Research

LP Rewards Formula Optimization

Completed

Project link

Funding amount

$20,000

Start date

May 2023

Execution

2 months

Team

0xCChan

Description

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).

Purpose

Liquidity providers are incentivized through the LP Rewards pool, which distributes DYDX every epoch based on the scores calculated through the LP Rewards formula. Optimizing this formula to incentivize more efficient liquidity, with tighter spreads and quotes across all markets, will improve the trading experience for everyone on dYdX.

Payment structure

25% upfront, 50% at research publication, 25% at proposal exeuction

Useful Links

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