[WIP] Liquidity mining rewards

Proposals
1

Motivation

  • Reward early traders with part of the inflation rewards to attract more traders to the system
  • Distribute PERPs to the hand of users
  • Create a positive feedback loop for traders and stakers.
  • Prevent wash trading

Proposal

  • Providing liquidity mining rebates for 1) trading fees 2) funding payment.
  • The Liquidity Mining program will test run for 4 weeks after the mainnet launches and see how it goes.
  • 50% of the inflationary rewards will be used for this Liquidity Mining program.

Reward Calculation Time

At the end of every week (Sun 00:00 UTC)

Off-Chain Process

  1. Perpetual Protocol aggregates all the trading fees and funding payment paid by each network participants of the given week into a spreadsheet
  2. Each network participant is rewarded USD-denominated value of PERP based on 100% of their aggregated trading fees and 50% of their aggregated funding payment.
    The USD price of PERP is TWAP of that week.
  3. The rewarded PERPs are capped by 50% of the inflation rewards that week. Once the rewarded PERPs > the cap, the rewarded PERPs will be proportionally distributed.
  4. 80% of the paid PERPs are locked on-chain for one year, and the rest 20% is claimable right away. The locked rewards would not be staked in Staking Pool.
  5. Perpetual Protocol pays each network participant by submitting an on-chain (or several) transactions.
  6. Upload the spreadsheet to IPFS for everyone who wants to verify it.

Example

Alice pays $50 of trading fees to open a long position on Monday and also pays $20 of funding to shorts on the same day. At the end of the week, she would receive $60 of PERP to compensate her fees.
She could claim $12 of PERP right away, and the other $48 of PERP one year after.

Updates to the Funding Payment

  • 50% of the funding payment would be sent to Insurance Fund instead of the receivers of the funding payment. This is to prevent wash trading.

Pros and Cons

  • Pros
    • Traders earning PERPs → more fees → more Insurance Fund / more yield for stakers → more demand of PERPs → more traders earning PERPs
    • Perpetual Protocol is giving 100% taker rebates, and so it’s “free” for traders to trade, but it also disincentivizes wash activity because of USD-denominated value of PERP and one-year locked-up
    • Off-chain process that’s easy to update
  • Cons
    • Need a reliable TWAP price before it launches

Parameters Updatable by Governance

  • The ratio of liquidity mining
    • 50% of the total inflation rewards
  • The ratio of 1-year reward lockup
    • 80% will be locked-up for one year
    • 20% will be claimable after the epoch
  • The raito of PERP rewards
    • 100% of trading fees
    • 50% of funding payment
2 Likes
2

We’re also thinking maybe we should update the following to distribute the tokens faster:

  1. raising the ratio of claimable after the epoch. Ex: 20% -> 40%
  2. Increasing the transaction fee from 0.1% to 0.3% or more.
  3. Including the average gas fee in the rebate as well.
3

I think we should have parameters to set a distribution ratio per Pool (e.g. 25% ETH/USDT, 25% BTC/USDT, 50% LINK/USDT). Then we can boost trading on new listing where we want more volume.

I also think we should have a parameter per Pool to set distribution ratio for longs vs shorts. If there are too many longs in a pool, we can incentivise shorts.

We can start out with an even distribution between the pools and longs vs. shorts.

4

Maybe longs vs. shorts incentives are too complex to administer, because the market is so volatile.