Proposal Discussion: Use Visor Finance to Migrate Liquidity Mining Program to Uniswap v3

Hey PieDAO Community,

We wanted to gauge your thoughts on migrating your current liquidity mining program on Sushiswap to Uniswap v3 using Visor Finance. Our proposal would be very similar to what we’re doing for mStable (see here for a recently passed proposal: https://forum.mstable.org/t/proposal-reallocate-public-uniswap-v2-mta-rewards-to-managed-visor-finance-position/567)

This proposal from Visor Finance offers PieDAO the ability to conduct liquidity mining and liquidity provisioning on Uniswap v3 through Visor Phantom, which is an enterprise-level tool suite for managing and incentivizing liquidity on Uniswap v3.

Background

Uniswap v3 allows for greater capital efficiency by allowing LPs to concentrate their liquidity within a specified price range. For PieDAO, this benefits the protocol by having the ability to incentivize more liquidity in PieDAO’s products with a lower expenditure on incentives and DOUGH dilution, while still providing the holders of these products similar slippage as there is now for high volume trades. For PieDAO’s LPs, they are able to earn more through a higher fee multiple due to the concentration of their liquidity.

Visor Finance actively manages liquidity on Uniswap v3. An LP simply mints a Visor Vault NFT and deposits the base assets of an LP pair into the vault. There is no need to deposit the LP tokens, and by simply depositing assets into a Visor Vault, the LPs permission Visor do the rebalancing and optimization automatically on Uni v3, saving both time and gas fees.

Visor additionally funds a research organization called Gamma Strategies (https://www.gammastrategies.org/) which is dedicated to researching optimal strategies on Uniswap v3.

Visor Phantom’s enterprise-level tool suite allows any DeFi project to co-manage and incentivize liquidity on Uni v3 with Gamma Strategies. The strategies implemented are flexible and tailored to the particular wants and needs of individual DeFi projects. The PieDAO community and team will also have the ability to sign off on any strategy that is being employed as well as manually control different aspects of the strategy such as rebalancing, fee collection / re-investment, and liquidity mining emissions.

Problem

The problem is that providing liquidity and liquidity mining got more difficult due to the following:

  1. Manual Price Range Management:

LPs need to manage the price range themselves, and will NOT earn fees or liquidity mining rewards if the current price is not within their specified price range

  1. Manual Compounding:

Other Uni v3 staking contracts require the LPs to manually collect fees and re-invest those fees back into position, incurring gas fees in the process

  1. High Gas Costs:

PieDAO LPs need to pay for gas when (a) providing liquidity on Uniswap v3, (b) staking / unstaking LP tokens, © claiming rewards, (d) rebalancing positions, and (e) collecting & re-investing fees back into the LP position. This is likely the main drawback to the current liquidity mining environment on Uniswap v3.

Solution

Visor Phantom offers PieDAO a user-friendly way to collect & re-invest fees, rebalance positions based on guidance from Gamma Strategies, and/or rebalance positions based on strategy endpoints on behalf of all of the LPs.

These functionalities can be easily accessed by the team by simply sending commands through a Telegram bot. Additionally, the price ranges will be co-managed by PieDAO and Gamma Strategies, and PieDAO will be able to sign off on the strategy being employed through the Visor Phantom tool suite.

Visor Phantom’s liquidity mining layer will also allow for gasless subscribing to liquidity mining rewards.
To summarize, Visor Phantom offers the following advantages:

  1. Automated Price Range Management:

An automated strategy (co-managed by Gamma Strategies & PieDAO) will manage price ranges so that liquidity is placed in optimal fee earning position, and LPs do not need to monitor and manually adjust the position themselves

  1. Automated Compounding:

On a regular basis, fees are collected and rebalanced back into position on behalf of all the LPs, saving them significant gas costs and allowing for a more profitable strategy

  1. Significant Gas Savings:

LPs pay for gas to deposit & withdraw the base assets in the Visor interface. They can gaslessly subscribe to the PieDAO liquidity mining program and because the gas fees for rebalancing, fee collecting, and re-investing is split amongst all the LPs, there are significant gas cost savings for each liquidity provider

Proposal

We propose using Visor Phantom to help migrate PieDAO’s liquidity mining program for the following pools, however other pools like the DEFI+S and DEFI+L Balancer pools could be migrated as well:

  •      Uni v3 DOUGH-WETH at the 0.3% or 1% fee tier 
    
  •      Uni v3 DOUGH-PLAY at the 0.3% or 1% fee tier
    

After taking a look at your liquidity mining program (from here DOUGHpamine Incentives Program), it appears that current issuance is about 4.89 DOUGH/BLOCK (Period 5). At current DOUGH prices of $0.332, this is a monthly spend of about $324,000.

Following Uniswap v3 Math, (see https://twitter.com/haydenzadams/status/1380217938867843072), if the strategy has a range of 40% around the current ETH/DOUGH price, capital would be 10x as efficient, that is, with only 10% of the assets you could generate the same amount of liquidity for the pool as well as requiring a lower amount of inventory for LPs. Therefore, DOUGH issuance could be reduced by a similar fraction and still offer the same amount of depth and thus slippage when swapping in the pool.

You can see the calculations here:

We hope this proposal is interesting for the community, and will be around to answer any questions you might have. If the initial pool is successful, we can look at expanding the program towards “PIE”/DOUGH pools and other pairs the community decides should be incentivized.

4 Likes

Hey BP333,
thanks for putting together this proposal! …quite a lot to digest :+1:

Can’t fully assess the technical side of things, but here my take on your proposal:
(+) Offers a chance to optimize current DOUGH rewards (quite needed)
(+) Uniswap it’s always an appealing venue for LPs

(-) Quite a big jump, since it implies the migration of entire liquidity pools and reward structure
(-) Sushiswap currently allows for multi-hops (up to 3 hops, to support trades like DAI - > ETH -> DOUGH -> PLAY), not sure whether Uniswap v3 supports the same

Some questions that come to mind:

  1. Security & Resilience of your solution (any audit to share? As a general note, I personally perceive a telegram integration as suboptimal, not allowing to be operated through multisig and relying on a third party centralized solution, but not sure what’s the reach of functionalities managed through TG bot).
  2. Mind sharing more on Gamma Strategies’ operations?
  3. The DOUGHpamine payout is currently composed of both liquid and escrowed DOUGH (20/80%). Could this structure be maintained?
  4. Visor fees involved?
  5. Would you guys consider Pies for Treasury diversification purpose?

Thanks,
G

Please see below in bold for my comments:


Can’t fully assess the technical side of things, but here my take on your proposal:

(+) Offers a chance to optimize current DOUGH rewards (quite needed)

(+) Uniswap it’s always an appealing venue for LPs

(-) Quite a big jump, since it implies the migration of entire liquidity pools and reward structure

With regards to this point, we can help seed some initial liquidity on Uniswap v3. We can provide up to $10K in ETH while you guys supply the liquidity for the other side of the pair. Due to the capital efficiency of Uni v3, you likely won’t need as much liquidity on v3 as well, so it may not be as big of a jump. PieDAO could begin slowly sunsetting the program in Sushiswap while ramping up the Uniswap v3 simultaneously, allowing our proposal to prove it’s worth.

(-) Sushiswap currently allows for multi-hops (up to 3 hops, to support trades like DAI - > ETH -> DOUGH -> PLAY), not sure whether Uniswap v3 supports the same

Uniswap v3’s SDK has the capability to conduct multihop swaps, see here: https://docs.uniswap.org/protocol/guides/swaps/multihop-swaps

Some questions that come to mind:

  1. Security & Resilience of your solution (any audit to share? As a general note, I personally perceive a telegram integration as suboptimal, not allowing to be operated through multisig and relying on a third party centralized solution, but not sure what’s the reach of functionalities managed through TG bot).
  • https://github.com/VisorFinance/hypervisor/blob/master/REP-Hypervisor-2021-07-07.pdf This is our latest audit from Certik. We have audits from Runtime and ConsenSyS Diligence currently in the works to stress test our vaults. Additionally, out of an abundance of caution, we also offer cover from Nexus Mutual on all of the LP positions (https://medium.com/visorfinance/announcing-cover-on-visor-finance-through-nexus-mutual-cdc3e53783c7)

  • The telegram bot is an option for protocols that want to participate in the active management, but one of our main value adds is the generation and implementation of these strategies, so that liquidity miners can be completely passive as in Uniswap v2/Sushiswap, while enjoying the benefits of Uniswap v3.

  • There are only certain controls that the telegram integration can do. It can rebalance positions, collect & reinvest fees, adjust price ranges, create limit orders, deposit assets, and perform swaps. There is no functionality to withdraw any of the funds.

  1. Mind sharing more on Gamma Strategies’ operations?
  • Gamma Strategies is the research arm of Visor that is tasked with generating active strategies. It is open for anyone who is interested to participate and receive a grant. The research is shared; you can see on the website many of the outputs: https://www.gammastrategies.org/
  1. The DOUGHpamine payout is currently composed of both liquid and escrowed DOUGH (20/80%). Could this structure be maintained?
  • Yes, liquidity mining emissions can be flexible and we could technically delay some of the liquidity mining payouts
  • It would likely be easiest if you had some tokenized representation of the vested token
  1. Visor fees involved?
  • 10% of the fees earned from LP positions go to VISR stakers
  • 90% are re-invested back into the LP positions
  1. Would you guys consider Pies for Treasury diversification purpose?
  • Yes, absolutely