StakeWise is a high growth startup project currently in its early stage.
BEFORE THE MERGE DYNAMICS
Prior to The Merge it is impossible to withdraw rETH2->ETH PoS rewards from the staking contract. Therefore, there is selling pressure at the UNI sETH2/ETH pool.
Priorities at this early stage:
- Maintain a good sETH2:ETH peg
- Grow in sETH2 terms (TVL)
- Build community
StakeWise deployed successfully current sETH2/ETH pool at Uniswap v3:
- A good farming program it is been able to attract sETH2 and ETH holders with more than enough liquidity to maintain a good peg.
- Pool flows: sETH2 selling pressure comes from people that wants to convert to ETH before The Merge; sETH2 buying pressure comes from StakeWise Pool new entrants that are currently routed through the pool.
But, why it is difficult to achieve a better peg? This is an important question.
- Uniswap v3 fee parameter of 0.3% (recommended for exotic pairs) implies a much bigger “tick distance” in the order book in comparison to a regular stable coin pair pool. For instance, at the moment the closest range to provide liquidity and maximize SWISE farming rewards is 0.991 - 0.998 (sETH2:ETH) and the average distance between ranges is 0.006.
Even though it is a great achievement for the project to maintain the peg since the very beginning, we can do some improvements in order to try to increase efficiency.
As a side note, but also an important consideration, routing sETH2 new entries as pool buy orders when the peg is below parity has a side effect -> TVL is not increasing hindering project growth and visibility.
Taking everything in consideration StakeWise may benefit greatly if it is possible to achieve these subset of objectives:
- Optimize necessary resources to maintain sETH2:ETH peg.
- A better use of liquidity, a better peg with less effort would allow the re-routing of new StakeWise pool entrants through the regular queue, therefore increasing TVL.
- More sETH2 in circulation -> more growth, more visibility, more DeFi integrations, etc.
IDEA/PROPOSAL: Migrate sETH2/ETH pool liquidity to a more efficient Uniswap v3 pool configured as an stable pair one with a fee parameter of 0.05%, smaller tick distance (0.001 as in the current rETH2:sETH2 pool) and, therefore, higher efficiency.
- Uniswap v3 stable pair pool.
- Recommended fee parameter set to 0.05% -> tick distance of 0.001 for the smaller liquidity possible range.
- Similar farming incentives to compensate for Impermanent Loss, less fees and, specially, to attract liquidity with a good APR. Moreover, a well design set of incentives would help Community Building efforts.
- It is not possible to update current pool parameters so it is necessary to create a new pool AND promote a smooth liquidity migration process.
For instance, stop current pool incentives at the time of creation of the new one, inform through all project and community channels, offer better farming incentives first month after migration, etc. Everything we can come up to help coordinate and promote liquidity migration from the old pool to the new one.
- Current pool works, migrate to a new one may seem an unnecessary risk.
What do you think?