[DRC] Launch Incentives Program Extension

Simple Summary

A proposal to extend the dYdX Chain Launch Incentive Program for an additional three months, covering two trading seasons, with an extra allocation of $10 million in DYDX from the dYdX Chain Community Treasury.

Motivation

The dYdX Chain Launch Incentives program is currently in its fourth and final season. Initially launched in late November 2023, the program successfully met its primary objectives of boosting trading activity and expanding the user base on the dYdX Chain. Below, we provide a detailed evaluation of the impact of the Launch Incentives Program. While determining the precise factors contributing to growth is complex, we acknowledge the various drivers that influence trading activity. This analysis highlights key aspects of the first three seasons, offering the community valuable insights into the program’s effectiveness.

Our end-of-season reports on the Chaos Labs blog and the dYdX Governance Forum provide more insight into the program’s impact.

Launch Incentive Program Gross Direct Profit

Overall, the dYdX Chain has witnessed substantial growth in usage throughout the first three seasons of the Launch Incentive Program, reaching a point where trading fees significantly surpass the cost of the program itself.

Season Rewards Fees Paid Net
1 $5 000 000 $ 1 874 266 -$3 125 734
2 $5 000 000 $ 5 597 469 $ 597 469
3 $5 000 000 $ 9 399 730 $ 4 399 730
Total $ 15 000 000 $ 16 871 465 $ 1 871 465

The program has evolved so each subsequent season has built upon the learnings to that point to innovate continually, furthering protocol usage.

Weekly Active Traders and Long-term Sustainability

The Launch Incentive Program is strategically designed to foster long-term, sustainable activity on the dYdX Chain. The program’s trajectory demonstrates that trading activity is sticky, compounding over time. Achieving sustained growth necessitates attracting a large and diverse base of traders. We measure this by the number of traders paying taker fees in a week, referred to as active traders from here on.

The breakdown of weekly active traders by category, as shown below, illustrates a progressively increasing retention and return of traders, catalyzing compounded growth in trader numbers.

Additionally, the program optimizes long-term sustainable activity as much as possible. A trader’s long-term value is highly dependent on their propensity to remain in the dYdX ecosystem, which has steadily increased week on week over the three seasons so far.

Value from New Traders

To demonstrate the program’s unit economics, we include the following breakdown of the value of solely the new traders acquired in season 3.

Weekly Retention Rate 75%
Ave weekly Fees $329
Implied Value of a New Trader $1 316
Season 3 new traders 4 324
Season 3 Value added from New Traders $5 690 384

As this analysis is focused on new traders, it excludes the positive impact on the 4,000 existing traders who are likely to have increased their trading activity on the dYdX Chain as a result of the incentives provided, further underscoring the effectiveness of the program.

Proposal

Given the Launch Incentives Program’s impact to date, and with the program scheduled to end at the end of season 4 by June 1st, 2024, we propose extending it for an additional three months. This extension would include two more trading seasons, which will be administered in a similar fashion to the previous ones.

Specification

An on-chain text proposal will be created to approve the extension of the program and the associated budget.

Should the community approve this allocation, Chaos Labs will continue administering the program and will request an extension of our current grant under the same terms.

Next Steps

Following community discussion on the forums, we are targeting an on-chain vote on Monday, April 22nd.

10 Likes

Congratulations on the success. Glad to see the Incentives Program Extension :100:

The text proposal for the extension of the launch incentives program is now live - Mintscan

We look forward to seeing the community’s participation in the vote.

As expected, we definitely support the extension of the program as we salute the transparency report and the emphasis to provide data to the community. It seems reasonable to maintain the current pace of allocation and we are also favorable to deploy ahead of the next two seasons.
pro-delegators-sign

Hi @chaoslabs - I had starting trading on DYDX platform about a month and half ago and although I believe incentives for traders are lucrative and will definitely help to attract new traders and sustainable growth of the platform. However, i believe the way incentives are structured can undergo a change. I have been trading on multiple platforms, and many of them have offered great incentives and therefore based on my experience and what I believe will attract me as a trader, I would like to list down some suggestions:

  1. Trading/Market Making Rewards - I believe instead of proportionally distributing the rewards, introduction of raffles/mystery boxes can be done based on a tiered approach. These tiers can be defined on trading volumes observed in the previous seasons. I believe this will encourage traders to aim for higher tiers. These raffles/mystery boxes can be attained for weekly trading volumes and also cumulative season trading volume. Also there will be a mystery element involved which can further increase interest and potential for higher rewards based on luck which the overall allocation can still remain the same for this category.

  2. Trading Leagues - I might be wrong in my observation but I believe the way trading leagues are currently designed, it discourages traders to trade (especially lower tier leagues) when they have made good profit and are sitting handsomely at the top of the league. As an example, if I have done few trades at the start of the season which has put me in top 5 of the league. I might not want to trade further because I might risk falling down the league if my trades doesn’t go well. I believe this can be better implemented with introducing certain level of trading activity based on volume or based on minimum days a trader needs to actively trading during the season along with the profitability metrics that are currently set.

at some point going to have to stop milking the now famished cow, which is the DYDX chain community treasury( how much DYDX left does it have), all the volume and fee metrics have improved yet DYDX holders have been fleeced as the non stop dilution from locked up coins just does not even PAUSE hitting the market. While i am in support of the extension, you cant keep doing this type of things forever,

and at somepoint DYDX is going to need to explore onboarding US customers for at least the major liquidity tokens. the fee rebates should dissapear soon for high liquidity coins and deeply incentive even small traders to “make a market” on the new list tokens… the liquidity on the newly listed tokens has been disgraceful, and quite frankly the expansion of tokens in this manner has been a failure.

These tokens simply are not tradeable on DYDX, yet new tokens continue to be added as if a market will simply auto matically appear.

while it is easy to get behind the continued growth, it does appear there are some better ways to go about doing this, even such as purchasing adds or finding people in the crypto space to write articles or partner on new customers. at some point to

DYDX will simply have to attempt to see if it is truly decentralized and open its doors to users of any location on earth.

3 Likes

I think it is also important to decide on a tactic for token listings.
Just adding tokens which are already traded on multiple CEX will not create the market, but more edge cases which are not yet on a CEX might prove all the more interesting.

That means also that there is more work to be done, yes… but I have learned that there is a handsome payment already given for the research for adding tokens. So maybe that just need to be done with more depth and time spend :slight_smile:

thank you for your response Leonoors. I am still recovering from todays SHOCKING action in WEF-DYDX in which volume was traded 1$ or 35% or so off the true market price.

I am not sure people understand how dangerous this is. say you have 3k in your account. you fill a position for 6k worth of WEF short. which is a very reasonable and responsible 2x use of margin, the trader has plenty of underlying capital (3k) to insulate himself and DYDX, HOWEVER, when you have 6k position out short (on the 3k) and you get a print that is 35% off, that is 70% off of your underlying margin. So your 3k is really like under 1 grand as that BAD PRINT PRINTS!!! in such an event you will likely be completed wiped out on what was a totally nonsense print, as you risk getting cleared out completely even if using margin responsibly.

Yeah, the perceived collateral is not the real collateral in that case, making the risk much much bigger.