AIP 62: Increase Uniswap v3 Liquidity

Koploseus commented 2 years ago

Summary

This AIP proposes to use the treasury to purchase ETH to increase the Uniswap LP pool with the goal of reducing slippage between AST/ETH pairs on the platform.

More ETH is required to sufficiently increase the LP pool on Uniswap v3.
AirSwap DAO currently has $30K equivalent pooled within Uniswap v3.
An extra $100K of ETH will need to be purchased.
The purchasing method will be the subject of a future vote.

Specification

AirSwap currently provides $30K in liquidity on Uniswap v3. In order to reach sufficient TVL (see Rationale), we will need to purchase $100K in ETH to supply $200K in TVL ($100K in ETH, $100K in AST). This will increase our TVL to $270k in total.

However, the DAO currently doesn’t have sufficient ETH to finance this project. We are looking into different scenarios and will propose the best solution to the community. There are several possible ways to purchase the necessary ETH:

Withdraw WETH from the protocol fee pool in exchange for AST from treasury
Withdraw AST from treasury and sell 50% for ETH in a community sale.
Withdraw AST from treasury as collateral for an ETH borrow.

Rationale

We believe that a suitable amount of liquidity should be able to support a $10K swap of AST / ETH with a maximum price impact of < 2.5%. This would require a TVL of about $300K. Currently, AirSwap has $30K equivalent pooled within Uniswap v3. An additional $100K has been added by the public through liquidity mining programs with Unipilot. However, this amount is only temporarily boosted for the promotional period. There are several problems with low liquidity pools on Uniswap:

MEV bots are attracted to low liquidity pools as it is easy to sandwich attacks.
Significant price impact for large swaps relative to the size of the liquidity pool.
Liquidity attracted through liquidity mining programs are temporary, and will decrease once the promotion period is over.

By adding to the AirSwap LP position the DAO would also earn additional fees. The fees generated from the DAO LP will be used to help finance AirSwap operational costs thus reducing the reliance on AirSwap treasury.

What is Uniswap?

Uniswap is a protocol that allows traders to swap Ethereum ERC20 tokens entirely on-chain. The swap rate is based on the demand for both tokens and the balances of the swapping pair. www.uniswap.io

Copyright

All proposals are public domain via CC0

agriimony commented 2 years ago

Can we update this to reflect the latest situation (i.e. after unipilot rewards have ended)? What is our current TVLs on uniswap v2/3 and other protocols?

Koploseus commented 2 years ago

Updated! Based on : https://v3.info.uniswap.org/#/pools/0x117439f6fdde9a09d28eb78759cd5c852a8653f0

agriimony commented 2 years ago

can edit this part as well

Currently, AirSwap has $30K equivalent pooled within Uniswap v3. An additional $100K has been added by the public through liquidity mining programs with Unipilot. However, this amount is only temporarily boosted for the promotional period. There are several problems with low liquidity pools on Uniswap:

The promo period should be over now i guess.

also i guess we should be clearer in the specification that the proposed solutions will be a separate AIP

airswap / airswap-aips