This post is part of the actions outlined in the Treasury management M1-2022 post to increase IDLE markets efficiency and slippage reduction.
This proposal aims at concentrating part of the current Uniswap v3 deployment (28k IDLE and 11 ETH) into a 土 4x price range, and deploying additional 50k IDLE out of range to improve the oracle’s resiliency.
Uniswap v3 allows LPs to provide liquidity in a particular range, increasing capital efficiency and reducing slippage.
Currently, we have 22 WETH and 56k IDLE in UNI v3 full range. The goal of this treasury operation is to deploy half of this liquidity (11 WETH and 28k IDLE) into Uniswap v3 with a range of 4x above and 4x below the price of IDLE, which would help the IDLE/ETH Uniswap V3 pool to have 2x concentrated liquidity and a ~50% reduction in slippage in that specific range.
At the time of writing, the liquidity deployment in a 土4x range would entail the following prices $0.28 < $IDLE price = $1.10 < $4.40.
Table 1.1 - ROI and fees with different price ranges (last 30 days)
|Full price range (unbounded)||0.30%||4.10%||4.20%|
|土4x $IDLE price range||0.90%||11.8%||12.5%|
|土2x $IDLE price range||1.50%||20.0%||22.1%|
The liquidity deployment 土4x the price range requires minimum efforts and less impermanent loss, as the deployment would cover a wide range.
We are not going forward with active liquidity management protocols, as it would increase the dependencies while providing minimum economic benefits. With a range as wide as 4x, the auto-compounding feature will result in a 0.7% ($700) increase in APR, which can’t justify the use of a third-party service at this moment.
Table 1.2 - Current Slippage on Uniswap v3
This deployment will allow to reduce the current slippage also on DEX aggregators as well while increasing the resilience of IDLE’s UNI v3 oracle.
Table 1.3 - Hypothetical Slippage on Uniswap v3 after liquidity concentration
This proposal includes also another 50k IDLE out-of-range deployment, 5x-10x above the current price (between $5 and $10). The position will be manually rebalanced, in case the token price reaches the $5 boundary.
This deployment would accommodate high-size swaps with lower slippage while strengthening the resiliency of the Uni v3 oracle against manipulation attacks. Given that the target range is far from the current price, this action represents a single-sided IDLE deployment with no impermanent loss.
- Treasury League multisig will concentrate 28k IDLE and 11 ETH into 土 4x price range (no on-chain actions).
- Route 50k IDLE from Ecosystem Fund to Treasury League multisig, which will deploy funds into 5x-10x price position in Uniswap v3.
We are going to leave this thread open for discussions and in about 3 days, if there are no objections, we will proceed with the Temperature Check. In case of approval, an on-chain proposal will follow.