Thread by @korpi87

1) I've been liquidity provider (LP) on Uniswap v2 long enough to understand that it was never an easy passive yield. If you didn't actively counteract impermanent loss (IL), it would most likely eat all your profits from fees. How does v3 impact life of LPs? Let's explore.

2) V2 didn't offer LPs any options to manage their liquidity pools. Each LP participated in the same market making strategy (x*y=k). To counteract impact of IL, LPs could merely average their entry prices to the pool and try to time their exit correctly.

https://twitter.com/korpi87/status/1372634332267954176

3) V3 changes this dramatically. Each LP owns a unique market making (MM) strategy by defining a price range on which they wish to provide liquidity to. This way LPs can easily express their opinions on market movements and compete with other LPs.

https://twitter.com/Uniswap/status/1374407418205990921

4) Active management of your liquidity pools takes time, skill and money. You need to constantly monitor price movements (time) and adjust your MM strategy. Each adjustment costs a lot of gas fees (money) and your yield is highly dependent on the price range you set up (skill).

5) So is $UNI v3 a playfield for professionals? Basically, yes. Does it mean that normal users can't profit from passive LPing? Definitely not. Hayden called v3 "a framework for creative passive LP strategies". And this is where it becomes interesting.

https://twitter.com/haydenzadams/status/1380906514307817477

6) Big brains will work on LP strategies to maximize yield from frequent adjustments of price ranges. This is an excercise which often goes beyond the skills of Solidity devs. You need smart data scientists to model and test data patterns and come up with optimal solutions.

7) This brings me to two main conclusions for $UNI v3:
- Most individuals won't be able to compete with professional MM strategies.
- Projects which combine the teams of skilled devs and data scientists will outperform the others.

Let me introduce you to @VisorFinance $VISR.

8) I must admit I was very skeptical when $VISR launched in March. I thought it was just a fork of @_alchemistcoin $MIST bringing little new to the space. But my colleagues from @DeFiOmega were extremelly bullish from the very beginning and this slowly became contagious :)

9) Each Medium article from @VisorFinance made me realise that $VISR might have started as a fork but it was also bringing a fresh breeze of innovation to DeFi. $SUSHI also started as a fork but does anyone think of it this way today? Forking and improving is the way to thrive.

10) When it was announced that $VISR would offer active liquidity management on Uniswap v3, I started paying more attention to the project. I was still on the sidelines knowing that there were many competitors working on the same concept. @GammaStrategies changed my perspective.

11) @GammaStrategies is an organization funded by $VISR to solely focus on active LP strategies. @VisorFinance initially allocated $500k to hire skilled data scientists. This is the bullish merge of devs and data scientists I mentioned earlier.
medium.com/visorfinance/i…

12) Active liquidity management by @VisorFinance starts on 17.05. At the moment it's impossible to say what percentage of the market it will capture but it's definitely a lucrative pie to fight for. Why? Because Uniswap v3 generates a lot of volume and fees for LPs.

13) In last 7 days volume on Uniswap v3 reached $5.48B which generated $20.09M for LPs. @VisorFinance plans to start with top 15 pairs only but they actually constitute the great majority (87%) of volume and fees: $4.78B and $17.63M respectively.
duneanalytics.com/gammastrategie…

14) LP Fees in v3 aren't automatically re-deposited to the liquidity pool as in v2. They are stored separately and how they get reinvested is defined by the LP strategy. @VisorFinance proposed a model in which 10% of the fees are used to buy $VISR and distribute to VISR stakers.

15) This is the tokenomics model I really like. It links the success of the protocol with the price appreciation of the token. The more liquidity is locked in Visor Vaults and the better LP strategies they have, the higher buying pressure on $VISR is. Let's explore some figures.

16) I consider two scenarios for Uniswap v3 total weekly volume:
- Conservative: $5.48B (based on last 7 days).
- Optimistic: $7B (average daily volume in last 2 days multiplied by 7).

Visor market share is hard to predict now so I chart all variants from 1% to 10%.

17) Depending on Visor market share weekly buybacks range from $17k to $176k in Conservative and from $23k to $225k in Optimistic Scenario. This revenue distribution model transforms $VISR from just a governance token (most projects in DeFi) into a productive capital asset.

18) Not many projects in DeFi distribute revenues to token holders. We can take a few that do and use Price to Earnings metric (P/E = Fully Dilluted MC / Annualized Tokenholders Revenue) to compare them. Lower P/E indicates that token may be relatively undervalued to others.

19) I used irreplaceable @tokenterminal to collect data on protocol revenue. I chose a few projects from top 10 by cumulative protocol revenue in the past 7 days and calculated their P/E (13.05):
- $MAKER: 33x
- $SUSHI: 38x
- $COMP: 142x
- $AAVE: 292x

tokenterminal.com/terminal/metri…

20) P/E for $VISR is dependent on the size of buybacks. At price of 2.7$, P/E ranges from 29 to 294 in Conservative and from 23 to 230 in Optimistic Scenario. Even the highest P/E in these calculations don't seem to be too high for such a young protocol. $TSLA has P/E of 582 :)

21) Visor Vaults allowing users to passively earn fees from active liquidity provision in Uniswap v3 is, in my opinion, the most important feature of the protocol and has the biggest impact on $VISR token price. But it's not the only feature.

22) Visor Vaults may play an important role in the new generation of yield farming using Uniswap v3. Currently used solutions support LP tokens from v2 and won't work with LP tokens from v3 which are represented by non-fungible tokens (NFTs).

23) There are more nuances with Visor Vaults but I should probably leave it for another thread :) Summing up, I think @VisorFinance is an interesting project which taps a huge and yet undeveloped market of automation for Uniswap v3 LPs. It's definitely worth observing $VISR.

24) TL;DR (1)
- Uniswap V3 generates a lot fees for LPs but LPing takes time, money and skill.
- Many LPs may prefer to use passive LP strategies which actively manage liquidity pools.
- LP strategies created by teams of skilled devs and data scientists will outperform others.

25) TL;DR (2)
- @VisorFinance funded an organization dedicated to build advanced LP strategies.
- 10% of LP fees generated by Visor Vaults will be used to buy back $VISR and distribute to stakers.
- $VISR becomes a productive capital asset with competitive P/E ratio.

Disclaimers:
- Not financial advice :)
- I hold $VISR.
- I created this thread in cooperation with @VisorFinance.