The current liquidity provider rewards formula includes a few different parameters for scoring providers on their quotes. This research will be exploring methods of optimizing these parameters to encourage better liquidity and improve the efficiency of the LP rewards program. The most significant update will be to the MaxSpread parameter, exploring competitive spreads across dYdX markets (currently set at 20bps for BTC and ETH, and 40bps on all others).

Grant will fund research to optimize dYdX trading fees for maximum trading volume and user onboarding, in preparation for community ownership of setting fees in V4. The research will study competitors, strategies, and historical fees on dYdX to determine optimal rates and adjustments that can be made going forward.