Thread by @WinterSoldierxz

1/ Uniswap vs Curve Part 2: Why @Uniswap fares better as DeFi infra than @CurveFinance

TLDR:
Curve is more innovative but Uniswap fares better as DeFi infra bc it
(1) Is sustainable & new entrant friendly
(2) Aligns incentives for stakeholders to create a more vibrant ecosystem

2/ This 🧵 is part of my discussion with @DeFi_Cheetah on @CurveFinance & @Uniswap. Both protocols laid the foundation for what we know as DeFi today and deserve your time and scrutiny.

For more context, refer to Cheetah’s latest thread

https://twitter.com/DeFi_Cheetah/status/1619579243561910273

3/ Curve’s ve-tokenomics are undeniably groundbreaking. It is widely emulated by new protocols and, to give credit where it’s due, is highly effective.

4/ Voting gauges are still one of the most robust implementations of game theory in DeFi, with hundreds of millions of dollars tx-ing between stakeholders

5/ However, as core DeFi infra for mass / institutional adoption, Curve falls short in several areas, namely:

(1) unsustainable cost structure
(2) high cost of liquidity
(3) unfavorable to future innovation and late entrants

6/ Cheetah argues $CRV emission costs are “pre-paid” by the following:
🔹Gauge bribes - transfer sell pressure
🔹Trading fees - substitute yield (3crv)
🔹Buy $CRV for locking - reduce supply

If anything, it proves my point on $CRV’s unsustainability

https://twitter.com/DeFi_Cheetah/status/1619579935492030465

7/ All of these mechanisms are built to prolong $CRV’s feasibility as a liquidity incentive, which is unnecessary if deep liquidity is achievable with just trading fees as incentives (100% of which are remitted to LPs), as is the case for @Uniswap

8/ There is simply no need to overcomplicate a token if its underlying economics are sound (as is the case for $GLP).

9/ Don’t get me wrong. Ve-tokenomics is successful (for now), but it’s not sustainable, creates high barriers to entry & discourages late joiners, all are unconducive to ecosystem growth

10/ Cheetah opines for $CRV inflation as means for governance power redistribution, and cites Curve’s emissions cap as a successful preventative measure against $CRV monopolization

https://twitter.com/DeFi_Cheetah/status/1619580132653662209

11/ In reality neither of these are the case bc of $CRV flywheel effect. Convex holds 85% of Curve’s TVL & ~50% of locked $CRV, which is indicative of two things:

12/ (1) Buying + locking $CRV for yield is not economically feasible, which is why almost all LPs choose to stake with Convex

(2) Convex accumulates tons of $CRV through their operations, preventing redistribution of power & extending their dominance from flywheel

13/ Liquidity is expensive on Curve bc new projects are forced to participate in gauges and compete with increasingly entrenched titans like Convex & StakeDAO, as well as other protocols for $CRV…

14/…either through bribes or market buys, neither of which are friendly or feasible for new projects. Flywheel tokenomics also widen the gap between future entrants and incumbent whales

15/ It does not make sense for any new project to build on costly infrastructure and inherit disadvantages when they do so

16/ Uniswap offers a healthy competitive landscape that encourages & rewards innovation, one where there is a true alignment of stakeholder interests

17/ Curve’s stack fixates on ve-tokenomics, and protocol level innovation is driven solely by its core team. Both of these are reductive traits since they limit future innovation and centralize the economic incentives of innovation

18/ Without proper compensation or innovate-able areas, builders will naturally seek new protocols to deploy their code and talents

19/ Most of Curve’s stack is built on blackholing $CRV, whereas Uniswap’s innovation is unrestrained, decentralized, and more diverse as a result, encompassing #OpFi, market making, liquidity management, and much more

20/ For Uniswap, there is no large upfront cost to join. Builders and protocols compete fairly on the basis of ingenuity and execution, and are financially rewarded by users who will happily pay for improved experience & returns

21/ This is how healthy core DeFi infra should operate

22/ Moreover, the haircut model is not unique to protocols atop Uniswap. Convex takes a haircut from users’ yield as does Yearn. Protocols collect fees as rewards for their strategies. It’s how the market works.

https://twitter.com/DeFi_Cheetah/status/1619582700624703488

23/ Cost savings from vertical integration are also negligible vs deficit CRV emissions, which underpin its entire economy.

24/ All in all, I believe Uniswap is more conducive to sustainable growth as DeFi infrastructure, but that is not to say Curve is unable to do the same.

25/ Every AMM comes with its set of tradeoffs that cannot be completely eliminated. It is a delicate balance between the interests of traders vs LPs, and protocols

Curve and Uniswap just have different approaches to the same problem.

26/ Uni V3 brings a new level of value to AMMs by pioneering the new DeFi primitive of concentrated liquidity.

27/ Fee tiers induce liquidity concentration, which addresses the issue of capital efficiency by enabling LP to deploy concentrated liquidity between any two price ticks.

28/ Report from @Uniswap shows that Uni V3 significantly enhances more extensive market depth in frequently traded token pairs compared to top CEXs such as @binance & @coinbase

uniswap.org/blog/fee-retur…

29/ Co-founder @haydenzadams has also provided an angle on capital efficiency in this tweet:

https://twitter.com/haydenzadams/status/1380217938867843072

30/ Many DeFi protocols, including @CurveFinance, have their own set of challenges that may not have been well explored. My viewpoints aim to foster more comprehensive and nuanced discussions that allow for diversity of perspectives

31/ Thus, while acknowledging the astuteness of Curve V2’s design, it’s also essential to recognize the unique offerings in Uni V3, and foster discussions around both protocols to create more informed users.

32/ Fueling the mind with the exchange of thought-provoking perspectives, the conversation with Cheetah was a productive delve into the modern AMM landscape.

A true testament to the power of healthy dialogue and critical thinking💡

33/ As Alan Watts puts it, “There is no such thing as a wrong turn, only unexpected paths.”

After all, everything is a matter of perspective.

34/ A special thank you to @DeFi_Cheetah for his engagement and contributions to my learning 🤝

35/ To learn more about my arguments on Curve V2 <> Uni V3, check out my first thread below.

https://twitter.com/wintersoldierxz/status/1619054919058857984

36/ For @CurveFinance, @DeFi_Cheetah is a certified subject matter expert. Check out his threads here:

Part 1:

https://twitter.com/defi_cheetah/status/1611798497250136069

37/ Part 2:

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

38/ If you liked the content, please like and RT the first tweet linked below.

Feel free to let me know your thoughts on Curve and Uniswap in the comments too👇

39/ Tagging a list of #DeFi gigabrains

@Chinchillah_
@DeFiMinty
@Louround_
@defi_mochi
@CurveCap
@haydenzadams
@ammori
@NoahZinsmeister
@xin__wan
@Mclader
@ConnorYMartin
@patagucci_girl
@saraareynolds
@grabbou
@AseemSood_
@mhonkasalo
@teo_leibowitz
@ashleighschap
@frogmonkee

40/

@Slappjakke
@EricCryptoman
@0xJamesXXX
@Patrick_Lung
@ThorHartvigsen
@0xTindorr
@eek637
@charlie_defi
@VoldiemortEth
@charliemktplace
​​@DegenSpartan
@DefiIgnas
@DeFi_Dad
@thiccythot_
@sgallardo_9
@LouisCooper_
@schizoxbt