✅ [RFC] Uniswap v3 Liquidity - Take 2

Summary

This RFC would like to gather feedback surrounding the re-deployment of another protocol-owned position on Uniswap v3, as the current LaaS incentive from Ondo Finance is coming to an end and has proven to be less effective than anticipated (exact numbers to follow once available).

It is suggested to deploy our own MTA/ETH position on Uniswap v3 and select a range that allows us to enter the position with 100% MTA or close to 100%, and have the pair slowly convert to ETH as MTA appreciates in value.

Abstract

Since we began thinking more on PCV, we tried several different options, including Ondo Finance’s LaaS, as well as Gamma Strategies actively managed Uniswap v3 position.

We came to the conclusion that Ondo Finance’s offer is very heavily dependent on a stable performance of MTA, while the Gamma offer is only slowly getting traction via the Gamma dial on our Emissions Controller.

Previously, we also directly competed with Gamma Strategies due to our own MTA/DAI pairing, and arrived at the conclusion that deploying our own MTA/ETH pair on Uniswap v3 would also stop the competing aspect of these pairs, and instead have them work together for a deeper liquidity offering.

As Gamma offers relatively tight ranges, we would deploy this new pair with a larger range to ensure constant liquidity, while also avoiding selling off any more MTA below a certain threshold.

Initially, we would like to target a range between 0.0002 MTA/ETH and 0.0010 MTA/ETH and deploy 1,000,000 MTA from the TreasuryDAO, of which the majority will come from the return of MTA via Ondo Finance’s tranches, with the rest being provided by the main treasury.

Motivation

In order to keep our liquidity in-house and not spend incentives to get someone else to deploy on our behalf, we have previously consulted with different protocols to do this on our behalf, with varying success rates.

Given the track record, we believe it be most wholesome to the mStable project to once again deploy our own liquidity on Uniswap v3 and consolidate the current effort with Gamma Strategies on one very strong pair, with easy entry and exit opportunities across the DeFi ecosystem.

The manual process involved combined with the unavoidable realization of some impermanent loss from Ondo Finance made us realize that their offer is currently too risky, given the economic and geopolitical sentiment we have today.

Instead, we want to try to solve this issue once and for all with a bullish range deployment of MTA on Uniswap v3, which also will give the treasury a lot of upside exposure to ETH, and will eventually arrive at the position owning only ETH, which can then be further utilized in the space as we deploy an even more bullish fresh MTA position on Uniswap v3, and at which stage the Gamma position should hold a much healthier portion of MTA than is currently the case.

Pros

  • Own all of our deployed liquidity ourselves
  • Even if we experience more impermanent loss, we won’t be forced to liquidate due to the maturity of tranches (Ondo Finance)
  • We consolidate our entire liquidity positions in the ecosystem in one pair that is extremely versatile

Cons

  • Need to ensure a sensible Uniswap range is picked, as to ensure a bullish token appreciation over time vs ETH
  • Might involve regular micromanagement to ensure the position is in range for deep liquidity until Gamma’s position is big enough on it’s own

Next Steps

It is suggested that the community comment on this RFC in the coming days, and bearing no significant opposition or change in ideation, we would move ahead with this RFC in the coming weeks and create a formal draft proposal on Github to be used for review.

Meta Governors are encouraged to provide as much feedback as possible until then, so we can create the best possible outcome for mStable and its users.

2 Likes

I would be keen to consolidate liquidity into one pair that we could manage. ETH pair seems like a good choice as it bridges to literally all the other assets.

We would need to analyse a good range, probably best approach is something that is quite wide to offer liquidity over a wide range and with no need to adjust constantly. Should be something very passive.

On that note, how does Gamma stack up? Do we get good value for having it or is it worth to consolidate this one as well?

@mZeroNine Thanks a lot for the write-up and the detailed analysis of the previously tried options
I’m very keen to explore this Uni V3 ETH/MTA pair for Ondo is subefficient for MTA with its automatic liquidation mechanisms and while Gamma is more tailored to MTA changing price, it seems we could manage on our own this liquidity.
I am especially in support of this as building-up liquidity on Uniswap V3 will be a great asset for further smart Treasury Utilization moves on products like FEI Turbo using Rari Fuse pools.
A few thoughts:

  • Joining @dimsome, we should be careful with the ranges as IL is the biggest risk we’re facing here
  • I like the pair to be MTA / ETH vs. MTA / DAI as it exposes us to 2 productive assets with significant upside

I’m very happy to see these Treasury DAO initiatives maturing :rocket:

What would be the process for determining the correct Uniswap range?

Great question, and I think it’ll come down to a big brain analysis of the previous MTA/ETH range and then deciding on a sensible amount for this new range.

Historically, we’ve been very conservative and picked a range around -75% to +75%, but this might even be considered risky in the current market.

Very keen on hearing what others think about ranges, as this is a preliminary exercise before we can move this forward.

If we can find two to three ranges, we can design the actual Snapshot vote like this as well. It’s also important to note that this is a somewhat time sensitive matter, as if we fail to deploy the new pair in time, we’ll suffer additional price impact loss from the Ondo Finance rebalancing.

We can of course also deploy multiple pairs, if that’s what people feel makes the most sense! The only thing to consider is that if we pick multiple ranges, this will be inherent with further MTA selling to acquire the ETH to create the range in the first place, whereas with a 95% - 100% MTA entry, we can effectively negate this process.

I have had a look at the current Visor position and I noticed a few things:

  • TVL is only about $81k (which is quite low to offer efficient swaps)
  • The liquidity is not concentrated at all (see graph below), paired with the low TVL it probably doesn’t offer good swap rates
  • Position hasn’t been rebalanced in a while and is out of range
  • Dial MTA hasn’t been put into this position in a while

I don’t think this position makes much sense. We are not getting any benefit from having it. On paper, actively managed liquidity that is in a tight range is a really good concept. In reality, it is not working as intended.

My personal opinion and recommendation:

  • Remove the Visor Position
  • Remove the Visor Dial
  • Create a new position with MTA from the Visor position and the MTA mentioned in this RFC
  • Change the fees to a 1% fees position (given the fluctuation in price and risks taking the position)
  • Choose a rather wide range (I will do some TA and come up with a suggestion)

https://info.uniswap.org/#/pools/0xa96c549fa361181a94c081597171e17d27459dbb

1 Like

Thanks for looking into this. From the data, I agree that we should move away from using Visor

Thanks a lot for the feedback everyone.

I think this Gamma issue is a somewhat separate take from this, as it would require several additional governance steps (remove dial, claim back and liquidate tokens, offboard with Gamma & Feedback) and thus could result in a skewed voting, as some people might only agree with a portion of the proposal but not the whole package.

Suggesting to create a separate RFC for this, as this RFC and deployment will not interfere with the other, as they’re going to be on the same pair, and we can simply add to that pair later with the reclaimed MTA. What do you think?

In preparation for the call next week, the big questions for this RFC are:
-Are we happy with the MTA amount proposed here
-What is a sensible range to pick for deployment
-How to deploy (single-sided/dual-sided with minimal ETH etc…)

Let me know if you want any other topics added to this, and looking forward to tackling this there! :sunglasses:

Thanks @mZeroNine

Keen to discuss this on a call as I’m not 100% clear on all the moving parts…
Are we still thinking of moving away from Visor? & are you still planning to write a separate RFC for this?

Thanks for the input @james.simpson :blush:

I’d be very keen to keep these things strictly separate, and I’ll be crafting a RFC to address these concerns raised and reach out to the Gamma Finance team to give them an opportunity to address all questions openly before moving it any further, so we can see and hear both sides of the story and give enough neutral ground to decide on the best possible way forward.

Whether that be a step away from Gamma, or an agreed upon strategy to have the product deliver upon it’s initial promises, we can clear up there :innocent:

This is the rough range I would suggest with a 1% fee, entering single sided with 100% MTA (therefore the upper range is to be determined just before queueing the tx, and adjusted upwards if price continues to move):

  • roughly 1130 - 7381 WETH/MTA

Thanks for this @dimsome!

I’ll begin working on a TDP for this now!