Dear Chaos Labs & dYdX Team,
As a long-standing participant in your trading ecosystem, having personally contributed approximately 20% of the daily volume on v3 last year on many days, with a cumulative trading volume exceeding $15 billion across v3 and v4, I feel compelled to share insights regarding your incentive programs.
Your recent statement regarding the design principle of your launch incentives—to attract, retain, and grow activity—while laudable, appears to have missed its mark significantly. The statistics from July, which indicate fewer than 700 daily users despite an investment of $30 million in incentives over six seasons, suggest a disconnect between the program’s goals and its outcomes.
In my experience, during all seasons but especially after season 1, the competition was overwhelmingly dominated by automated trading algorithms, or ‘bots.’ My observation, supported by the leaderboard, shows that 95% of the rewards were captured by just 0.1% of users, primarily professional market maker firms. This skewed distribution undermines the program’s intent to foster broad user engagement.
The current model, where 90% of rewards are tied to trading volume, inadvertently favors these high-frequency trading entities, many of which operate at a loss pre-incentives, solely to farm volume for rewards. This strategy does not align with the stated goal of user retention or growth but rather inflates volume metrics without necessarily enhancing the trading experience for retail users.
I propose a reevaluation of the incentive structure:
Dedicated Retail Rewards: Allocate a substantial portion of the rewards, perhaps 75% or more, exclusively to retail users (desktop and mobile app users). This would not only level the playing field but also genuinely incentivize new user acquisition and retention.
Gamification for Engagement: Introduce a ‘DYDX Unlimited Journey’ program, a tiered reward system where users can achieve milestones through various activities. For instance, starting with a modest reward for a small deposit and volume, escalating to significant rewards for sustained activity and higher volumes.
Clarity on Affiliate System: Please provide detailed information regarding the affiliate system’s funding source and how the $1,500 monthly cap is structured. Ensuring this cap does not limit potential earnings based on trading volume would be beneficial.
Lastly, I wish to commend the professionalism of Chaos Labs and the functionality of the dashboard. However, the delay in reward distribution post-season is a notable area for improvement. Aiming for a maximum one-week delay would significantly enhance user satisfaction.
Thank you for considering these insights. I am hopeful that these suggestions will contribute to a more equitable and engaging trading environment on dYdX.
Sincerely,
RetailTrader