π Uniswap v3 would not exist without the the rest of the team at Uniswap Labs
π And it would not exist without our advisors, investors, contributors, and incredible community of users and developers
I'm so grateful to be surrounded by so many amazing and talented people
5/
I was originally planning on posting a thread on the tradeoff space between low slippage and price risk (imp loss), and how Uniswap v3 "solves" these problems by exposing the tradeoff space between them
But had to write this one first π
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Uniswap v3 provides the only possible "solution" to impermanent loss and price impact
It also lets you reduce total price risk while increasing your impermanent loss (relative to v2) with concentrated liquidity
This might need a blogpost but I'll try a long thread first
2/
"Impermanent loss" (IL) refers to the fact that if you sell a token before it rises in value it would have been better to hold it and sell more at the higher price
Similarly, if you buy a token and it drops in value it would also have been better to hold
3/
The "impermanent" part refers to the fact that if you sell a token and it rises in value you, but buy it back as it falls in value you are back to where you started
IL is only "impermanent" if prices eventually revert to where they started. Then all fees are pure profit
Result 1:
"If the volatility of an asset is high enough relative to its average rate of return, LPs on Uniswap will do better than HODLers over time, even when the only incoming trades are arbs."
TLDR: LPing can be good without "retail" volume and arb is not bad for LPs
3/
Result 2:
In a zero latency, zero network fee, arbitrage-only (no "retail") world, the profit-optimizing LP fee approaches (but never touches) 0.
This was one of the more shocking results
TLDR: Lower fees = more profitable arb trades = more total fee revenue
Second, you canβt directly compare manipulation resistance of entirely on-chain oracles that pulls from dex with something like chainlink that reports off-chain data
The attack surfaces and trust assumptions are very different
3/
Uniswap TWAPs report 100% accurate average of Uniswap price (at start of block) across arbitrary time periods with perfect reliability and accuracy.
The cost of manipulating is whatever is lost to arbitrage by moving the average market price across this period
Can't tell who is pretending and who legitimately doesn't understand that the $1B TVL deposited in an incredibly high risk investment on a single days notice is mostly massive whales
Anyone talking about community vs VC here is either delusional or intentionally misleading.
2/
This is not YFI. Andre built something new and real, that has value.
Sushi is one days effort by any competent dev at most.
It's just whales playing whale games trying to cash in on a hype cycle and the value created by Uniswap.
Not surprised to see @iamDCinvestor talking about this, he's one of seemingly few people on crypto twitter who seems to understand the games whales play when the stakes are raised (and tries to explain them).