Just a few days after the deployment of Arrakis V2 & PALM, we have one of the more high-profile liquidity mining programs on Uniswap v3 to date. Lyra Finance has decided to move its governance to Ethereum Mainnet to better serve its newly cross-chain community. Lyra is partnering with Arrakis to bootstrap mainnet liquidity for LYRA and streamline the transition. A successful LM program would see Lyra accomplish its liquidity goals, LPs performing well (net of incentives), and no UX hiccups for users. Nailing this debut could allow Arrakis to shed its dependence on tightly pegged pairs and rekindle interest in the active liquidity management space. It will be important to monitor this program and its implications elsewhere.
Due to the increased complexity of concentrated liquidity, LM programs on Uniswap v3 have been sparse. Notable attempts such as Ribbon Finance’s program have earned mixed reviews at best. In the meantime, veTokens and bribe designs have proven to be effective ways of directing liquidity. Velodrome, a Solidly fork, has carved out a cozy niche on Optimism with its veVELO bribe system. If Arrakis can effectively incentivize liquidity on Uniswap, it may be difficult for Velodrome to stay relevant. Gearbox/Arrakis could chip away at the peg stability value prop, while Arrakis v2 undermines the effectiveness of bribes for exotic pairs. Generally pretty bearish on medium-term designs that gain traction only while new tech slowly matures.
The next wave of DEX upgrades coupled with a resurgence of simplified liquidity mining is shaping up to be a big narrative heading into the summer.
