Hi NFTX Community,
We wanted to gauge your thoughts on deepening the liquidity of NFTX index fund pools by migrating from Sushiswap to Uniswap v3 using Visor Finance. The low liquidity and high slippage of the current NFTX pools on Sushiswap could benefit from the concentrated liquidity model of Uniswap v3. By switching over to Uniswap v3, NFTX could potentially realize 10x lower slippage based on the same amount of liquidity provided.
This proposal from Visor Finance offers NFTX 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. Essentially, the NFTX community would be able to decide which price ranges to provide liquidity at if they so desired.
Our proposal would be similar to what we’re doing for mStable (see here for a recently passed proposal: [Proposal] Reallocate Public Uniswap v2 MTA Rewards to Managed Visor Finance Position - Discussions - mStable | Governance), who recently migrated liquidity from Uni v2 to Uni v3.
Uniswap v3 allows for greater capital efficiency by allowing LPs to concentrate their liquidity within a specified price range. For NFTX, this benefits the protocol by having the ability to incentivize more liquidity in NFTX’s products with a lower expenditure on incentives and dilution, while still providing the holders of these products similar slippage as there is now for high volume trades. For NFTX’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 just by 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 each individual DeFi project. The NFTX 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 price range management, rebalancing, fee collection / re-investment, and liquidity mining emissions.
To summarize, Visor Phantom offers the following advantages:
1. Automated Price Range Management:
An automated strategy (co-managed by Gamma Strategies & NFTX) 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
2. 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
3. Significant Gas Savings:
LPs pay for gas to mint a Visor Vault, deposit & withdraw the base assets (i.e. PUNKS & ETH) in the Visor interface. They can gaslessly subscribe to the NFTX 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
The low liquidity and high slippage of some NFTX index fund pools could benefit from the concentrated liquidity model of Uniswap v3. By switching over to Uniswap v3, NFTX can deepen liquidity, control how liquidity is provided, monitor positions, save LPs gas fees, and save in liquidity mining emissions.
- By lowering slippage and spread on certain assets, more users would acquire NFT assets via NFTX vs. OpenSea
- The higher fees that can be earned through concentrated liquidity would incentivize more users to mint and provide liquidity with their NFT assets as the opportunity cost would be higher if they don’t
- NFTX could also incentivize LPs at a lower cost due to the concentrated liquidity of Uniswap v3
- By adding liquidity to Uniswap v3, LPs may be subject to impermanent losses as the floor prices for NFTs change
- Smart contract risk - Visor Vaults have been audited by Certik and will be audited by both Quantstamp and ConsenSyS Diligence; additionally, LPs have the option of buying cover from Nexus Mutual for any fo their positions
Proposal for Discussion
We propose using Visor Phantom to migrate NFTX’s liquidity pools from Sushiswap to Unsiwap v3. We can also migrate the pool for NFTX-ETH as well. Additionally, the DAO may easily program the farming incentives across the different funds in the way that it best sees fit.
Following Uniswap v3 Math, (see https://twitter.com/haydenzadams/status/1380217938867843072), if the strategy has a range of 40% around the current ETH/PUNK 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, liquidity mining issuance could be reduced by a similar fraction and still offer the same amount of depth and thus slippage when swapping in the pool.
We hope this proposal is interesting for the community, and will be around to answer any questions you might have.