ACX liquidity is an ongoing topic in the community. I want to use this forum to share some observations and gather feedback and views to help guide any potential actions we should consider taking.
Open questions to discuss:
- Should we increase or decrease incentives on platforms such Aura?
- ACX liquidity is primarily on Balancer, should we consider other decentralized exchanges such as Uniswap v3 with the help of projects like Arrakis?
- Should we consider other ways to increase liquidity in ACX? For example, there was a discussion about community owned liquidity (COL).
- Should we explore a way to create protocol owned liquidity (POL) or other ways to accrue value to the Across Dao treasury?
Current ACX Liquidity
We have received mixed feedback about ACX liquidity. Some people believe liquidity is appropriate for the market capitalization of the token whereas others believe the liquidity is poor.
At the moment, ACX liquidity is primarily on a Balancer pool that is incentivized through bribes on Aura. The initial proposal that describes the construction of this is here. Risk Labs is consistently incentivizing this pool and the process should migrate to the DAO to manage in the near future - read about this here.
For token holders who believe they experience poor liquidity we notice two consistent themes:
- The user does not see the Balancer pool where the bulk of ACX liquidity is located and incentivized. Uniswap has very little liquidity and platforms such as DEX screener do not show the Balancer pool. The use of aggregators such as CoW Swap solves this problem. Should we do a better job of telling users where to trade ACX? Or is there something else we can do?
- We have noticed that the “slippage” value shown on aggregators is incorrect. For example, when we compare the ACX / USD price from execution to the price on Coingecko or Coin Marketcap it ties out; however, depending on the day a large positive or negative slippage number can appear. We are uncertain as to why this is and could spend some time on understanding this.
We try to measure liquidity in a different way by measuring the depth of the market relative to comparable tokens. We used CoW Swap to figure out the price for transacting 0.1% to 1% market cap of $ACX, $HOP and $STG. From the table below you can see that we have much better liquidity than $HOP, but liquidity is not as great when compared to $STG. Stargate has a much larger market cap and spends a lot on incentives to create deeper liquidity pools. In addition, they are also listed on centralized exchanges.
ACX on a L2
There have been some discussion about this and there seems to be a general debate that involves the following:
- Is there actually any use at the moment for having $ACX on a L2? What would the purpose be?
- Are there benefits to having $ACX liquidity on a L2 such as supporting the L2 ecosystem and building stronger relationships with those projects.
- Does this fragment our liquidity given we would have $ACX on mainnet and a L2?
Velodrome provides some information and arguments for pursuing L2 liquidity. The team lays out a plan and how the economics of it would work in this discussion.
Please share any feedback you have on ACX liquidity and also take a few seconds to respond to the questions below.
Should we take action to improve $ACX liquidity on main net?
- Yes, we should explore options to improve liquidity in $ACX.
- No, liquidity is fine, we do not need to take action.
- I’m not sure or I would like more information.
Should we support $ACX liquidity on a L2?
- Yes, there should be liquidity to trade $ACX on a L2.
- No, there is no need or the costs relative to the benefits for $ACX liquidity on a L2.
- I’m not sure or I would like more information.
The current Balancer pool pairs ACX with wstETH, but we should only incentivize ACX pairs that are also providing liquidity to the Across bridge. We can use a Balancer Boosted Pool with Across LP tokens to incentivize both ACX trading liquidity and underlying bridge liquidity at the same time.
Incentivizing the opening on L2 makes more sense on mainnet, think about the smaller size holders, it is not the same to try to open a position on Arbitrum than on Mainnet.
Also thinking about Optimism, Velodrome and their bribes, plus leveraging it with BeefyFinance or PickleFinance strategies and looking for the opportunity to create DCA in MeanFinance could help incentivize this in L2.
- I think Balancer’s UI/UX is rough, and combined with L1 gas fees, makes trading ACX a pain in the butt.
- I think Risk Labs over-indexes on product-only focus. A healthy, easy to trade token is good for the product and awareness.
Therefore, I think reasonable liquidity on an L2 is a great idea. This is combined w/ the fact that we can get support from Velodrome for rewards (Right?) – I’m a big fan of velodrome. I also think doing something with Optimism is a good call right now–The pendulum of attention will inevitably swing from Arbitrum to someone else, and I think if Across invests in our relationship with Optimism now, it’ll pay off when things pick up over there.
This sounds interesting, but does that mean there needs to be an Across LP / ETH pool to make this work? Just not sure how liquidity will be like if a pool is created this way.
Also, the Across LP would not earn Across reward locking emissions.
And another question for this and in general - should we just move away from bribing all together. the emissions / ACX bribed started around $2.50 and it’s creeped down to $1, so economics aren’t as great.
We could even consider incentivizing using our own reward locking system
What would the cons be, regulation apart, of listing on a centralised exchange, as well?
Having ACX on an L2 would increase incentive to hold, utilise and trade ACX, given its easier to generate a profit by traders and coming up with more use cases, DeFi or other, such as gaming.
cons of L2 liquidity are the cost of promoting and maintaining it. the DAO treasury would need to pay ACX to incentivize it - LPs naturally won’t be providing that liquidity.
As for centralized liquidity - it’s been brought up to exchanges or they have inquired, but there’s no set time line as to when that happens. so not fully in our control.
Hey yall this just came across my desk a few days ago. I have been thinking and I wanna make sure you are aware of what we do at Bunni.pro. We should be able to help in a few different ways.
We are a liquidity engine built on top of Uni v3. In its own rights, Uni v3 is very powerful, but the reward is limited for LPing without incentives. We solved this with our liquidity engine. Think Curve but for Uni.
Before incentives we start saving LPs right away by allowing LPs on Bunni to mint ERC20s instead of the gas inefficient Uni v3 NFTs. Providing valuing from day 1! Next we offer LPs on bunni incentives on top of Uni trading fees! Incentives are paid in oLIT which is an option to buy LIT at a discount. Rn its a 50% discount this can be changed by the community. The other 50% comes from WETH. These are transferable & do not expire. We also have an interesting feature where holders of our gov token get up to 10x boost on those incentives. This is Curve math but with a 10x boost instead of a 2.5x. (TLDR is if your % of the total supply of veLIT matches your % of the LP pool you get max boost). This is subject to change and certain folks would like to see it lowered to increase the non boosted APY (onboarding more TVL). Holders of our gov token direct these incentives via our gauges.
Protocols can bribe voters on Hiddenhand & Warden this is extremely efficient for the protocols participating! As of last epoch it was $1 in bribes = $3 in emissions!
veLIT holders also get 50% rev share including oLIT redemptions which has been pretty profitable
We have a Dune page that you can also see a lot related to us competing with Curve even with much less TVL due to Uni v3 concentrated liquidity.
So imo we help to get you on Uni which should help solve common complaint 1 and 2 while also creating deeper liquidity at a more efficient price!
We are also in the process of moving to L2 so work done with us on L1 could also lead to an improved situation on L2. We could grow together for a long time…
I am here if yall wanna do a community call or just talk shop! Hmu!