Incentivize Uniswap ETH/YAM pool with Treasury Funds

Incentivize Uniswap ETH/YAM pool with Treasury Funds

Basic Summary
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.

Abstract
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.

Motivation
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.

Specifications
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.

Pros
Better experience for noobs trying to buy YAM = more people buying YAM.
Can earn trading fees in the pool

Cons
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

Should we provide liquidity to Uniswap with treasury funds?
  • yes
  • no

0 voters

How much liquidity should be provide?
  • $100,000 in ETH
  • $250,000 in ETH
  • $500,000 in ETH
  • Other - post below

0 voters

I vote yes for it .
But I can’t agree with that mint new yam . When there is need ,the treasure should buy yam from market!

you guys always say that since we can mint yam as much as we can. But this will make yam less precious. This will make yam more likely a shit coin.

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山药需要抓紧时间找到自己的定位,到底在区块链项目里面需要干什么?能干什么?我现在发现山药什么都想做,怎么什么都不突出?

The main reason that I am proposing minting YAM to pair with the ETH is that we have a limited amount of ETH that we can use overall. This ETH is already getting spread around and requested for different projects (minting uGas, bootstrap umbrella, yield farm, etc). If we buy YAM with ETH to LP then we can provide only half as much liquidity per ETh provided vs if we mint YAM. Minting it is twice as capital efficient. And if all this YAM is burned when we remove the liquidity then it doesn’t add to the overall supply.

As mentioned above, if YAM beats ETH in price over the time that we provide liquidity we will get more ETH which we can then use to buy YAM to burn and keep our issuance balanced. Or if YAM lags ETH in price then we will get additional YAM and we can burn the extra YAM or give it to the community who are LPing in sushiswap or other participating in governance or whatever.

If the community were to mint YAM and keep it in the treasury for 1 year and then burn it, that is no different from not minting YAM. What I have proposed above is similar, even if there is a chance that some of this YAM makes it to market. This YAM will only make it to market if the price of YAM beats the price of ETH. And even then we can use the ETH we get to buy it back later.

I voted yes on this, but once the current on-chain prop goes through (tomorrow), there wont be any ETH left in the treasury to do this with. It will all be allocated to minting/LPing uGAS-FEB. We would need to couple this prop with an OTC purchase of ETH using the yUSD in the treasury as well, which has came up recently anyway

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Please refer to updated post further down below. Fundamentally changed my mind on this and voted NO.

++++++++++++
Voted YES but pls read Caveats and Rationale

Pros:

  • Uniswap gives visibility to trades
  • A ton of data tools integrate with Uniswap which traders need
  • YAM DAO will make decent fees from LPing

Been in favor of this idea for some time. Agree that we should not compromise Sushi rewards in return.

Caveat:

  • I would prefer to wrap the YAM minting into a larger proposal, that also includes yield farming and contributor rewards for our new products (eg Umbrella)
  • I get the point about “YAM won’t make it to the market” but many will not go into such detail. Also , we have to decide for how long the LP programme is in place. Suggest to say 6 months with renewal option at YAM tokenholders’ vote

Rationale:

  • YAM has just come out of rebase. The market will not frown at the DAO for putting in place a new token structure. In fact, this could be the trigger the market is waiting for.
  • Just want to avoid that we print YAM for any individual proposal. This could come across the wrong way.

Saw @flygoing.eth comment: DAO should be OK to convert yUSD into ETH as long as it doesn’t decimate ability to pay for contributor.

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Just as I shared this idea in the Discord:

  • YAM DAO can vote in a certain $YAM rewards number per month/quarter for the next 1-2 yrs (for product users and contributors)
  • We mint all these rewards and those that are earmarked for the future are locked in a Uniswap pool in the meantime. Each quarter a fixed amount of $YAM unlocks and then gets distributed to the reward buckets
  • Whatever YAM is lost due to IL needs to be bought back with ETH + LP fees

This way we can have our cake and eat it: Get a larger rewards number, have YAM for Uniswap. Kill two birds with one stone.

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I voted NO on this proposal. It’s delivering marginal improvement at best. Explanation below.

“Uniswap pool is a UI/UX improvement for small investors or noobs”:

  • People are struggling with v2 vs v3. I have friends who’ve been in crypto for years and asked me 5x which YAM the correct one is. The UX/UI fix needs to happen on CoinGecko, CMC and other portfolio tracking apps first. I know it’s WIP but will not go away for another month. Add in some delays from the various service providers.
  • See this Discord post for confirmation where the investor UI for $YAM is broken : Discord
  • Will noobs really buy YAM? The token is a micro-cap compared to the “blue-chips” that are on everyone’s mind as a first investment. In short, are we building an improvement for someone that’s not even looking right now.

SushiSwap:

  • SushiSwap is the rocketship in DEX-land. Recent examples with other token (eg RUNE) just show what Sushi can do to a token as a DEX.
  • By the time we voted on the proposal, Sushi will most likely have made further improvements to attract more users. I suspect we might chase a status quo scenario here

Trading volume:

  • The last days have shown that trading volume finds its way to Sushi if there’s momentum. Most traders go to CoinGecko anyway to identify the best pair.
  • If $YAM can generate consistently high trading volumes, investors will buy $YAM on Sushi and seed a Uni pool to get the fees. We’ve seen numerous times that Uniswap pools evolve and deepen because investors want the fees.

$YAM & Liquidity constraints:

  • YAM DAO only has so much $YAM and/or $ETH. In fact we have none of it readily available. We’d have to go through fundamental processes like minting $YAM only to do this. We are seeing what controversy this can cause within other communities (eg YFI) + market/investor community whereas the DAO’s focus should be on getting products out, governance, hiring, marketing.

The initial point of this proposal is good. Uniswap is still the first choice of many new DEFI traders. This may increase the trading volume of YAM. However, even burning is considered, minting YAM may not be a good resource to get YAM. It will increase the total supply of YAM increase the consensus rate for on chain vote…

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uniswap sushiswap both dex,user could no sign up,if you have eth ,u can swap right now,why care uni or sushi.

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I am shelving this proposal for now.

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