Hey folks! I have some questions about how you are handing liquidity provisioning. This could lead to a proposal, but I wanted to get some background information first.
I noticed that BIP-26 rolled out on the order of 80,000 BADGER each in payments to liquidity providers of the WBTC:BADGER pair on Uniswap and Sushiswap, on the order of 160,000 BADGER total (and I see that they get some DIGG issuance too). Due to price appreciation of the incentives, this has resulted in very large liquidity pools: $60-70mm on each platform, nearly $135mm in total.
A few questions for discussion:
This is a lot of liquidity. A million-dollar BADGER buy has a less than 1.5% impact on the price when split across Uniswap and Sushiswap. Since this extreme amount of liquidity comes at the cost of a high rate of dilution for existing BADGER holders, is there interest in reducing these incentives?
Uniswap and Sushiswap provide identical services. DEX aggregators like https://matcha.xyz and 1inch.exchange intelligently split large orders between the two dexes, but most trades today are still going directly to Uniswap or Sushiswap to place trades. Direct trades of this sort give users a slightly worse price, and trigger arbitrage bots to trade between Uniswap and Sushiswap to even out the prices, creating unproductive (but profitable, for the bots) transactions that consume gas and fill blocks. Since paying for identical liquidity in two venues is more expensive for BADGER holders, and splitting liquidity is bad for users and bad for Ethereum, is there interest in consolidating the liquidity incentives on a single venue?
Gauging the sentiment before formulating anything more specific as a proposal. Thanks in advance for sharing your perspective