down the path of reducing INDEX distributions by taking advantage of other LM programs, we could revisit INDEX staking. INDEX staking could be used as a so-called loyalty program. We can target APY of 5% for people staking/locking-up INDEX, paid in INDEX from the savings we get from taking advantage of other LM programs.


I think there may be something to be had with a Sushi pool at the end of February. The timing lines up nicely with the potential inclusion of Sushi in DPI which is around 28th Feb. The benefits would be

  • Marketing event for both teams, collaboration with a token held within DPI

  • Rewards can be split and reduce the burden on INDEX alone

  • Liquidity in general is split between Uniswap and Sushi, makes sense to widen the options for users. Aggregators will still allow for best option if users are slippage/gas sensitive

  • With the potential update mentioned by @puniaviision that helps whales continue to move in and out of DPI in size, there is no longer a need for huge liquidity in one pool

  • Retention analysis will give more info, but if we assume DPI is a sticky token, the more users we get holding it, the greater the potential for retaining them

  • Gives enough time to fit the intrinsic productivity experiment in Jan/Feb before moving on to Sushi for potentially a longer term program


  • Splitting liquidity means splitting user attention
  • Whales may not want to use the more sophisticated method for minting DPI in size, lack of large pool could turn potential trades away

Other than Sushi I’m not too fussed what we do apart from tuning the INDEX contribution to match our liquidity targets and making sure the community doesn’t feel like we are overpaying.

@verto0912 specifically, when it comes to INDEX distribution I posted some thoughts here about the potential to reward for index holder governance participation or providing a risk backstop. It led to some passionate debate in the comments. Perhaps you can take a look and see if it’s the kind of thing you were thinking of.


@DarkForestCapital I don’t want to re-start that conversation here as that’s not the point of this post. I was thinking that if we save INDEX by using other protocol’s LM programs, we can distribute some of these savings maybe 15-20% of them, to INDEX stakers as a loyalty reward (with lock-up). I would target a small APY of 5%. This is different from the options discussed previously. I agree that this staked INDEX serves no objective purpose. However, those who will stake INDEX for 5% APY with lock-up are likely to be a) committed to the project; b) involved on forum & discord; c) long-term holders. The loyalty reward will, to some degree, remove the opportunity cost of holding INDEX (no APY) while the net impact on INDEX distributions would still be negative (due to savings from utilising BAL or SUSHI or LRC rewards).

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Hi Punia,

You raise some good points, and I’ve wondered about them myself. But I wanted to provoke some discussions and toss some ideas out.

@verto0912 and @DarkForestCapital there is a balance between wanting to distribute INDEX and getting being as effective as possible (Each INDEX should add value to the coop). The less we spend on Liquidity mining, the more we can spend elsewhere.

It’s also a case of building a sustainable system - one that we can scale even after the INDEX treasury is exhausted and we have multiple products.

OK, i may have phrased that badly. What I’m trying to say is “We want large liquidity on the market, but we don’t care where on the market”

I think the response to this is:

Why are we incentivising Uniswap when Uniswap do nothing to help us?

Is it just because Uniswap are the incumbent and everyone uses them?

Loopring, Sushi, Linkswap and Balancer are all promoting DPI liquidity by providing incentives. But we promote Uniswap…

If we stopped promoting Uniswap, I think we would see some liquidity moving to the other pools to capture those incentives.

I think, my general aim is:

  1. Move the discussion / mind share to total market liquidity and not Uniswap.
  2. Encourage use of aggregators on the Set and coop websites - we may even get a referral fee(?)
  3. Make direct purchase / exchange issuance from ETH easy for larger customers.

All of these should be cheaper and more sustainable than 3,864 INDEX on IIP-11.

On aggregators

On direct trade, xToken have two purchase options:

  • You can mint x tokens directly with a 0.2% issue or redemption fee,
  • You can purchase via a balancer pool. Both options are visible if you purchase from ETH.

In the screen shot below, the balancer purchase is 5% better than minting.

I think we should aim at a similar UI:

  • Enter ETH value.
  • See number of DPI via aggregator market buy
  • See number of DPI if using the ETH --> 10 token --> DPI route.

I’m sure it’s a pain in that ass to code, but a single 3,864 INDEX bounty (1 days at current emissions) could get us a working code / UI that will allow us to minimise the need for massive DPI liquidity.

On Loopring
Technically and from a market perspective, I think loopring adds complication in the short term. However there are some positives:

  • Reducing onchain gas costs for everyone - Uniswap is the largest gas burner.
  • Helps smaller traders to DCA into DPI as no gas for purchases
  • Builds bridges with one of the DPI tokens
  • Marketing

To be honest, I think the biggest benefit to the coop will be the Marketing aspect. So maybe I should be asking the Treasury for a marketing budget for a strategic partnership with Loopring :smiley:


I generally agree across the board w/ Punia’s post above.

Here are some more thoughts:

  • I think, all else equal, targeting liquidity in one pool is probably the best strategy. With fragmented liquidity, the slippage will be worse (worse UX)

  • If the question comes down to: Do we want to keep giving UNI the incentivization, especially if other AMMs can potentially subsidize LP rewards.

This one, I can understand the argument for both sides. Obviously, if Sushi or another provider subsidizes rewards, that is better for the LP.

However, I think we see that UNI just has a lot more usage (volume), so imo it kind of makes sense to stick there rather than switching to Sushi for rewards, and then asking liquidity to migrate again. I feel like asking liquidity to migrate could incur more AUM loss than not doing so.

EDIT: I also agree that trying to reignite liquidity mining on other platforms is a step sideways or backwards towards trying to understand real demand for DPI. I understand the marketing benefit of continued liquidity mining/high APYs so I don’t feel extremely strongly about forgoing someone else’s subsidy.

And lastly, the point about usage looks forwards towards non-incentivized liquidity, which is our goal. Once we stop providing rewards, liquidity will want to live where the trading is happening to capture fees on volume. I pretty firmly believe that will be Uni.

I’d say there is also a tangible marketing benefit to being on UNI as well, tho I don’t think that’s a great reason alone to not switch.

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But I will say I think aggregator route sounds best for exchange:issue unless its incredibly easy to spin up through Uni or some other benefit like reduced dev time.

Something to keep in mind is that most wallets are only integrated with Uniswap and so moving liquidity elsewhere may hurt the ones that aren’t integrated with an aggregator. Although, I don’t think there is too much volume from such wallets. I’m not even sure if there is way to check.

is 1 $10M == 2 $5M from an aggregator’s perspective?

I don’t think so because it would incur the slippage of the $5m pools

Wallet integration is one issue. But I would expect most commerce scale wallets to realise that Uniswap isnt the only game in town.

For smaller (mobile phone) wallets, then I would expect there to remain enough liquidity in any pool to minimise slippage.

Yes, the aggregator should allocate $5 M to each. If there is a price difference between the two, then it should allocate more to the pool with the best price.

INDEX and DPI added to Sushswap liquidity mining.

March is a long way off… may need to incentivize a v3 xniswap

Updated Liquidity figures doe DPI:

Regarding Loopring “Helps smaller traders to DCA into DPI as no gas for purchases”

This is excellent! Would it be possible to mint DPI using Loopring as well?


From speaking to the Set team, and to Matt @loopring, it should be possible to mint and redeem DPI on the loopring L2. However, I don’t think we have prioritised any work in this area.


A few datapoints looking at INDEX and DPI. I’m not sure what they mean…


For both it appears that the liquidity as migrated to balance the available rewards with incomes ~25% being available.

For DPI, the larger Uniswap pool attracts most of the volume and the fees are about the same on each platform. I think this makes sense as larger trades would be attracted to the larger liquidity pool, so most volume naturally ends up there.

For INDEX, the Sushi pool is larger due to the Sushi rewards (~$1,000 per day) but it captures a smaller share of the trading volume.

I think, that there is a significant Uniswap effect (i.e. people default to uniswap without considering the options available).


Some more stats on volume.

Seems like $DPI is traded about almost exclusively on Uni.

(DPI volume)

IMO for DPI should keep focus on Uniswap market. Providing a deeply liquid pool even on one exchange is challenging, trying to create several liquid venues is close to impossible and doesn’t have practical sense. It’s fine if Sushiswap/etc introduce incentives to DPI pairs on their exchange, but Indexcoop shouldn’t add additional rewards outside Uniswap.


Hi @Integral and welcome to the forum :+1:

It is challenging (and expensive to incentivise) to produce large liquidity, as we grow $DPI and it’s traded the fees will help support the liquidity. Also a large funds becomes attractive for others to use as targets for liquidity mining to distribute their tokens (Sushi, BAO, Link swap…). When we get some more CEX liquidity that will also help the markets.

BTW, where did that figure come from. I don’t think I’ve seen anything so clear before.

Agree. At some point we have to figure out how to attract liquidity without high incentives. Maybe Sushiswap liquidity will grow significantly over time via their Onsen program, at that point volume might flip as well.

Also, nice point on CEXs. I was having only L1 Ethereum in mind. Have to consider L2 and CEXs liquidity as well.

(The figure came from private tool we made. Let me know if you want more info).