Olympus Pro / G-UNI Program Review

Overview

Gelato’s bond program with Olympus Pro ran from 19th January to 23rd February. The program represented the first time that Olympus supported the bonding Uniswap V3 liquidity using our G-UNI protocol. We would like to share the results of the program and our assessment of its future applicability.

Original Objectives

As per the proposal we recognised that there was thin liquidity in the GEL/ETH pool on Uniswap V3 - particularly in the lower price ranges - adversely affecting the experience for traders with significant price slippage and price impact.

Various solutions were considered but at the time we felt that creating a protocol owned liquidity pool via Olympus Pro and G-UNI was the best option; enabling us to:

  • Build liquidity depth in the lower range of the pool
  • Further demonstrate the composability of G-UNI
  • Avoid the pitfalls of traditional liquidity mining programs
  • Minimize amount of team resources required so that we could focus on our core mission

Results

The map of liquidity depth at the start of the bond program is shown in red in the diagram below, with decent depth at the higher price ranges, including some highly concentrated positions reflecting likely range orders.


The green area reflects the liquidity depth after the program and as can be seen depth has been added over much of the range and down to lower price levels.

In total 7077 GEL-ETH G-UNI LP tokens were bonded, in 34 bonding events and by 19 different wallets. These LP tokens were made up of 131,382 GEL tokens and 117.2 ETH - representing a total USD value of approx $477k at time of minting. 6548 of these G-UNI LP tokens (92.5%) were bonded into Olympus Pro.

In return for adding these 6548 LP tokens, bonders received a total of 468,491 GEL tokens. The value of these tokens based on their values at the time was approx $523k.

The average “price” that bonders therefore acquired GEL at was $0.94. The average market price of GEL over the bond program period was $1.13, so a near 17% discount.

The bonded G-UNI is now under the control of the Gelato DAO and we can use the capabilities of G-UNI to automatically compound trading fees earned back into the pool and rebalance ranges over which the liquidity is deployed.

The bond program did operate smoothly and completely autonomously which did represent a considerable benefit for us enabling us to keep focused on delivering our roadmap and not worry about negotiating token sale deals.

An issue that other protocol users of Olympus Pro have encountered is the tendency for bonders to immediately sell their redeemed tokens, creating sell pressure and negating one of the anticipated benefits of running a program like this.

If we look at the pattern of redemptions (in red) and sales by these same users (blue) we can see that at the start of the program redeemers did indeed tend to sell their redeemed GEL pretty much immediately but over time this trend faded away and bonders appear to be holding on to their tokens.


Note: only DEX based sales are shown on this chart.

Conclusions

The program delivered on several of our core objectives and we were delighted how easily G-UNI integrated with Olympus Pro. Olympus Pro is a complex product for many end-users which inevitably limits the population of users who can navigate this complexity and optimize the best rewards.

In terms of pure economic value we know that we could have negotiated OTC deals for GEL tokens that would have been on better terms. For a protocol at our current level of decentralization such OTC deals probably represent a better approach but with the trade-off that they take effort and time. For protocols that are fully decentralized from the get-go, Olympus Pro makes a huge amount of sense.

The liquidity situation has improved although we recognise that there is plenty of scope for it to improve further. As we highlighted in the original proposal we appreciate the need for GEL to be efficiently tradable on other networks and we expect to be making announcements on this soon….

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