Prolong Incentives for Various StakeWise Pools on Uniswap V3 [July 2022]

Proposals
#1

Link to this Snapshot: Snapshot

Prolong the incentives for sETH2/ETH, sETH2/rETH2 and sETH2/SWISE pools on Uniswap V3 for 30 days (199385 blocks):

  • 2,500,000 SWISE goes to the sETH2/ETH pool (0.3% fee)
  • 500,000 SWISE goes to the sETH2/rETH2 pool (0.05% fee)
  • 500,000 SWISE goes to the sETH2/SWISE pool (0.3% fee)

Total SWISE allocation towards liquidity mining campaigns in the following month: 3,500,000 SWISE

A few changes to note from the previous month’s vote. We propose to reduce the SWISE emissions to the main sETH/ETH pool from 5M to 2.5M SWISE.

The APR in this pool over the past 4 weeks has been excessively high, ranging from 35% to over 100% at times. This has been due to a couple of factors:

  • The recent volatility in sETH2 has caused a lot of LPs to fall out of the price range.
  • LPs removed liquidity during the market downturn to de-risk, causing the pool TVL to drop.

We as a team are in the process of constructing a longterm liquidity plan for our staked ETH to ensure we provide first class liquidity during and after the Merge. We will be sharing our suggestions for liquidity in the coming weeks. In the meantime, we feel it is important to save the DAO some SWISE during this period of market uncertainty.

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Incentives for the sETH2/ETH Pool on Uniswap V3 [Aug 2022]
#2

Could you add the changes compared to the previous incentives to your post?

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#3

Thanks for flagging, post updated!

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#4

Thanks for updating. I’ll just share some random thoughts:

The APR is relatively high due to non-permanent factors. In particular actually due to low liquidity in the current tick (which may not be a good thing).

While I do think eventually all these markets need to stand on their own without any subsidy at all (i.e. the trading fee pays enough for liquidity), I kind of envisioned a more gradual approach instead of a sudden halving, and maybe not in the middle of market turmoil and having lost the peg.

At the same time, I do really like the idea of distributing less Swise, so we keep more for other things, or can keep doing some things going for longer.

But it’s also kind of important that the ETH part of a Liquidity position returns more than simply staking that same ETH, otherwise there may be very little motivation to provide liquidity in this pool.

It might all still work out fine with 2.5m swise reward, hard to say really, and we can always correct next month if it turns out to have been detrimental.

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#5

What is the reason for halving the apr of the seth2/eth pool? To limit Swise emissions?

As a liquidity provider things have stabilized and we’re not being pushed out of range every few hours- I’m personally satisfied with where things are now.

The main reason I participate in the seth2/eth pool is because of the high apr’s. I’ve been riding the rollarcoaster in recent times and I have no complaints about the seth2/eth pool at this time.

Before the seth2/eth pool volatility I remember the apr being around %10- so if you are halving the swise emissions to that pool and things return to a similar situation as they were before would the apr then be around %5?

It wouldn’t make sense for me to provide liquidity in that situation I’d just hold the seth2.

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#6

I share some of the concerns. I, too, expected the emissions to go down in a more gradual way like @ottodv mentioned rather than cutting them in 1/2.

In either case, I’m not sure if reducing the emissions to 2.5M will cause any capital leave the pool, so perhaps it’s an appropriate reduction.

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#7

Let’s try this month as an experiment. If it causes liquidity to decrease, we could re-evaluate for next month? @ottodv / @dreth / @Jstar / @StrangetoshiNakamanl

What do you think?

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#8

Best would have been if this were discussed before creating the vote proposal, instead of being faced with a sort of fait accompli.

Right now I’d like to see what rest of the community wants before making a decision. There are two options:

  • go with the current proposal for 2.5m swise rewards in the sETH2/ETH pool
  • create a new proposal for 5m swise rewards in that pool and vote down the other proposal.

Either way is fine with me (everything has pros and cons), but I’d like to be sure that the community is happy with the choice that ends up being made.

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#9

@ottodv @StrangetoshiNakamanl @brianchilders @dreth - Thanks for your comments!

Firstly, the SWISE rewards were coming to an end so we needed to get a snapshot out in time else there would be no pool rewards altogether. I do appreciate it is a sudden drop, however. The key thing here is that we can always add more rewards should we need to, but we can never take them away.

LPs deserve to be rewarded for their participation in liquidity and this market downturn has highlighted that managing an LP position on V3 is not easy. What we cannot afford to do as a protocol is to offer 40% APY for providing liquidity - we would never be able to scale effectively, not to mention it would hurt SWISE holders in the long run.

The liquid staking market has shifted in the last few months. Rather than putting an expensive plaster on the problem, we are looking to revamp the liquidity solution for sETH2. We are doing this to be better positioned for when the markets are more turbulent (like now), but also in anticipation of the post-Merge era when validator withdrawals become enabled. We must find the balance between rewarding LPs and the costs as a protocol.

Our immediate response was to try and reduce the costs of the protocol. Should we need to, we can add further rewards. I think it would be wise to monitor our liquidity over the next month so we can make a more informed choice about pool rewards when the next vote comes along.

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#10

Things sometimes seem counterintuitive, but it’s only 40% because there aren’t enough people wanting to provide liquidity, even at 40%!

Anyway, I don’t see anyone else responding here, so I guess we can just continue with the existing proposal vote.

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#11

Pretty much this. I think after this vote, we gather data, see how it impacts liquidity and adjust accordingly for the next vote.

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