| DIP | title | status | author | shortDescription | discussions | created |
|---|---|---|---|---|---|---|
8 |
Reducing liquidity provider rewards threshold from 1% to 0.25% |
WIP |
Denis Tenchurin (@dionist) |
Reducing liquidity provider rewards threshold from 1% to 0.25% |
2022-02-15 |
The purpose of this DIP is to reduce the liquidity provider rewards threshold for market makers from 1% to 0.25% so that smaller and medium-sized market makers can be included as well.
In reference to a thread on market maker incentives, Denis Tenchurin submitted a Snapshot vote to reduce the volume threshold % for market makers to qualify to receive Liquidity Provider Rewards.
The Snapshot vote concluded with a record 306 unique voters and 27M DYDX in agreement. The majority of the community (195 voters & 99.8% of DYDX) supported to reduce the threshold to 0.25%.
Snapshot vote for DYDX holders: https://snapshot.org/#/dydxgov.eth/proposal/0x785066561be1e5d170eb28960da5ef2643ee0d0c3d590fd797c028512cc6be43
Maker Volume Distribution: https://metabase.dydx.exchange/public/dashboard/5fa0ea31-27f7-4cd2-8bb0-bc24473ccaa3
Discussions: https://forums.dydx.community/discussion/3683-drc-reduce-the-threshold-for-receiving-liquidity-provider-rewards
Having a high threshold of 1% is worse for liquidity on dYdX. It excludes smaller and small-sized market makers from competing with larger market makers.
28 more market makers would be included in the next epoch if the threshold had been reduced to 0.25%.
Reducing this threshold from 1% to 0.25% will provide better competition for tight quoting and uptime (especially on alt pairs, which have had quite wide spreads) and should result in better liquidity overall across dYdX Protocol.
Copyright and related rights waived via CC0.