Challenge #2: Optimizing Gas Subsidies

Overview

The previous challenge highlighted the need for deeper and more structured analysis to understand the impact of gas subsidies on Uniswap's ecosystem. This challenge focuses on refining our understanding of how gas subsidies could optimize user engagement and improve liquidity provision, particularly on L2s under various economic conditions and in different liquidity pools.

On mainnet, our insights suggested gas subsidies might not impact user activity enough to be impactful. But on L2s, where the vast majority of retail users are conducting activity, subsidizing gas costs might be having a larger effect on users.

Challenge Objectives

1. Effectiveness of Gas Subsidies: Analyze the direct impact of gas subsidies on user transaction volume. Determine which types of transactions (swaps, adds, or removes of liquidity) are most positively impacted by subsidized gas fees.
2. Behavioral Analysis of Liquidity Providers (LPs): Examine how LPs' behavior changes with the introduction of gas subsidies. Investigate if LPs are more likely to adjust their strategies (like adjusting pool selection or the frequency of updates to their liquidity positions) when transaction costs are reduced.
3. Comparative Analysis Across Different Liquidity Pools: Explore how the benefits of gas subsidies vary across different types of liquidity pools (e.g., stablecoin vs. volatile asset pools). Consider the volume, number of active users, and the total value locked as metrics.

Ultimately, these are all just options for you. Even a single chart with thoughtful analysis can be insightful. Your may feel free to explore one or a few of these objectives.

Expected Outcomes & Deliverables

• A detailed report analyzing the correlation between gas subsidies and increased transaction volume, with a focus on different types of transactions and their economic implications.
• Behavioral analysis of LPs, highlighting changes in their engagement and strategy in response to gas subsidies.
• Comparative metrics across various liquidity pools, with insights into which types of pools benefit most from gas subsidies.
• Visualizations of key metrics and trends, possibly using tools like Allium or Dune.

Suggested Tools & Ideas

• Data extraction and analysis through platforms like Flipside Crypto, Dune Analytics, Arkham Analytics.
• Labels to identify retail traders vs. professional traders
• Use of Allium for visualizing transaction data and LP behavior
• Simulation tools like v3-polars for modeling different subsidy scenarios