Farmer Action Required!
Before diving into the why, let’s address the how.
And don’t worry: Funds are SAFU.
EthOS Ecosystem Farming
At approximately 3.30pm CET today, the currently active shared-NFT Uniswap v3 farms for BUIDL, ARTE and UniFi will end, and farmers will no longer receive any further rewards per/ block. But they will still be able to claim all rewards they’ve earned up until then, as well as withdraw their staked liquidity.
Then, at block 12825553, new regular Uniswap v3 farms will open.
To reiterate: Funds are SAFU. You will still receive all rewards that you have earned, and your staked tokens are not affected.
Due to price fluctuations and to avoid rewarding inactive liquidity, the bullish and semi-diluted curves are being deprecated. The amount of rewards that had been pre-allocated to farming isn’t changing, but it is being reallocated to the new diluted curve farms.
So, now there will be just one new (diluted curve) farm for each token:
BUIDL
Total Available Daily Rewards: 222.5 BUIDL
https://covenants.eth.link/#/farm/dapp/0x3D8ffd1d0b28dB55F918c8BBF5C61ac49237B15b
ARTE
Total Available Daily Rewards: 154,95 ARTE
https://covenants.eth.link/#/farm/dapp/0x1760824E62058AD6f182033fb3b7439c04fe2A39
UniFi
Total Available Daily Rewards: 1842,4 UniFi
https://covenants.eth.link/#/farm/dapp/0x540Ab59Aa87A05A0B91a8512540920C1D6160D3c
Where Is My Dragon (WIMD) card farming will continue as per usual (using the shared-NFT farming) until the next farming season begins in 10 days.
Wrapped USD (WUSD) farming will also continue as per usual (using the shared-NFT farming) until the next rebalance event in 10 days.
Why?
Two weeks ago, we released customizable farming contracts for Uniswap v3. The key feature of these is their shared-NFT architecture, which allows farmers to add liquidity to the same NFT and still earn rewards and fees on a pro rata basis. This is also the cheapest way to add liquidity to Uniswap v3.
Trading fee entitlement for these contracts is calculated as a percentage of reward entitlement. It’s complicated, but basically 100% of the total available rewards functions as the owner of 100% of the earned trading fees. Farmers can claim trading fees in proportion to the amount of rewards they can claim.
Overall, this provides a highly efficient way to farm in Uniswap v3 pools. But, as it turns out, it isn’t very effective if the trading volume in a pool drops too much. Users can experience impermanent losses in the fees they have earned.
Here is an example:
Day 1
Total Daily Available Rewards: 100 TOKEN A
Daily Trading Fees Earned: $100,000
-Farmer A opens Position A by staking 1000 TOKEN B and 1000 TOKEN C.
-As the only farmer in the setup, Farmer A is entitled to 100% of the rewards.
Day 2
Total Daily Available Rewards: 100 TOKEN A
Total Daily Trading Fees: $1,000
-Farmer A’s Position A of 1000 TOKEN B and 1000 TOKEN C remains open.
-Farmer B opens Position B by staking 1000 TOKEN B and 1000 TOKEN C.
-Farmer A earns 50% of the rewards, while Farmer B earns the other 50%.
Day 3
Total Daily Available Rewards: 100 TOKEN A
Total Daily Trading Fees: $1,000
-Farmer A (with Position A; 1000 TOKEN B and 1000 TOKEN C) and Farmer B (with Position B; 1000 TOKEN B and 1000 TOKEN C) again earn 50% of the rewards each.
End of Day 3
Total Trading Fees Earned by the NFT Shared by Both Positions: $102,000
-Farmer A (with Position A) has earned 200 TOKEN A in total in rewards. This entitles him to $68,000 in fees, calculated by the dynamic reward-fee system.
-Farmer A (with Position A) has earned 100 TOKEN A in total in rewards. This entitles him to $34,000 in fees, calculated by the dynamic reward-fee system.
~
In this example, Farmer A has lost more than 30% of the trading fees he earned in day 1.
So, the shared-NFT architecture for our Uniswap v3 contracts is great for pairs with consistent trading volume, but not for those that experience decreasing trading volume combined with positions being opened that are equal to or larger than previously opened ones.
It’s Not Over For Shared-NFT Farming
We aren’t deprecating our Uniswap v3 farming contracts. In fact, we’ll be upgrading them (after the deployment of DFOhub v0.5 and Items v2) during the AMM Aggregator v2 and Periphery Builder update, using these two innovations to solve the trading fee impermanent losses issue.
Anyone creating a farming contract can still select the shared-NFT farming architecture, but should be aware of this issue.
Regular v3 Farming Contracts
These are built like the shared-NFT contracts, but without the shared-NFT feature. To open a position in a setup, farmers will mint their own NFT as they usually would when providing liquidity directly through Uniswap. Of course, this will be less cost-effective in terms of gas than shared-NFT farming, but will protect farmers from any possible trading fee impermanent losses.
We will publish full developer documentation for these contracts tomorrow.
Funds are SAFU
This is not an exploit or anything like that. The rewards you have already earned are not at any special risk, nor are any of the tokens you’ve staked.
The issue also doesn’t affect the inflation rate of the three ethOS tokens or the original total amount of rewards available for farmers.
All of the unissued rewards that were allocated to and which are stored in the current v3 shared-NFT farming contracts will be burned automatically once all liquidity is withdrawn, and replaced for the new contracts via minting.
We have put up a notice linking to this article on the BUIDL, ARTE and UniFi farm pages on Covenants.
