SLURP-13 | Modification of SLURP 10b

SLURPs
1

First time writing here, apologies if it looks amateurish.
Update: Thanks to Eric for guiding me writing this slurp with more professionalism.

Abstract

This slurp aims to modify Slurp 10b to augment the quality of the incentives surrounding the SDL liquidity and ultimately give a better experience to the LP.
It is proposed that instead of incentives being directed to a to-be-established Uniswap v2 pool, the same amount and duration of incentives be directed to a to-be-established SDL/LINK Uniswap v3 pool for the full range of liquidity

‘’ The migration of liquidity mining incentives for the SDL/LINK SushiSwap pool to a to-be-established SDL/LINK Uniswap v2 pool. This allows for the same low friction, set-and-forget liquidity provision and remediates the issues experienced with the current SushiSwap pool including inconsistently effective routing, enabling users to exchange SDL with tokens other than LINK. Until such a time as LINK is able to be freely bridged to Optimism using CCIP, the current amounts of SDL LM incentives will be directed to the new SDL/LINK Uniswap Pool.‘’

Rationale

Although Uniswap v2 is an upgrade from Sushiswap, Uniswap V3 aims to improve upon the already successful Uniswap V2 by offering greater flexibility, efficiency, and control to liquidity providers and better prices to traders.
Univ3 UX of provisioning liquidity across the full range is as set-and-forget as Uni v2, but enables a more sophisticated and/or active LPs benefit from the additional flexibility offered by v3, higher fees and lower risks of impairment loss.

Motivation

Being a LP myself, I would like LP to benefit from the highest quality pools.
I have 6 years of experience with liquidity provision on both Ethereum main net and arbitrum having tested Uni v1, v2 and v3.

Why do I think univ3 is a better option than univ2 you may ask?
For starters, everything univ2 can do, univ3 does better and cheaper including finding different liquidity routes.
Since liquidity for SDL is thin, we could use a pool with 1% fee instead of the standard univ2 0.3%.
The additional fees of 0.7% (3 times more) for being an ‘‘exotic’’ or “rare” token will give more rewards to the LPs.

V3 also gives an additional option to monitor and adjust the range of the LP position to obtain concentrated liquidity for more active users that wishes to do so.
Others that want a set and forget option can choose the full range.

Non-fungible liquidity: Uniswap V3 introduces a new concept called non-fungible liquidity, which means that liquidity providers can deposit their assets as unique, non-interchangeable tokens. This allows for greater flexibility and control over their liquidity provision.
Unlike uniswap v2, univ3 allows you to withdraw the collected fees without having to unstake the whole position which is a big advantage IMO.
Unlike v2, rewards are separated and arent stacked on top of the LP position which slightly reduces the risk of impairment loss.
Fees are also cheaper to stake and unstake on univ3.

Improved price oracles: Uniswap V3 uses an improved price oracle that can provide more accurate prices for trades, which can lead to lower slippage and better prices for traders.

As for the liquidity incentives, they would only be awarded if the LP position is in range.
Those choosing full range wont ever have to worry about being out of range.
I am currently part of protocols that incentivizes univ3 LP so I could reach for help if needed.

Its in the best interest of all LPs to take our time and choose the most favorable option.
All the moves we make on mainnet (approve, unstake, withdraw, redeposit, restake, etc) are costly and should be limited to a minimum.

I want the SDL LPs to pay less fees, enjoy the most advanced LP technology and receive the highest APR while maintaining a high security.

DISADVANTAGE of v3: The only disadvantage I found with v3 is with regards to voting. From what I know so far, Snapshot cannot calculate the amount of tokens in uni v3 LP to allow voting. Something they are able to do with v2.

Specification

It is proposed that the amount and process of SLURP 10b be preserved, with the only change being to direct SDL incentives to a to-be-established Uniswap v3 SDL/LINK pool.

Since liquidity for SDL is thin, it is proposed to set the pool fee to 1% instead of the standard univ2 0.3%. The additional fees of 0.7% (3 times more) for being an ‘‘exotic’’ or “rare” token will give more rewards to the LPs.

Ethereum Mainnet Incentives, Current and Proposed

SDL/LINK Sushi stLINK/LINK Curve ixETH/ETH Curve SDL/LINK Uniswapv2 SDL/LINK Uniswapv3
Current Liquidity ($) 750,000 1,125,000 250,000
Current 1 Day SDL Emissions (tkn) 2520 1240 825 0 0
Proposed Target Liquidity ($) 0 500,000 N/A 0 330,000
Proposed Target SDL APR* (%) 0 10 0 0 15
Proposed 1 Day SDL Emissions (tkn) 0 978.47 0 0 968.69

*APR excludes the 1% trx fees from the univ3 pool|

Cheers

2 Likes
2

Hey Hugo, thanks so much for this SLURP! Glad to see you chiming in here :slight_smile: You’ve long been a very active community member and your feedback and participation in the formal governance process is exciting, especially on a topic you’re obviously passionate about. The following is intended exclusively for the fact that your SLURP will be recorded and memorialized and I want whats written to accurately reflect your knowledge, experience, and the thought you’ve obviously given this over the last months.

A few pieces of feedback:

Abstract

  • Try to summarize briefly the intention of the SLURP and also the effective ultimate change. Intro looks good generally, quote is good, I’d just add in what the mechanical change would be, e.g.:

This slurp aims to modify Slurp 10b to augment the quality of the incentives surrounding the SDL liquidity and ultimately give a better experience to the LP. It is proposed that instead of incentives being directed to a to-be-established Uniswap v2 pool, the same amount and duration of incentives be directed to a to-be-established SDL/LINK Uniswap v3 pool for the full range of liquidity

Rationale

  • I’d remove the “I told you so” elements. Not helpful, not relevant.
  • Focus on the positive benefits of your suggestion - call out specifically that the UX of provisioning liquidity across the full range is as set-and-forget as Uni v2, but enables more sophisticated and/or active LPs benefit from the additional flexibility offered by v3, etc.

Motivation

  • Largely looks great to me

Specification

  • Focus exclusively on the mechanistic change proposed by your SLURP. More specifically, I think the entire specification section of this SLURP could be summarized in a single sentence plus a quote:

It is proposed that the amount and process of SLURP 10b be preserved, with the only change being to direct SDL incentives to a to-be-established Uniswap v3 SDL/LINK pool

  • Feel free to then quote the relevant section of 10b including the table but replace the instances of Uniswap v2 with Uniswap v3, etc. Doesn’t need to be overly wordy in my view. The more concise and to the point the Specification section is the better.
  • Feel free to preserve the rest of your thoughts here in the Motivation and Rationale sections as you feel appropriate.
3

Hey @hboss, I appreciate you providing comprehensive details about the disparities between Uniswap V2 and V3.

I think this SLURP makes perfect sense in optimizing gas efficiency and rewards towards LPs.

From my understanding, the DAO should ideally reward LPs with full range or specific ones. LPs setting an arbitrary range might distort the pair’s curve and affect price trends.

1 Like
5

Weird I cant delete my post?

The condition to receive LM incentives sould be:

You need to be in price range.
If your position is out of range, you don’t earn anything.
By choosing full range, you never worry about being out of it so always receive LM incentives, but you also bear 100% of the risk of IL, just like uni v2.

1 Like
6

@hboss thanks so much for the edits!

One last nitpicky set of them:

Pull everything but the following out of Specification and move it to Motivation:

Something like:

Since liquidity for SDL is thin, it is proposed to set the pool fee to 1% instead of the standard univ2 0.3%. The additional fees of 0.7% (3 times more) for being an ‘‘exotic’’ or “rare” token will give more rewards to the LPs.

Otherwise overall it looks good to me. I’d like to see some feedback from @SethVdL, @JimmyR, @EqS, and @Fox if they’ve got any!

8

If we are increasing the fee from 0.3% to 1% for LPs then can we not reduce some of the other incentives?

1 Like
9

I think that would be a reasonable suggestion for the newly proposed Uni v3 pool on Mainnet, but would need to bear in mind what the fee earnings have historically been + some kind of projection of possible enhanced fee earnings based on the new rate and presuming the routing issues etc being fixed as a result of the migration. I don’t think it should necessarily touch any of the other pools’ incentives.

This is exactly the type of thoughtful feedback I was hoping to hear btw!

1 Like
10

For posterity’s sake, I copy pasted the entirety of this message over @hboss’s original post at the top of this thread per his explicit request. The current settings for this forum limited him to being able to edit the post only after so many days. Im gonna edit that limit to be for 10 days, which in my experience has been more than enough time to include modifications as a result of the discussion period for nearly all SLURPs thus far.

Done, btw

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11

I agree with this. Would half the SDL incentives to Uni v3 suffice?

1 Like
12

Lets test it first, get the data and adjust thereafter?
Extra incentives to hopefully capture additional liquidity from the get go, wouldn’t that be a good thing?
Could propose another slurp thereafter to reduce the token emission for that said pool.
The accepted amount of slurp 10b isnt changed in this slurp

1 Like
13

@SethVdL @EqS I think its worth noting our liquidity has decreased fairly substantially - which is mostly due to one big LP pulling out. Personally, I’m against reducing those incentives out the gate. I also feel like 1% is a fairly high fee, but given this is the only venue to purchase SDL now I don’t think its unreasonable.

Personally I’m good with the proposal exactly as is and would be happy to take it to vote this week.

2 Likes