[RFC] Replace WETH/DAI 60/40 in Tier 1 with WETH/USDC 50/50

Background

We currently provide 15,000 BAL/week to the 60/40 WETH/DAI pool. We also provide 5,000 BAL/week to the 50/50 WETH/USDC pool & 5,000 BAL/week to the WETH/USDT pool.

  • The USDC/WETH pool currently has $8,800 in liquidity per BAL/week allocated in rewards.
  • The DAI/WETH pool currently has $5,453 in liquidity per BAL/week allocated in rewards.
  • The USDT/WETH pool currently has $6,267 in liquidity per BAL/week allocated in rewards.

The USDC/WETH & USDT/WETH pools are also more capital efficient due to the weighting.

USDC does by far the greatest volume across the Ethereum ecosystem.

Over the last 7 days (as of this post) there was $46.98m in USDC volume via 0x API ( 0x Tracker ), vs. $15.11m in DAI volume.

On 1inch ( 0x Tracker ) there was $11.42m in USDC volume, vs. $7.96m in DAI volume.

Core Proposal

We replace WETH/DAI 60/40 in Tier 1 with WETH/USDC 50/50. Over the coming weeks we phase out rewards for WETH/USDT & WETH/DAI. We potentially direct the T2 slots currently fragmenting our USD/WETH liquidity across multiple pairs towards the WETH/USDC pool, and facilitate other stable->weth swaps via the stablepool.

Dependencies

None that I am aware of.

Risk Assessment

Primarily that USDC for some reason freezes what’s in the pool’s smart contract. I don’t see this as any greater risk than them doing the same for what’s in Maker’s smart contract, which would cause big problems for DAI.

We also may upset some LPs who can no longer pool ETH with their favoured stablecoin.

Open Questions

  • Is it better to have all our liquidity in a single deep USD/WETH pool and facilitate other swaps via the staBAL pool?
    What impact would this have on someone trying to trade e.g. DAI for LINK (currently they’d do DAI->WETH->LINK, if we scale down that pool it would require DAI-USDC-WETH-LINK. Is fragmenting USD/WETH liquidity worthwhile for eliminating this hop for some trades?
  • Do we think it’s important to have some redundancy in our main WETH-stablecoin pool, so e.g. should there be two main pools in case of some black swan event with a stablecoin, at the cost of fragmenting liquidity significantly?

Next Steps

I propose leaving this RFC to run over the next couple of weeks, before moving to a proposal if there seems to be reasonable support. Please answer the snap poll here on whether you support this proposal or not.

  • Yes, it makes sense to replace WETH/DAI with WETH/USDC
  • No, we should retain WETH/DAI 60/40 in T1 (Why? Explain)

0 voters

What other options do we have? the DAI>USDC>WETH>LINK is a reason of concern IMO, especially with high gas fees we might lose traffic.
Is a USDC/DAI/USDT/WETH pool on Tier 1 a possibility? Can we consolidate the 3 pools into one? Is liquidity a concern? maybe we can slowly transition by initially lowering tiers on DAI and USDT and see how the market behaves?

Creating USDC/DAI/USDT/WETH is a major waste really, as you will have much shallower liquidity for each pair than you could going via the stablepool then a deep 50/50 usd/weth pool.

Most volume is USDC->[token] anyway, so the added gas only occurs for other stablecoins. The bet is that having a single deeper pool will mean more larger trades get routed through it. There are a fair few large USDC->WETH swaps on ETH.

2 Likes

this would be an improvement, though a marginal one. I still think my tri pool idea would be a bigger improvement (replace wbtc/weth and dai/weth with wbtc/weth/usdc) via increased competitiveness in wbtc<>stable swaps (no need to do wbtc<>eth<>stable anymore). But I recognize that’s not a popular idea atm.

tldr, I support.

2 Likes

Yeah I think it would be interesting to see what 30k BAL/week going to a WBTC/WETH/USDC equal pool would look like. Although worth noting so far that pool requires triple the BAL per $ on Polygon, vs. the WETH/WBTC on eth. Does ~double the trade volume/fees though, and the polygon pool is still growing. Not a like/like comparison.

I also support it on the basis of showing off a pool others can’t do as our biggest TVL pool.

1 Like

we have no true 1:1 comparisons but seems like there is a higher rewards APY floor on polygon generally compared to mainnet.

curve’s tri crypto has ~double APY on polygon compared to main net. So far ours are following similarly.

2 Likes

The one thing that I liked about the 60/40 nature of the current WETH/DAI pool is that it is the most ETH-centric pool on balancer v2. For people who want to park eth and in some sense, forget about it. If we do move towards a 50/50 WETH/USDC pool, could look perhaps also look at adding a Tier 4 50/50 WETH/stETH pool that might also be combined with incentives from the Lido? This would soften the blow of the move, a potential new partnership, and allow a similar place to park ETH for folks who expect ETH to grow in value.

I think a stETH pool would be good at some point, @DavisRamsey do you remember where the lido convo got to with that? I can’t remember if we were waiting for stablepools, metastables or staking contracts.

waiting for meta pool, we suggested wstETH/3pool BPT and they agreed. soon™

I agree in principle - I am extremely afraid of USDT, I think the project carries more risk just bc recently it came out that T’s are NOT backed 1:1, but buy ‘commercial paper’. (and the leadership is a bit…strange.

FOR SURE - you can say that USDC and DAI BOTH carry different risk, but in my opinion, add up to less.

My idea - Drop USDT/WETH + DAI/WETH to the lowest rewards if not zero. Do what Bak says with USDC/WETH.
THEN - why don’t we try the WBTC/WETH/DAI pool and see if that would attract enough liquid and swaps to be viable.

I mostly support the first change - and the second (the WBTC/WETH/DAI) is open for discussion.

1 Like

I also think this is a good path forward @HavOx.

Would love though to have more community members chiming in: @Eugin, @followthechain, @Coopahtroopa etc.

I agree whole heartedly with this proposal. Do it… NOW!