Moving current and future LPs to Balancer to dampen front-running and impermanent loss

[archive] 💡 Ideas & Discussions
,
#1

We currently have two liquidity pools, one for XIO/wETH and one for FLASH/wETH, both on Uniswap 2.0.

I would claim that the first is healthy, with a good sized liquidity pool of >$4m and two liquidity mining incentives in the form of the XLP and a double* allocation towards the TBD tokens.

The liquidity pool of FLASH was created with a low $value and since there are no external incentives to provide liquidity, due to the high risk of impermanent loss, it is generally seen as a very high-risk/low-return strategy.
Since the liquidity pool is small, it is much more exposed to vampire/leech attacks and front-running bots.

While FLASH could possibly become a success with no further changes or incentives, I believe that it could benefit greatly with the stronger price stability and more healthy liquidity pool('s) could bring.

My proposal is to move all liquidity of Blockzero Labs from Uniswap 2.0 to Balancer, into an ever growing liquidity pool of wETH and all assets developed by Blockzero Labs.
Contrary to the dual nature of liquidity pools of most DEXs, Balancer allows multi-asset pools (up to 8) with flexible weights.
This would start off with wETH, XIO and FLASH and for each token developed, it would grow to include it as well.

Balancer does not in itself negate impermanent loss, but due to the nature of using more assets in one pool, the liquidity pool becomes much larger/stable, with smaller spikes, leading to less arbitrage and front-running.
The weighting of FLASH would also be very small in the liquidity pool, thus having only a small impact even with decent size transactions.
Balancer is useable via 1inch and Zerion, to name a few tools/exchanges.

While Uniswap 3.0 is in development, it has been so already for a year and a half and waiting for it to release seems unwise at this time, where even a day can feel like a lifetime.

*XIO in the XLP have a four times higher multiplier than XIO in one’s wallet, but requires having half of the value in wETH, thus the end-result is double, not quadrupled.

Simple explanation of Impermanent Loss:
A short guide to Balancer by CoinBureau:

2 Likes
#2

Interesting proposals which definitely have its merits.

Flash’s pool on Uni is too small at the moment, a lot of investors look at pool sizes to gauge a project. But wouldn’t migration to Balancer with a multi-asset pools limit arbitrage opportunities? I’m trying to think about Flash volatility… If Flashvalue decreases, it pushes APY on the dapp up, incentivizing people to flashstake. If enough people get to know about Flash, dipps could be bought as getting cheap FLASH makes flashstaking very lucrative. But then if too many people flashstake, the pools get less and less alt tokens, lowering APY, but highly increasing arb opportunities. People would then sell Flash on Uni, lowering the price. Something similar could happen when Flash’s price goes up. There’s gonna be sellers, but also people who’d swap an alt for flash to sell it…
I apologize if this is confusing, I’m basically thinking out loud. The point is: is volatility good for Flash or not?

#3

I totally agree that the flash liquidity pool’s size is a limiting factor. I don’t see how its going to increase without some sort of incentive structure. Given its size, even if demand flows in, it will dry up quick as the price movements are too severe with small volumes given the small liquidity. I’ve seen otherwise good projects fail quickly because of lack of ability to sustain movement.

I’m not sure migrating everything to balancer is the answer though. Right now Uniswap is the place to be, and I think it will remain so for some time. I’m nervous about compromising the liquidity pool of XIO by moving to a less known exchange, especially as uniswap seems to just be getting more popular as time goes on.

1 Like
#4

While Balancer is definitely much smaller than Uniswap (2.8% vs 41.2% 24h volume*), Balancer is also available via different DEX-Aggregators and services such as 1inch exchange (8,2% of 24h volume) and Zerion.
Just 1inch (~$187.7m) and Balancer (~$63.8m) combined made up over $250m these last 24h, so I don’t think the volume is too low.

*Source

Unrelated, but it would be awesome to have the FLASH dApp included on https://defimarketcap.io/

#5

I agree that there would probably be less arbitrage opportunities with a more stable liquidity pool, but I think that it will still be volatile enough, given the amount of paired alt tokens and this way FLASH itself would (potentially) have a much more solid foundation to increase in price.

With the current liquidity pool, there is definitely still a point to acquire FLASH, to Flashstake, but to truly reach out to a wider market, I believe that it has to also be possible to sell.
As it stands you really cannot sell more than a few ETH worth without crashing the prize and that is due to the lack of liquidity in the pool.
It wouldn’t change with a higher price.

#6

Liquidity is definitely an issue. @alerk323 rose a good point with Uniswap being the main dex though… finding a way to incentivize people to provide liquidity to Uni might be a viable option too. I also feel like Flash is not know enough or that people don’t really get it. I mention it because the more people get into Flash, the more liquidity will be added (likely). But then it a bit of a circular problem: we need more liquidity to attract buyers while buyers will bring more liquidity.

#7

I really like the idea of a multiasset pool with XIO being the base, as that would fit with the blockzero mentality of launching projects off the base of blockzero itself. I’m just nervous about leaving the main DEX. I didn’t realize balancer allows for aggregates, so that does change things somewhat but its still not the main show in town.

Would it be possible/feasible to move some of XIO’s liquidity to balancer and have FLASH join that pool? My understanding is a certain amount of flash is already locked in uniswap (the initial drop) so we wouldn’t be able to move all of it anyway.

1 Like
#8

I like the proposal can’t see why we should’nt try to improve.

Will add Flash when/if someone with knowledge set’s up a proper pool.

#9

i wouldn’t do that… we have to stay in the most used dex… going to a less important and used dex is not a very clever option in my opinion…

it’s like moving from binance to huobi… non sense…

uniswap was key for the success of XIO in its moment…

#11

I understand your point and agree for the most part, I’m not very keen on moving the original pool added by the blockzero foundation,

That being said, if a 100+ Flash’ers or so go together and put some liquidity on a dex where the impermanent loss is greatly reduced would most likley just benefit the project by diversifying it, to me this sounds like a possibility to reach more people?

I’m not very keen to add liquidity on Uniswap (gave it a go but soon realised what I was getting myself into), and very few other people seems to be interested aswell at this stage.

#12

Both Uniswap and Balancer are available via 1inch, Zerion and other DEX Aggregators.
I don’t see many people interacting directly via any DEX for much longer, when you can use a DEX Aggregator with zero negatives and always get the best price from any integrated DEX.

1inch for example has more than 35 DEXs integrated today, while also allowing limit orders.

#13

Looks like someone made a Balancer pool and put 30K liquidity in there

2 Likes