I agree with moving the UniV2 FXS-Frax liquidity over to Fraxswap from UNI, this seems like a no-brainer to me.
I am still hesitant about rewarding this pool with emissions-based rewards from the gauge rather than protocol profit-based rewards that currently only go to veFXS holders.
This was tangentially discussed in this thread: Switching from veFXS to ve(FXS-FRAX LP) but in summary, FXS-Frax liquidity is some of the most valuable LP for the protocol to have locked since it dampens the FXS volatility and locks more Frax away from circulation, both of which are valuable for the protocol Frax.
If we’re already unlocking the FXS-Frax liquidity (which is introducing a lot of risk, even if it is quantifiable in some respects), I’d rather see it get added to the veFXS pool and be rewarded from protocol profit rather than emissions. For more on how this could work check out the other thread.
Since this LP is so important to Frax, we really need to work to ensure it doesn’t get siphoned away, and this proposal as-is would probably see a drastic drop in the amount of locked FXS-Frax liquidity. Yes, lots of this LP is coming from some of the earliest, most fraximalist investers (like me!) but ultimately what they will see is an up to 40% APY drop to something much less. The biggest gauge option right now receives about 25% of the FXS rewards, so ~3000 FXS daily, even if the whales of FXS-Frax LP go all in on it’s gauge it’s unlikely to capture anything close to the 67% of the gauge that would match the previous APY and LPs will be less likely to lock into something new with a lower rate and no other change.
Contrast this to adding this FXS-Frax LP to the veFXS pool where it would receive less APY but have voting rights, and profit-based instead of emissions-based yield that will remain somewhat consistent instead of halving multiple times over the potential new 4yr lock and personally, I’d be more willing to stomach the change instead of leaving when it unlocks.
Maybe there’s a better way to incentivize FXS-Frax LP than this but I just want to stress that it’s very important and valuable to the protocol in ways that some of our other locked liquidity cough veFXS cough is not. It’s important that whatever we do it is incentivized to stay.
I want to preemptively say I’m not just cheerleading FXS-Frax because I’m a bagholder but because I think it has a uniquely strong value proposition that is explained more in depth in the other thread Switching from veFXS to ve(FXS-FRAX LP)