DRC - Introduce Allocations for Trading Rewards Per Market

Proposed Changes:

  • Introduce Allocations for Trading Rewards Per Market


The current Trading Rewards Program acts as a protocol-wide rewards program for traders. No matter what market they trade in they get a share of trading rewards proportional to their fees paid. While this is great from a user’s perspective, it might not be great from a protocol perspective. Specifically, the protocol currently pays LPs to sit and quote alt markets (non-BTC & ETH) but doesn’t actively drive volume there. Therefore, we propose to introduce trading rewards for individuals markets.


The Trading Rewards program is a simple and effective incentive system that rewards users proportional to the amount of fees they pay in a given epoch. Such a mechanism is very efficient from a user’s POV as it’s essentially a rebate on all trading activity regardless of the market they trade. For example, a user trading in BTC & ETH markets against much tighter spreads receives better execution and the same “fee” as someone trading in a longer tail asset with wider spreads.

This is completely fine if we believe the purpose of trading rewards is to pay users to trade on dYdX according to their regular behaviour. However, if we view Trading Rewards as a mechanism to incentivise trading volume in longer-tail markets or markets in general, it is very inefficient. Other than marginally reducing the transaction cost for longer tail markets, the current trading rewards program fails to directly incentivize trading in these markets. Furthermore, the Liquidity Provider Rewards program is paying LPs to sit there and wait for trading volume in longer tail markets, while Trading Rewards fail to actively drive volume to such markets.

Figure 11: Weekly Trading Volume by Market ,

Therefore, we propose to introduce market allocations for Trading Rewards similar to what already exists in Liquidity Provider Rewards. Importantly, I believe that for this to be successful it would require marketing efforts and a clear way for users to identify the amount of DYDX each market is allocated for that epoch (weekly prizes would work better). Each market will have an individual prize pool as opposed to one grand prize pool, and being conscious of not cannibalising ETH & BTC markets which contribute the most to volume and fee. We propose a market split of:

One concern we have is the inability to access volume and fee data in real-time and historically. Thus, it’s hard to know if we are overpaying or underpaying for volume in certain markets. I assume that with the introduction of a Growth subDAO in V4, this data will be available and a better understanding of optimal allocations can be achieved.

Next Steps:

We’d like to request feedback from the community surrounding this change. Pending community discussion, we will look to initiate a Snapshot Vote.

There will be a binary vote, with:

  • Yes - Introduce trading rewards per market as described above.
  • No - Do nothing.

Excuse me, @Callen_Wintermute but if you forgot we now have 1,582,192 $DYDX in rewards and not 2,876,712 $DYDX

I am very against trading rewards per market. Market makers should be stimulated to bring liquidity to low volume markets. Normal users shouldn’t care about that. Who would trade i.e CELO with 355K celo maximum position size and dead orderbook with just limit orders from market makers.

It’s a good idea. But you killed the incentives. So now we have declining volume in the early stages of a decentralised exchange trying to become a dominant force. So while this idea would be great if we had the rewards to support it you killed what we had to work with. It is now a bridge too far. Please read into our post about the redistribution of rewards. It appears you may have put your own interests before the exchange. If the exchange thrives, you thrive. Not sure if you fully weighed up the cons of your actions this early in the game. Respect your long term ambitions but short term it is way too much too soon.

  • Yes - Introduce trading rewards per market as described above.
  • No - Do nothing.
  • Keep investigating and simulate various adjustment scenarios
0 voters

Hey @Callen_Wintermute

Thanks for sharing this proposal and this was something I was thinking about last June given the reward distributions if it can possibly encourage more volumes

Since nearly all the volume is generated from the 2 majors, I’m not sure if its necessarily a good thing to try to drive volume elsewhere

Yes, this was reposted from Commonwealth which was all posted in separate proposals spun out from V4 Vanguard. Obviously, the reduction in trading rewards had not happened when V4 Vanguard went up.