SIP (#003): Protocol Incentive Modulation

Summary

As is described in our litepaper (as well as our initial whitepaper), our protocol incentives are meant to be modulated in tandem with our fees in order to dissuade wash trading and optimize user behavior.

In increasing fees, one can dissuade wash trading, as doing so increases the amount of trading needed to “break even”, however one can also reduce incentives should there be the belief that doing so itself will not impact liquidity significantly.

Proposal

Given the context provided in this discussion: https://gov.swivel.finance/t/change-protocol-liquidity-incentives/22

There are ongoing conversations on how to optimize our current liquidity incentives, as well as ongoing attempts at implementation.

That said, given the context of the intended modulation of incentives, now is also a great opportunity to reduce our liquidity incentive emissions in general.

I would then like to propose that we reduce our emissions 50%, from 5,000 SWIV / day per market, to 2,500 SWIV / day per market.

This will not only reduce the impact of, and dissuade wash trading, but prepare our emission and liquidity structure for future reductions as we launch additional markets.

Voting

Each voter will be able to either vote to support or oppose, or abstain a vote towards the reduction of protocol liquidity incentives.

NOTE: This does not refer to SWIV token incentives on uniswap, for a discussion of Uniswap incentives see: https://gov.swivel.finance/t/re-filling-uni-v3-incentives-incentive-review/105/7

I’m all for this opinion. It makes sense to adjust fees on a case-by-case basis.