Ongoing Proposal to add a High Leverage [G-UNI DAI/USDC Uniswap V3 Vault on Maker]

There is an ongoing Proposal implemented by the Gelato Network on the Maker Forum that requires your imminent attention: This collateral application was created by the [Gelato Network ]

We highly encourage you to step over to Maker’s Forum and read the full original post by @hilmarx in support of integrating the proposed G-UNI Vault.

Here is a summary of what G-UNI is and its proposed implementation to Maker

G-UNI is an ERC20 wrapper around Uniswap v3 LP NFTs which can be used to make liquidity provision on Uniswap v3 fungible and its fee reinvestment process automated. It basically turns Uniswap V3s liquidity positions into Uniswap v2 like ERC20 tokens. Based on several discussions with MakerDAO stakeholders and Uniswap v3 Liquidity providers, we believe that the G-UNI DAI / USDC pool token would provide great value to Maker users as an efficient way of utilizing their USDC collateral to borrow DAI while earning compounding trading fees on Uniswap v3.

An example of how G-UNI tokens are already used in production today is the INST / WETH G-UNI pool launched by Instadapp. They recently released their INST token and wanted to incentivize liquidity provision on Uniswap v3 for the INST / WETH pair, however they did not have a fitting solution that would make the NFT LPs positions fungible and which could automatically reinvest the earned fees back into Uniswap v3 to create a compounding effect.

That’s why they partnered with Gelato to deploy a G-UNI token that wraps around the INST / WETH pool on Uniswap v3. G-UNI tokens have the following functionalities:

  • Simplicity: Having a simple one size fits all liquidity strategy making market making very accessible for everyone as users don’t have to actively manage their position
  • Fee Compounding: Reinvesting the earned trading fees back into the pool resulting in an automated compounding effect
  • Fungibility: One Uniswap LP token is equal to another, meaning they can be used as money legos in other protocols such as on Maker for collateral or for liquidity mining schemes like what Instadapp is doing, making the underlying capital hyper-efficient

Users can always exchange G-UNI tokens for the corresponding underlying tokens (e.g. DAI & USDC) and the accrued fees that are currently being stored on Uniswap v3 by the G-UNI contract. G-UNI uses no external oracles or other dependencies and G-UNI tokens can be minted and burned at any point in time by liquidity providers.

G-UNI tokens can be created permissionlessly by anyone for any Uniswap v3 pool. However, this application only concerns one specific G-UNI pool which has DAI / USDC as the underlying tokens which are provided as liquidity on Uniswap v3. More G-UNI pools that have different underlying tokens can be added in separate Collateral Onboarding proposals in the future.

The automated reinvestment of fees is a key feature of G-UNI pools, which is conducted by bots of the Gelato Network which act similar to Maker Keepers. Those bots constantly monitor the accrued fees of each pool and execute the fee reinvestment function when sufficient fees have been collected and it is worth executing it. Ranges of the USDC / DAI cannot be adjusted by bots and will remain static.

Each G-UNI pool takes a 1% cut of the accrued fees when reinvesting the fees for building, operating and further improving the G-UNI system.

Not Gelato nor anyone else will have any special privileges for the discussed DAI / USDC G-UNI pool, making the system fully immutable.