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The Tally Newsletter, Issue 24

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The Tally Newsletter, Issue 24

March 24, 2021

monetsupply
Mar 24, 2021
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The Tally Newsletter, Issue 24

newsletter.tally.xyz

Welcome back for issue 24 of the Tally Newsletter, a publication focused on all things decentralized governance. We’ll keep you updated on key proposals, procedural changes, newly launched voting systems, shifting power dynamics, and anything else you need to know to be an informed citizen. 

This week we dig into the Uniswap v3 launch announcement and implications, plus quick updates on the wider governance ecosystem.

We’d also like to share that Tally is hiring full stack engineers anywhere in the Americas time zone. If you’re interested in working with us to make on chain governance work, apply on our jobs page!


Uniswap Announces v3

TL;DR: Version 3 of the protocol will incentivize integrations and grant more power to UNI governance than ever before. 

Uniswap’s v3 upgrade has been one of the most anticipated advances for the crypto space over the past year. But even with hype building from shortly after the launch of Uniswap v2 in May of last year, the impact of the protocol upgrade can’t be overstated.

Twitter avatar for @Uniswap
Uniswap Labs 🦄 @Uniswap
1/ 🦄 Today we are thrilled to present a detailed overview of Uniswap v3, the most flexible and capital efficient AMM ever designed! 🏃 Mainnet launch is scheduled for May 5, with a scalable Optimism L2 deployment set to follow soon after uniswap.org/blog/uniswap-v…
uniswap.orgUniswapAll about Uniswap V3.
5:07 PM ∙ Mar 23, 2021
8,335Likes2,640Retweets

V3 brings advances in a few key areas. First, it offers extreme capital efficiency and fine grained control for LPs. Where Uniswap v1 and v2 required users to provide liquidity over the entire range of possible prices, users in v3 will be able to provide funds over a chosen price range between two geometrically determined “tick” values. This effectively concentrates and leverages liquidity, allowing for greater trading volume with less slippage (on the other hand LPs experience amplified divergence loss from price changes).

Among other use cases, this allows for Uniswap to compete with Curve and other exchanges optimized for stablecoin swaps. 

Twitter avatar for @hasufl
Hasu @hasufl
Here‘s a take I haven‘t seen before: Uniswap v3 is basically an attempted killshot at Curve
9:01 PM ∙ Mar 23, 2021
497Likes26Retweets

LPs will receive fee earnings in proportion to the liquidity they provide within a given range, which creates potential for a competitive dynamic where actively managed LPs can earn a greater share of swap fees. As a result, this may make it more difficult for passive LPs to use the platform, or for “long tail” low capitalization assets to build liquidity. 

Twitter avatar for @Fiskantes
🃏Fiskantes @Fiskantes
@mhonkasalo @fintechfrank How does the dynamics between LPs change? E.g. is v3 is making LPins drastically more competitive within the same pool? If no, explain why....
1:09 PM ∙ Mar 24, 2021

However, this should greatly increase Uniswap’s appeal to professional market makers. It also gives yield aggregators and vault strategists like Yearn a huge opening due to updated fee distribution mechanisms for Uniswap v3 pools. 

Unlike in v1 and v2, where LP shares were represented by fungible erc20 tokens and all swap fees were automatically reinvested, v3 will create non-fungible LP positions that don’t reinvest funds. This is necessary to support the increased LP flexibility present in v3, but also creates immediate opportunities for yield aggregators and other integrations. 

Protocols like Yearn can create managed LP strategies which reinvest fee earnings on behalf of users (in addition to any other active liquidity, borrowing, or hedging strategies). And with total LP assets requiring management potentially reaching into billions of dollars, this could provide substantial tailwinds for this market segment even if the final strategies can only command low fee margins. 

V3 brings significant governance changes in addition to updates to the core exchange protocol. Unlike most other projects in the space, and potentially in response to the experience with Uniswap v2 being forked ad infinitum, v3 was released under an uncommon software license that only transitions to open source after 2 years. This will limit competitors’ ability to copy Uniswap’s feature set, although anonymous deployers could still theoretically make use of the code in an unapproved project.

Twitter avatar for @The3D_
Emilio Frangella @The3D_
The NoDelegateCall github.com/Uniswap/uniswa… prevents using the contracts as logic in external proxies, which essentially avoids anons pulling a "Swerve" on top of the uniswap protocol. In line with the license restrictions
github.comUniswap/uniswap-v3-core🦄 🦄 🦄 Core smart contracts of Uniswap v3. Contribute to Uniswap/uniswap-v3-core development by creating an account on GitHub.
8:58 PM ∙ Mar 23, 2021
40Likes3Retweets

The contracts were built to resist any attempts to circumvent the license through using contract logic in an external proxy. This was the strategy employed by Swerve to copy the Curve protocol even though the latter was not released under an open source license. 

The ownership structure is also novel, with the license being under the direct control of Uniswap governance. This is handled by giving canonical control of the license to the uniswap.eth ENS domain, and represents an early test case of decentralized organizations owning IP and other intangible assets. Luckily for the wider ecosystem, governance can accelerate the open source transition but cannot delay or halt it.

Twitter avatar for @visavishesh
Vishesh 🔬 @visavishesh
👀 As I read it, in v3 @Uniswap governance has the option to set $UNI protocol fee to be (or 0 ofc): anywhere from .005% to .25%. This is more than the previously understood .05% cap. Governance can also add more trading fee values to the set.
Image
8:49 PM ∙ Mar 23, 2021
44Likes6Retweets

In contrast to Uniswap v2’s simple, one size fits all fee framework, v3 gives LPs and governance a much larger parameter space. LPs will be able to choose from among 3 possible levels for swap fees (0.05% competes with stable swaps like Curve, 0.3% matches existing Uniswap implementation, and 1% favors high volatility pairs), while Uniswap governance will have the freedom to select within a range of possible protocol fee shares on a per pool basis. Uniswap governance could even effectively subsidize liquidity for partnered protocols by offering reduced fees rather than UNI token incentives. 

With much greater control over protocol parameters and assets, we can expect Uniswap governance to begin heating up again with more proposal activity. Likely top priorities include considering the case for activating Uniswap v2’s 0.05% protocol swap fee, and developing processes to handle the ever greater number of governance concerns in v3.


In Brief:

  • Compound proposal 41 passes to create upgradable WBTC market: 

  • Compound’s governor bravo upgrade has nearly enough support to be submitted as an autonomous proposal, delegate here:

Twitter avatar for @Arr00c
Arr00 @Arr00c
Just another ~7300 COMP needed. Help us get there!
Twitter avatar for @Arr00c
Arr00 @Arr00c
The Governor Bravo CAP (Compound Autonomous Proposal) is live at 0xd122638eca5bb644591fe660fce0b85e2ab6186a. If you want to see Governor Bravo become a reality, please delegate your COMP to the CAP. When the CAP reaches 100k COMP delegated, it will turn into a proposal.
1:46 AM ∙ Mar 24, 2021
12Likes6Retweets
  • Inverse proposal 13 considers incentivizing liquidity for INV backed loans with Ruler protocol:

  • Inverse proposal 12 passed, accepts ownership of Dola / Anchor lending protocol: 

  • PoolTogether resubmits POOL prize vote as proposal 4 due to a defect that prevented execution of proposal 3.


Thanks for joining us for issue 24 of the Tally Newsletter! Be sure to check out the Tally governance app, join us on Discord, and subscribe to our protocol calendar for the latest updates!

Anything we missed? New developments or protocols you’d like to see covered? Drop us a line at newsletter@withtally.com

Best,

Nate, Tally

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