Change Protocol Liquidity Incentives

I recently talked with Julian in discord about hte liquidity incentives and the fact that they also incentivize some degree of wash trading.

I think there might be a couple ways to deal with this?? An AMM contract or something? Or something like dydx does?

It sounds like the team already has a few ideas in mind, but maybe we can use this board to brainstorm?

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We’ve talked about this with a couple of our community mods + community members :slight_smile:

And yeah there are really a couple end result variations of liquidity incentives for an orderbook, our conclusion has just been that we need to gather data in order to commit to a certain direction or start an implementation.

I’d say the ideal implementation is something along the lines of hummingbots paper or dydx’s current incentive program:
a. https://hummingbot.io/en/liquidity-mining-whitepaper/
b. https://docs.dydx.community/dydx-governance/rewards/liquidity-provider-rewards

As an interim the thing that I believe HHUH had mentioned (but dont quote me) is at least adding a time dimension, and maybe beyond that a spread dimension as well?

With at least a time dimension, you can require wash traders to actually provide liquidity to the orderbook for a certain amount of time to earn maximum rewards, ensuring minimal orderbook coverage

Yes, I’ve been thinking about other things lately.
First of all, SWIV is about to be launched. How to increase the stickiness of liquidity incentives? Can the functions of SWIV be brought into play?
So is it possible to increase the function of staking SWIV and set a pledge period. When you stake SWIV, your liquidity incentive amount will increase.
Is this possible?

Bumping this discussion along, I think it would be very appropriate to explore optimization in two directions.

  1. Time
  2. Distance from market price

This will reduce rewards for people who’s orders are filled further from market price, and further also reduce rewards for users that quickly place and fill orders.

Between these two parameters, it will be relatively easy to, not completely prevent wash trading, but ensure any wash trading follows the same trading pattern as a very naive market maker, placing orders near market price and waiting for them to be filled.

Further, I think it would also be a good idea to explore the reduction of emissions per market. As we launch more markets this was intended, however there has also been significant research that indicates a reduction in emissions does not proportionally reduce the activity that drives them (staking, LPing, or otherwise).

So is it possible to increase the function of staking SWIV and set a pledge period. When you stake SWIV, your liquidity incentive amount will increase.

There is a chance this could happen in the future, though it would be dependent on changes in infrastructure that impact fee sharing between LP’s and the protocol.

Right now the fee system and incentive system are completely separate, however we could implement a system that alternatively rewards based on the weight of one’s stake in the future…

Swivel-v3 anyone???