UIP-1
Proposal Summary
Short Name
UIP-1
Long Name
Re-investment of the ULP share of the trading fees into the ULP pool
Area of Impact
Logistics
- Where: Uniwhale space at Snapshot.org
- When: 2PM UTC Apr 14, 2023 - 2PM UTC Apr 17, 2023
- To participate, you must unstake esUNW before the Snapshot.org snapshot.
Proposal Description
UIP-1 asks our community if we should update the ULP earning mechanism so that the relevant Revenue Distribution is re-invested into the pool, instead of a direct distribution to ULP holders.
If UIP-1 passes, the relevant Revenue Distribution will be sent to LiquidityPool and accrued as part of the intrinsic value of the ULP, which can be redeemed by its holders. There will be no direct distribution of the Revenue Distribution to ULP holders.
Voting
The voting will take place at the Uniwhale space at Snapshot.org.
The voting will start at 2PM UTC Apr 14, 2023 and end at 2PM UTC Apr 17, 2023
To participate, you must unstake esUNW before the Snapshot.org snapshot. You can stake your esUNW again after your vote is recorded. You are recommended to unstake at least 30 minutes before the intended voting start, to ensure the Snapshot.org nodes can capture your unstaked esUNW.
Snapshot.org is a 3rd-party platform we use to facilitate off-chain voting. In accessing and/or using Snapshot.org, you acknowledge and agree that you shall have no claim against Uniwhale or its affiliates in respect of any loss suffered by you in relation to or arising from your access and/or use of Snapshot.org.
Background
Our single-sided liquidity pool acts as the central counterparty to all positions at Uniwhale Exchange and its valuation proposition to liquidity providers are founded on the well-established academic research that demonstrates, over time, market makers win over short-term traders.
This is, therefore, a zero-sum game between ULP holders and traders: the traders’ profit and losses will be directly transferred from/to the Liquidity Pool (resulting in a price increase/decrease of the ULP).
ULP holders are compensated by the platform revenue distribution and the token emission.
Problem
There are concerns among some ULP holders that the ULP price does not seem to reflect the traders’ profit and losses, especially after observing those days when the ULP price decreased even though the traders lost money.
Cause
Currently ULP price fluctuates based on the traders’ gross profit and loss, while the ULP share of the trading fee (50%) is distributed directly to the ULP holders, on top of the esUNW emission, which is also directly distributed to ULP holders.
So this means the ULP price will go down so long as the traders’ gross profit and loss is positive (that is, before deducting trading fees), even when on a net basis (that is, after deducting trading fee) they lose money (and ULP holders make money overall).
This contrasts with some other protocols where the trading fee earned is re-invested into the liquidity pool. From the net economic perspective, the same value accrues to the liquidity providers. However, the latter has the net effect of increasing the pool price, while the former (our current approach) does not.
Join us!
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