Proposed by JakeXBT.
Arbitrum is quickly becoming a hotspot for L2 DeFi activity. In the wake of high profile NFT airdrops, fees on ETH mainnet have skyrocketed, making on-chain transactions for simple financial interactions like ERC-20 token swaps extremely expensive. More and more dApps are deploying their contracts directly onto L2 and bypassing ETH mainnet entirely. This creates a flywheel effect where the liquidity that users port to L2 may never need to return home (or only on an infrequent basis) given enough tangible utility within the L2 environment exists to satisfy all users’ needs. As a result, trade volumes and pool depth on Uniswap L2’s continue to accelerate.
We suggest deploying a novel STFX<>ETH V3 concentrated liquidity pool onto Arbitrium Uniswap. Doing so would solve 3 major obstacles:
- It would provide a low fee environment for users/traders to acquire STFX protocol token
- It would offer optionality for traders to greatly reduce their slippage costs on trades, as MEV exploitation by Sequencers on Arbitrum L2 is essentially nonexistent in current form
- It allows the protocol to tap into “static” liquidity that sits exclusively on L2, with no intention or ability to return to L1
Given that the overwhelming bulk of STFX specific protocol activity has been conducted on Arbitrum (via GMX liquidity), deploying a novel STFX<>ETH pool into this environment would demonstrate natural synergy.
The existing liquidity pool set-up for STFX token consists of the following approximate treasury positions:
- An Ethereum mainnet Uniswap V3 position with ranges 0.4 and 40 cents, comprised of approximately 470 ETH and 21m STFX tokens ($1.6m)
This existing position has accrued swap fees of ~$50k since inception, which we propose recycling into the Ethereum mainnet position. So, the net liquidity pool set-up for STFX token would consist of the following treasury positions:
- An Ethereum mainnet Uniswap V3 position with ranges 0.4 and 40 cents, comprised of approximately 390.5 ETH and 17.45m STFX tokens ($1.33m)
- An Arbitrum mainnet Uniswap V3 position with ranges 0.4 and 40 cents, comprised of 94 ETH and 4.2m STFX tokens ($320k)
Finally, we propose an ongoing monitoring of L2 vs. L1 STFX<>ETH traded volumes. If there is material uptick in L2 volume against L1, the community can re-assess the liquidity spread across the two pools, and deliberate if a rebalancing of capital across the chains may be desirable in future proposals.