This proposal is intended to move over the DAO-controlled liquidity of NFTX/ETH from SushiSwap towards a 1% Uniswap V3 position, with the goal to optimize liquidity efficiency while increasing trading fees generated for the DAO treasury.
If this proposal passes, only the NFTX/ETH position will move to Uniswap V3. Any other pair, including all vToken/ETH pairs as part of the yield program, will remain on SushiSwap until a separate XIP to do so would pass quorum.
Back in January 2021, with the NFTX token launching a few weeks before, we made a proposal to migrate overall current and future liquidity from Uniswap towards Sushiswap. The main goal to do this was to work closely together with the Sushi ecosystem, while also being able to generate treasury yield from their Onsen program by staking (parts of) our position.
Since that migration a lot has changed. At NFTX, we moved away from building blue-chip NFT Index products, and instead focused on building out an NFT Liquidity Protocol, enabling high yields for liquidity and inventory providers of Floor NFTs - with FloorDAO recently becoming a poster child to this Defi NFT movement.
Externally, the AMM landscape changed too. A few months after our migration, Uniswap launched V3 onto the Ethereum Mainnet - bringing a new concept called concentrated liquidity towards the DeFi scene. In short, this allows any liquidity provider on an AMM to narrow their buy/sell ranges, drastically increasing the efficiency in which pooled capital can be used. Additionally, Uniswap V3 introduced different fees suited for different pools, from 0.05% (stablecoins) upwards to 1% (exotic pairs).
By moving our governance token pair towards V3, we can generate more fees during periodic volume increases while also preparing ourselves for further migrations of i.e. vTokens towards non-infinite ranges in the future. To get a view of the fees that could be generated through using the 1% exotic fee structure, we take FloorDAOs’ position as an example.
- Moving our NFTX/ETH LP position to a range on Uniswap V3 allows us to generate more revenue for the DAO treasury during high volume periods.
- Using concentrated liquidity instead of infinite ranges allows the DAO to market make our governance token more efficiently in the future, decreasing price impact with the same amount of capital.
- Using concentrated liquidity too aggressively increases the need for active management of LP positions, hence we start out on an infinite range.
- If we move into concentrated ranges in the future, generally speaking, these positions come with higher impermanent losses.
If this proposal passes, we will move over the DAOs’ entire position of NFTX/ETH from Sushiswap towards Uniswap V3, which at the time of writing is worth approximately $8MM.
We will migrate our position towards a 1% Uniswap V3 position starting with infinite ranges. Over time we may tighten these ranges through a new proposal.
This request does require funding, which are the NFTX/ETH SLP tokens. At the time of writing we control 94% of this token pair pool.
- Discord: https://discord.gg/xcJkxMXSR8 2
- Moving over liquidity from one AMM to another may break third-party products that have NFTX integrated if we do not alert them in advance. Are we aware of any products potentially failing when we remove our liquidity from Sushiswap?
- While V3 is currently dominant on the concentrated liquidity topic, alternatives will arise. How do we respond to others, potentially Sushiswap and/or Balancer, launching equal or better?
- Minimum Quorum: At least 5 votes
- Passing Threshold: More than 50% must vote in agreement for the XIP to Pass. For changes to the NFTX contract, more than 70% must vote in agreement for the XIP to pass.
- Yes, move NFTX/ETH to V3