Thread by @WinterSoldierxz

1/ @DeFi_Cheetah is one of my most respected DeFi analysts. But in the spirit of fruitful discussion, I respectfully disagree with some points in his analysis of @CurveFinance V2 vs @Uniswap V3.

A rebuttal🧵

2/ Before I begin sharing my thoughts, make sure to check out the thread by @DeFi_Cheetah. Thought-provoking insights👇

https://twitter.com/defi_cheetah/status/1618645060291284998

3/ TL:DR of my views Pt. 1

(1) Curve ponzinomics are unsustainable
- Curve ve-tokenomics delays & offloads sell pressure, does not solve it
- CRV emissions > Curve revenue + bribes
- Curve + protocols rent liquidity with emissions
- Ve-tokenomics is not favorable to late joiners

4/ TL;DR Pt. 2

(2) Uniswap has a better business model
- Lower cost of liquidity
- Protocol ecosystem provides more flexibility and innovation
- Uniswap symbiotes create new products based on Uniswap mechanisms
- Curve symbiotes designed to extend ponzinomics of CRV

5/ Curve’s utility and value proposition are undeniably important for Ethereum and crypto, and the protocol is often heralded for its innovation with ve-tokenomics, which spawned gauges, bribes, curve wars etc.

6/ But Curve’s ve-tokenomics is ultimately a ponzi-style scheme (ponzinomics) for incentivizing liquidity, either by delaying sell pressure (lock) or offloading pressure to tokens of symbiotic protocols (e.g. Convex, Yearn)

7/ This approach to liquidity generation is successful at attracting mercenary capital and temporary inflows, but is not indicative of TVL sustainability or resilience.

8/ The pic below charts Curve’s TVL (green) along with its emissions (lilac).

Other than the initial spike in emissions for bootstrapping liquidity, Curve’s emissions line chart closely traces its TVL.

Why is this?

9/ Simply put, liquidity mining = renting liquidity with emissions. It is cost-effective and efficient initially, yet if rent payments cease or diminish, liquidity is no longer adequately incentivized and it leaves. (as shown above)

10/ The same applies to $CRV. When emissions run low (or out), only trading fees remain as incentives. Consequently, the benefits for LPs to continue providing liquidity, and for protocols to compete within Curve’s ecosystem erode

11/ Such an approach of selling tokens at a discounted rate in exchange for impermanent liquidity is not sustainable or efficient use of capital, and Curve is well aware of the situation

12/ Which is why Curve uses a lock mechanism for ve- (delay), and offloads its sell pressure to participating LPs and symbiotic protocols such as @convexfinance and @yearnfinance, thereby propping up the value of $CRV with their native tokens.

13/ Even so, the cost of emitting $CRV to “rent” liquidity on Curve far outweighs the value of revenue AND bribes pertaining to the rented liquidity, resulting in significant operating deficits for the protocol.

14/ @DeFi_Cheetah opines $CRV emission, while often perceived as a cost for the protocol, is actually fees to Curve paid by projects in exchange for access to liquidity.

15/ In other words, the emission of $CRV has been “prepaid” by the protocols to secure on-chain liquidity, thereby offsetting $CRV’s inflationary pressure.

16/ Let’s assume this were true.

Ergo, Curve’s total operating profit/deficit = (total fees + total bribes) - total emissions

($101mn + $234mn) - $1.2bn = - $865mn

This deficit is highly destructive for $CRV and its holders.

17/ Furthermore, according to LlamaAirforce, every $1 spent on bribes yields $1.42 for $CVX holders, which means protocols are paying $1 for more than one dollar of $CRV, thus refuting the idea that bribes suffice as “prepayments” that offset inflationary pressure for $CRV.

18/ In reality, all liquidity on Curve is rented.

Its ve-model is a house of cards:
(1) Protocols rent liquidity from Curve (bribe for $CRV)
(2) Curve rents liquidity from LPs ($CRV for liquidity)
(3) LPs mint liquidity from Protocols (liquidity for $CRV)

19/ Curve takes the brunt of the operating costs under this model, and employs ponzinomics to delay the inevitable effects of continuous deficit $CRV emissions, which is unsustainable

20/ Last but not least, Curve’s ve-tokenomics disproportionately favors first movers and deters new entrants. Neither bribes nor $CRV accumulation are feasible liquidity strategies for new protocols that are often capital and resource constrained

21/ It will only be increasingly difficult for any new (and potentially game changing) protocols to build deep liquidity on Curve as first movers extend their $CRV lead on the platform

22/ Now, onto Uniswap’s advantages.

I will start by pointing out DeFi protocols operate like early stage tech startups. They burn cash to acquire users, drive top-line growth, and reach critical mass, upon which they become self-sustaining

23/ Cost efficient customer acquisition + retention is imperative for long term sustainability and growth. In a DeFi context, this translates to acquiring + retaining liquidity at the lowest possible cost

24/ Uniswap relies solely on fees generated by trading, yet still successfully attracts and retains liquidity on its platform.

25/ Which is indicative of a self sustaining low cost business model that is positioned for explosive growth and success once DeFi reaches mass adoption

26/ Uniswap also has a growing ecosystem of innovative symbiotic projects driving V3 adoption, by enhancing user experience and optionality

27/ @xtokenterminal removes the need for manual input and active management of key parameters of LPing, addressing one of the biggest criticisms of Uni V3.

28/ @ArrakisFinance offers trustless algorithmic market making strategies to create deep liquidity on Uni V3 through automated strategies

29/ @Panoptic_xyz and @GammaSwapLabs labs are innovative examples of #OpFi symbiotes that expand Uni V3 use cases by fundamentally altering LPing as a DeFi primitive.

30/ @panoptic_xyz offers trustless, permissionless options trading by enabling execution on any underlying asset pool within the @Uniswap v3 ecosystem, with instant settlement.

An informative thread by @Slappjakke delves into the protocol's architecture:

https://twitter.com/Slappjakke/status/1600913968993746944

31/ @GammaswapLabs’s innovation enables gamma long shorts using LP tokens as an asset representing volatility. Gammaswap Uni V3 LPs (short) receive an upfront premium from traders betting on volatility of underlying tokens (long)

32/ You can refer to my research deck for a deeper understanding of Gammaswap:

https://twitter.com/WinterSoldierxz/status/1616450147956981764

33/ The point is, Uniswap’s symbiotes are more sophisticated since their advantage does not come from $UNI, but rather the enhancement of V3’s mechanism, which offers more compelling and useful products than protocols built to extend $CRV ponzinomics

34/ Innovation is what will drive DeFi forward, and sustainability is what will make DeFi stay. Imho, Uniswap is better positioned as a driver of both in the long run.

35/ In the same spirit as @Defi_Cheetah, I welcome discussions and divergent thoughts to calibrate my understanding.

36/ Tagging a list of @Uniswap & @CurveFinance threadoooooors to get things started

@haydenzadams
@ammori
@NoahZinsmeister
@xin__wan
@Mclader
@ConnorYMartin
@patagucci_girl
@saraareynolds
@grabbou
@AseemSood_
@mhonkasalo
@teo_leibowitz
@ashleighschap
@frogmonkee
@sgallardo_9

37/

@slappjakke
@EricCryptoman
@0xJamesXXX
@Patrick_Lung
@ThorHartvigsen
@0xTindorr
@eek637
@charlie_defi
@VoldiemortEth
@charliemktplace
​​@DegenSpartan
@DefiIgnas
@DeFi_Dad
@thiccythot_

38/ If you liked the content, please like & RT the first tweet linked below so more people learn about this.

https://twitter.com/WinterSoldierxz/status/1619054919058857984?s=20&t=KDtFLSoZJwwXoOweEW9beQ