RAI Uniswap V3 Mint + LP Incentives Program

Overview

The RAI Mint + LP strategy requires that participants mint RAI and provide RAI/ETH or RAI/DAI liquidity on Uniswap v3 at the same time in order to accrue retroactive rewards. The RAI/ETH Uniswap v3 pool for this program is here and the RAI/DAI one is here.

NOTE: from 9th of August 2021 onward, Uniswap v3 RAI LPs should concentrate liquidity around the RAI market price, NOT the redemption price.

How It Works

  1. Go to app.reflexer.finance or DeFi Saver and mint some RAI.

  2. Go to the RAI/ETH Uniswap v3 pool or the RAI/DAI Uniswap v3 pool and add the RAI you minted as liquidity

You do not accrue rewards if:

  • You provide RAI/ETH or RAI/DAI liquidity without minting RAI (e.g buy from the pool and LP)

  • You mint RAI without adding RAI/ETH or RAI/DAI liquidity

  • The RAI market price is outside or shifted off your liquidity band

You accrue less rewards if:

  • If the RAI/ETH or RAI/DAI price shifts, resulting in the position owning less underlying RAI compared to your debt

  • Your debt goes down due to repaying your debt or liquidation

The exact relevant metric used for rewards is:

min(Sum of all safe debtSum of all active RAI in LP,1)×Sum of active UniV3 virtual liquiditymin(\frac{\texttt{Sum of all safe debt}}{\texttt{Sum of all active RAI in LP}}, 1)\times \texttt{Sum of active UniV3 virtual liquidity}

Example:

ETH price: $3000, RAI Price: $3.02

First, deposit 3 ETH to mint 1000 RAI (Collateralization ratio around 300% and liquidation price around $1500). Then deposit the 1000 RAI along with 1.5 ETH into a Uniswap V3 RAI/ETH. Let look into 2 options for LP price range:

  1. From $2.97 to $3.07 DAI = $0.10 wide range

  2. From $3.015 to $3.025 DAI = $0.01 wide range

Since the second option is about 10 times more concentrated, it will return 10 times more FLX rewards. However, if the price move above $3.025 or below $3.015 the second option will not give any rewards.

LP Strategy

The rewards will be distributed considering how much each LP concentrates liquidity around RAI's market price. To visualize this, let's take the example of Alice (red), Bob (purple) and Charlie (green) who LP in the RAI/ETH pool.

Alice accrues the most rewards because she LPed close to the redemption price

You can see that:

  • Alice accrues the most rewards because she concentrated liquidity really close to the current RAI market price

  • Bob is not accruing any rewards because none of his liquidity includes the tick where the current

    market price is

  • Charlie is accruing some rewards but less than Alice because he has a wider liquidity distribution around the market price

To maximize rewards, LPs have to concentrate liquidity closer to the market price (at the risk of higher impermanent loss).

Important Notes

  • You must use the same address to mint RAI and provide Uniswap v3 RAI/ETH or RAI/DAI liquidity

  • The Uniswap v3 RAI/ETH or RAI/DAI LP tokens must stay on the same address that you used to mint RAI and provide liquidity

  • If you open multiple Safes with the same address, your total RAI debt will be the sum of all RAI minted by each of your Safes

  • If you have several LP positions with the same address, the total sum of the liquidity will be considered for rewards.

  • Only positions from the official Uniswap V3 NFT manager are supported (used by the official UI at https://app.uniswap.org/#/pool). Positions directly minted on the pool contract are not supported.

  • If your Safe gets liquidated, the amount of minted RAI you have decreases by the amount of RAI that got confiscated