Incentivize Uniswap ETH/YAM pool with Treasury Funds
Uniswap is the most recognizable exchange on Ethereum, and one that many users default to. Right now, liquidity for the YAM/ETH pair is really bad and has the potential to push interested buyers away. We should improve the liquidity on Uniswap for buyers who may not be familiar with Sushiswap or aggregators.
I propose that we use ETH from the Treasury as well as mint new YAM in order to provide liquidity to the ETH/YAM uniswap pool. This added liquidity will make buying YAM on uniswap a better experience for small users who are interested in the project but maybe not very familiar with DeFi.
Minting new YAM does not need to add to the total supply in the long run. When we decide to stop this initiative and remove the liquidity we can burn the YAM that we get back. If the price of YAM has lagged the price of ETH over the time period that we are providing liquidity, we will withdraw more YAM and less ETH than we put in. If we burn this YAM then we will have reduced the supply from when we started, although we will have less ETH. If YAM beats ETH over that timeframe then we will get more ETH and less YAM. We can then burn the YAM and use the additional ETH gained to buy back and burn YAM.
Our Sushiswap liquidity pool and the incentives on it have been a resounding success and I am not proposing we change that. As of this writing, that pool has earned the treasury over $700,000 dollars of sushi tokens at current prices (including the 2/3 lockup). Giving YAM farming rewards to sushiswap LPs should continue as is.
But we should be aware that right now, trying to buy 1 ETH worth of YAM incurs 2% slippage on Uniswap compared to 0.05% slippage on Sushiswap. Beyond a worse price, higher slippage is more likely to cause a transaction to fail. While we expect that more experienced users will use Sushiswap and/or aggregators like 1inch, we should not expect that this will be the case with newer DeFi users. Given that we may be at the start of a bull market and will see an influx of new participants in the DeFi space, we should expect that there will be a segment of potential YAM buyers who will want to use centralized exchanges or Uniswap. We should not present these users with a bad experience from the start with significant slippage and potential failed transactions even on small buys.
The first step is to determine how much liquidity we think is appropriate in Uniswap and how much we can afford to provide. Since we are minting the YAM, the $ amount of ETH is what we should focus on.
I have noticed some discrepancies in the slippage calculator we have been using internally so I don’t want to post those numbers yet. But 500K in added liquidity would require $250K in ETH from the treasury and I think would result about 0.5% slippage on a 1 ETH buy. I will update slippage numbers in the poll below once I confirm the calculation
Once numbers are determined, we will need an on chain vote to buy additional ETH, mint additional YAM, and deposit liquidity to Uniswap.
Better experience for noobs trying to buy YAM = more people buying YAM.
Can earn trading fees in the pool
Uses treasury funds that maybe could be used elsewhere.
Risks impermanent loss. This is more pronounced if the YAM price lags ETH as the treasury will lose some ETH that may not be counteracted by fees.
Poll to Measure Sentiment
- $100,000 in ETH
- $250,000 in ETH
- $500,000 in ETH
- Other - post below