Uniswap V3 LP loses about $100 million, uncovers inventor of 'financial perpetual motion machine

Original title: What does the V3 LP post warning Uniswap about $100 million Loss really say?

Original article by Alex

原文编译： Katie 辜 ，Odaily 星球日报

Originally, I had made a Dune dashboard for Uniswap, but in   DeFi  It caused a stir in the circle. Disturbingly, it reveals the true face of those who think they invented the "financial perpetual motion machine". This is a story about charts, Cookie data, arrogance, social proof and the future of DeFi.

Last month, I spoke to the UnisV. ETH/USDC  The "toxic flow" of the pool is analyzed. Damage to Uniswap V3 LP on ETH/USDC is estimated at $100 million.

The "toxic order flow" has attracted attention. Just to be clear: when you make an LP, you're betting on how a trade pair will perform; This bet has nothing to do with whether your trading pool has a "toxic order flow."

After deducting the cost of its original LP holding, the conclusion is shown in Figure 1:

FIG. 1

In a nutshell, LP in AMM is at cost. IL: Impermanent loss profit at expense < Loss when not permanent loss. The chart shows that LP fees are about $100 million lower than IL this year.

Figure 1 Further interpretation of the data

Figure 1 Measures the "markout" of each transaction in the ETH/USDC pool on Uni V3, i.e. the amount of unrealized book gains and losses (a measure of profit) of transactions using future prices.

For example, the 5-minute mark = unrealized profit or loss 5 minutes after the trade occurred.

This is a metric commonly used in traditional finance by the HFT high-frequency market makers I used to work for. It measures the cost to performance of trades executed over multiple time frames. The "boundary" indicates the profit and loss we realize, and it can be tedious to find exactly each LP and trading method.

LP no profit or loss after 5 minutes:   - $21 million

LP unrealized after 1 hour: $56 million

LP did not achieve profit or loss after 1 day: -  97 million dollars

No LP profit or loss after 7 days: -  92 million dollars

@0xShitTrader's interpretation of the chart is that retail investors should not participate in the passive liquidity offered on the CPAMM due to the large losses.

Personally, I am neutral to this view. The LP boundary of ETH/USDC has dropped seriously recently.

The Uniswap team's rebuttal of Figure 1 and confrontation with analysts

A scathing post from @teo_leibowitz, @xin__wan and @AustinAdams10 from Uniswap's Risk and research department said I was charting Uniswap and ignoring "cookie" data in my analysis, Claiming that my analysis was wrong in every respect.

The team at Uniswap claims that I did not calculate fees in my analysis and that the Uniswap ETH/USDC pool has actually earned $150 million since its inception. The difference is so huge.

@0xShitTrader found that Uniswap had an error in its query that caused all LP buys to be thrown, more than half of all LP trades.

After correcting the error, their analysis was identical to the original chart, showing LP losses of nearly $100 million in 1 day.

The issue was immediately brought to their team. It's been more than five days and they still haven't recanted and asked me to explain the truth. It's important for me to share the true state of the DeFi world. I was struck by the fact that the Uniswap team felt it was reasonable to make $150m in profit by providing passive liquidity in the ETH/USDC pool.

The Uniswap team's leanings are clear. They don't think traditional financial markets work for them. They thought they had invented a "financial perpetual motion machine", a "money-printing machine" that did not require alpha. This misinformation and lack of truth from Uniswap spread like a virus among Kols in the DeFi community who trusted the Uniswap brand but did not delve into the data themselves.

DeFi the state of the world

In the ETH/USDC pool, funds are over-allocated to provide liquidity. This is not my personal attack on the AMM or Uniswap team, but the reality. DeFi is in an existential crisis and as a community we need to be honest about what we have achieved.

AMM is an excellent tool for stablecoin trading and to enhance the liquidity of long-tail assets. Fighting CeFi technology is something we are still grappling with as a community. There is too much money on the chain looking for yield, which creates a negative risk premium for almost every opportunity that the Uniswap pool cannot afford.

ETH has over $70 billion of stablecoins looking for use cases. There are not enough use cases for this kind of capital, especially in an environment where risk-free returns exceed 4%.

Most people have yet to realize that DeFi is an adolescent who is confused about his identity. We are being chased by capital, which most of the DeFi community takes for granted. DeFi is in a race against time to persuade capital to stay. Innovation, creativity, and truly productive use cases are necessary for an ecosystem to survive. We cannot rest on our laurels because DeFi is far from the end of sustainable development.

A good friend of mine recently talked to me about the difference between precision and accuracy, which I believe is at the root of DeFi's problems. Precision is the ability to hit the target. Accuracy is about making sure you're aiming at the right target.

What problem is the DeFi actually trying to solve?

In the last cycle, the world needed a growth narrative (aka an unregulated casino) to inject historic liquidity. As a community, we need to abandon the promises of "financial alchemy" and "financial perpetual motion" of the last cycle and focus on the long-term sustainable sources of innovation that DeFi can truly address.

I hope this is a wake-up call to the crypto builder. Many of us have been very lucky to accumulate capital and build projects in bear markets. Let's make sure we're aiming right, because we have a responsibility to make the world a better place.

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