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feat: liquidity mechanisms overhaul #2299

Merged
merged 12 commits into from
Jul 8, 2024
Merged

feat: liquidity mechanisms overhaul #2299

merged 12 commits into from
Jul 8, 2024

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cdummett
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@cdummett cdummett commented Jun 10, 2024

closes #2253
closes #2268

Warning

This PR will make the new liquidity reward metric #2266 redundant as the existing liquidity fees metric will no longer be abused from wash trading.

Instead #2309 should be merged, as this introduces an alternative method for the new liquidity reward metric where rewards are distributed pro-rata by the volume of notional each LP provides.

Summary

PR deprecates previous liquidity specs and replaces them with simplified liquidity mechanisms which:

  • require no bond
  • require no sign-up transaction
  • yields more predictable liquidity fees

In short the mechanics work as follows...

  • parties accrue ELS points over time proportional to their maker fees earned.
  • parties are designated as LPs on an epoch by epoch basis if they receive above a specified proportion of the markets maker fees.
  • parties receive a proportion of the liquidity fees accumulated in an epoch relative to their accrued ELS points and volume of notional (but only when designated as an LP).

Open questions:

  1. Points accrued and LP designation driven by maker fees received - how open is this to abuse through wash trading?
    • Resolved: with introduction of "volume of notional" weighting
  2. Does this incentivise deep books? - advantageous for minimal slippage and quick disposal of network position.
    • Resolved: with introduction of "volume of notional" weighting
  3. Does this incentivise being on the book throughout the epoch enough?
    • Resolved: with introduction of "volume of notional" weighting

@cdummett cdummett added this to the 🕌 Genbu Temple milestone Jun 10, 2024
@cdummett cdummett self-assigned this Jun 10, 2024
@cdummett cdummett changed the base branch from master to colosseo_II June 10, 2024 11:34
@cdummett cdummett force-pushed the feat/0091-LIQM branch 2 times, most recently from 674e066 to 0f6c34e Compare June 10, 2024 11:56
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@davidsiska-vega davidsiska-vega marked this pull request as ready for review June 19, 2024 10:25
@cdummett cdummett force-pushed the feat/0091-LIQM branch 2 times, most recently from 6388f2e to c531acb Compare June 24, 2024 12:48
@cdummett cdummett changed the base branch from colosseo_II to genbutemple June 24, 2024 12:52
@cdummett cdummett requested a review from a team June 24, 2024 14:45
witgaw
witgaw previously approved these changes Jun 27, 2024
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@witgaw witgaw left a comment

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LGTM

@witgaw witgaw merged commit 58d9aaa into genbutemple Jul 8, 2024
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@witgaw witgaw deleted the feat/0091-LIQM branch July 8, 2024 13:03
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Replace ELS with internal LP volume asset Remove bond account and remove becoming an LP mechanism
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