SIP (#004): Protocol Incentive Optimization

Summary

While our current incentives reward liquidity providers based on their contributed volume, the goal of our protocol liquidity incentives is simply to attract the most potential liquidity at the least cost to our SWIV treasury.

This proposal furthers the DAO’s goal of optimizing our incentives by introducing two additional parameters to the rewards that liquidity providers receive:

  • Time (Time between placement and fill)
  • Price (distance from market price)

Proposal

As a follow up to our previous proposal on the modulation and reduction of protocol liquidity incentives: https://gov.swivel.finance/t/sip-003-protocol-incentive-modulation/173

And our discussions surrounding the optimization and modulation of incentives: https://gov.swivel.finance/t/change-protocol-liquidity-incentives/22/5

Our current incentives reward our users using their raw volume contribution as a maker over a given daily period. This unfortunately means that while our protocol fees have been significant as users compete for rewards, they are not necessarily rewarding the right participants.

As a way to increase the consistent liquidity on our exchange, as well as ensure wash trading is not rewarded, I would like to introduce price and time as parameters that scale a users rewards.

Price: Scale rewards based on an order’s price and its distance from the “best” price on the market.

This ensures users cannot receive rewards when filling orders with outsized prices that otherwise would sit vacant.

Time: Scale rewards based on the amount of time that they have sat on the orderbook before being filled.

This ensures that a user cannot place and order and quickly fill it themselves while still receiving rewards.

We will be introducing an additional section to our documentation on liquidity incentives to ensure the current parameters are always transparent for our community: https://docs.swivel.finance/swivel-exchange/liquidity-incentives

Voting

This proposal will have a binary vote to either support, oppose, or to abstain the addition of time and price based scaling for our protocol liquidity incentives.

Conclusion (EDITED)

With the passing of this EIP, orders placed must remain on our orderbook for 30m for the maximum SWIV reward, and all orders filled must be within 5 orders of market price.

Fills within 5 orders of market price receive weighted rewards as they scale away from the market.

These two factors ensure that wash trading is no longer an issue for our incentive program, and community/grassroots liquidity providers can now participate and compete in our liquidity program.

3 Likes

I felt from my own experience that your community should decide, but I will tell you how it came to awards for me, you did nothing for me for several months because I invested the community.This is your overall approach to receiving awards, people should have paid their own money, I’m disappointed with you and still want to create a community, no wonder there are so few people with you.

1 Like

I think you’ve commented on the wrong thread?

This thread and proposal, has nothing to do with a retroactive distribution. There have been a couple active threads on the retroactive distribution over in /discussions! If youve got some great ideas to contribute over there we’d definitely appreciate them!

1 Like