[RFC] Consolidating vdUSH to Mainnet

Dear Community,

I’d like to initiate a discussion and gather community feedback on a proposal to consolidate vdUSH from Binance and Arbitrum to the mainnet. This would necessitate migrating user vdUSH to the mainnet and sunsetting the BNB-USH LP on BSC, as well as the ETH-USH LP on Arbitrum.

unshETH has pioneered a truly omnichain protocol by employing LayerZero technology, making it possible for users to access USH and unshEHT seamlessly on Mainnet, BSC, and Arbitrum. Unfortunately, being an omnichain protocol has its drawbacks. It necessitates maintaining multiple liquidity pools to facilitate token trading, and it requires incentivizing these pools to draw liquidity from market participants.

Currently, unshETH has the following USH liquidity pools across chains:

  1. Binance | Pancakeswap - USH/BNB | TVL - 91.45k | 7d VOL - 334.49k
  2. Arbitrum | Camelot - USH/ETH | TVL - 134.7k | 7d VOL - 150.57k
  3. Mainnet | Sushi - USH/ETH | TVL - 339.54k | 7d VOL - 1.3m

The trading volume and liquidity depth clearly indicate that the mainnet is the principal liquidity pool among the three. While offering users an opportunity to acquire USH and participate in governance on other chains, this has a negligible positive impact on the protocol.

This approach leads to liquidity fragmentation, increases the cost of maintaining liquidity, discourages larger wallet entries due to thin liquidity across multiple chains, amplifies governance complexity and management, and creates a pathway to arbitrage price differences and profit by buying on Binance/Arbitrum and selling on Mainnet, which can put pressure on USH price action.

I believe that unshETH would benefit from sunsetting vdUSH on other chains and maintaining the Mainnet as its sole chain for governance. As vdAMM inherently resides and operates on the Mainnet, and as Project Sentience maintains that as the cornerstone of the protocol, it seems logical for all governing tokens to remain on Mainnet.

Risks and Challenges:

  1. Significant development efforts have been expended to facilitate vdUSH on Binance and Arbitrum. Altering user-locked assets may not be technically feasible.
  2. Since users have their liquidity locked, migrating the LPs may be impossible.
  3. unshETH should remain omnichain, but by staking unshETH, users receive USH emissions, which they will not be able to sell if these liquidity pools are sunsetted, adding unnecessary friction for users wishing to sell their tokens.
  4. Redirecting development resources to this task might hinder protocol growth in the short term, as efforts from handling key integrations or developing new protocol aspects will have to be paused or delayed, potentially negatively impacting unshETH’s growth.

I’d like to hear your feedback, concerns, and thoughts on the proposal of vdUSH consolidation to Mainnet!

2 Likes

I would like to hear from the team about why we should have USH on other chains - what do they foresee us getting from it? Anything?

If there are no strong arguments for USH being multichain, then it should be housed firmly on Mainnet. unshETH can be multichain, but we currently gain little if anything from USH being dragged from one place to another. Also, staking of vdUSH on multiple chains gives us this compartmentalisation of rewards on specific chains, which should not be the case. In the future, if vdUSH were sequestered entirely to mainnet, we should still see rewards for, say, bETH in whatever form, credited to us on BNB chain. I am not sure of the technicalities of all this and it might take a lot of time, regrettably.

But why was this not done initially? Why were different chains given different opportunities to earn different rewards?

As for the challenges, yes there are some. If someone stakes unshETH on Arb, can they not receive their USH rewards credited to their wallet address, which will be the same, on ETH mainnet?

I am also not entirely sure of the technicalities of unlocking the locked LPs on BNB and Arb and getting people to restake on mainnet. I am prepared to do it, personally, and I make up a decent portion of all the pools - mainnet, BNB, Arb.

1 Like

In full support of vdUSH and USH LP consolidation described above

As it currently stands the LP fragmentation creates continuous arbitrage opportunities whenever a significant buy as made on mainnet.

These arbitrage opportunities are capitalized upon solely by arb bot operators who are buying cheap USH on BSC/Arb after big buys on mainnet then selling USH on mainnet to realize their gains.

Their gains do not come out of thin air, they are extracted from USH value.

Voters against this proposal must justify why USH holders should continue to be robbed by the arb bot operators.