Hi @antonio,
Thank you for sharing your valuable insights on the recent changes in trading rewards on dYdX. I have been reflecting upon your perspective, particularly regarding the doubling of fees relative to rewards, and as a trader and community member, I believe there are some concerns worth addressing.
We’ve observed a considerable decline in trading volume and active traders following the 45% reduction in trading rewards. This development doesn’t merely affect the ratio of fees to rewards but also has broader implications for the platform’s liquidity.
As you’re well aware, decreased liquidity often leads to larger bid-ask spreads and price gaps, particularly on shorter time frames. This situation contributes to a challenging trading environment, making it more difficult to execute trades at the desired prices and leading to increased slippage. This enhanced slippage can result in more substantial losses for traders during volatile periods, a risk now exacerbated on dYdX due to the reduced rewards.
Furthermore, this decrease in liquidity and the subsequent increase in trading risk could discourage traders. This could potentially instigate a negative feedback loop leading to a further decrease in trading volume. When compared with centralised exchanges, which offer competitive taker fees as low as 0.01% and are less prone to significant slippage issues, it seems crucial to ensure that trading on dYdX remains an attractive option.
An additional concern relates to the current reward distribution system. In my view, the concentration of rewards into a single account could discourage broad participation, further threatening our user base and the platform’s liquidity.
While these observations reflect my personal opinion rather than definitive facts, I feel the long-term implications of decreased incentives, declining volume, and reduced liquidity are potentially serious issues we need to address.
I cordially invite you to join us in a discussion we’ve initiated about innovating and revitalising the dYdX rewards system. We are brainstorming strategies to enhance user adoption, foster platform growth, and increase trading volume.
The thread can be found at this link: https://dydx.forum/t/revitalising-the-dydx-rewards-system-innovative-strategies-for-enhanced-user-adoption-platform-growth-and-increased-trading-volume/56
Our discussion explores several key strategies and principles:
- Crafting principles for an equitable rewards system.
- Developing strategies to prevent reward concentration, such as caps and limits on rewards per account, and a tiered rewards distribution system.
- Proposing incentives for user growth and participation, including bonus rewards for new users and affiliates.
- Suggesting additional rewards incentives like incentives for long-term users, competition rewards, activity-based milestone rewards, loyalty tier rewards, and early adopter rewards.
- Enhancing the user experience and accessibility of the rewards system through a user-friendly interface.
These measures aim to create a more equitable system that fosters a strong user base, maintains robust liquidity, and ensures competitive trading conditions.
As a fellow member of this community, I believe we should concentrate on nurturing a strong user base, preserving robust liquidity, and ensuring competitive trading conditions to safeguard dYdX’s standing in the DEX market. Our ultimate goal is to put forth a proposal that the community can vote on, ensuring we collectively build a sustainable and thriving platform with a better rewards system.
I look forward to your engagement in this crucial discussion.
Kagan