[DRC] Launch Incentives Season 2 - Distribution Proposal

dYdX Chain
1

Simple Summary

A proposal to distribute $5M in DYDX tokens from the dYdX Chain Community Treasury to qualifying users in trading season 2 of the dYdX Chain Launch Incentives Program.

Motivation

In line with the initial proposal shared with the community regarding the Launch Incentives Program, Chaos Labs will provide recommendations on the distribution of incentives to individual accounts.

These recommendations are derived following a detailed analysis of the season’s trading data, specifically looking to identify and address any artificial or wash trading. Our aim in this is to maintain the integrity and effectiveness of the program, ensuring that the incentives are fairly given to those participating in genuine trading activities on the platform. For a deeper understanding of how Chaos Labs identifies wash trading, please refer to our detailed blog post here.

The recommendations, the end-of-season report, and relevant data are openly published on the dYdX Chaos Labs Risk Portal. This transparency allows community members to see that accounts receiving substantial rewards contribute significant volume and generate actual fees on the platform. Those in the community who wish to verify this data independently can do so, as all information is verifiable on-chain.

The recommendations are posted publicly, along with the end of season report and supporting data on the dYdX Chaos Labs Risk Portal for community members to observe. Utilzing these, communty members should be able to easily confirm that accounts receiving significant rewards drive significant volume and accrue real fees on the platform. In addition, for any community member preferring to verify the data independently, everything can be confirmed on-chain.

Specification

In this allocation, $5M in DYDX tokens are proposed to be distributed across 2,091 accounts.

The value of DYDX in USD for this allocation is based on a 7-day Time-Weighted Average Price (TWAP) as of the last day of trading season 2 (02/22/23), where 1 DYDX equals 3.12 USD.

The complete list of accounts and their respective proposed incentive allocations is available here.

To view the historical trading data for each account, please visit the Chaos Labs portal here.

Implementation

The DGP will help create the proposal payload using these addresses and reward amounts. Once complete and after sufficient time for the community to discuss this proposal it will be submitted for an on-chain vote.

Next Steps

Chaos Labs will sponsor a dYdX Chain on-chain proposal for the community to vote on the proposed incentive distribution early next week.

Copyright

Copyright and related rights waived via CC0.

Disclaimer

This post is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, nor does it constitute an offer to provide investment advisory or other services by Chaos Labs. No reference to any specific security constitutes a recommendation to buy, sell, or hold that security or any additional security. Nothing in this report shall be considered a solicitation or offer to buy or sell any security, future, option, or other financial instrument or offer or provide investment advice or service to any person in any jurisdiction. Nothing contained in this report constitutes investment advice or offers any opinion with respect to the suitability of any security, and the views expressed in this report should not be taken as advice to buy, sell, or hold any security. The information in this report should not be relied upon for investing. In preparing the information in this report, we have not considered any particular investor’s investment needs, objectives, and financial circumstances. This information has no regard for the specific investment objectives, financial situation, and particular needs of any specific recipient of this information, and the investments discussed may not be suitable for all investors. Any views expressed in this report were prepared based on the data available when such views were written. Changed or additional information could cause such views to change. All information is subject to possible correction. Information may quickly become unreliable, including market or economic changes.

Throughout the program, Chaos Labs’ role is confined to providing recommendations regarding the allocation of rewards. The actual implementation and distribution of said rewards are subject to the formal approval process of the dYdX Chain governance votes. Any actions pertaining to reward distribution shall only be executed following affirmative governance votes within the dYdX Chain framework.

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The proposal for rewards distribution is now live - Mintscan

We want to thank the community for your patience and look forward to seeing the participation in the vote.

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Just a few days after the original post, both the TWAP and the VWAP (time and volume-weighted average prices) over the weekly anchor rose to $3.75. In context, this corresponds to a 20.19% increase compared to the targeted price in the initial proposal. We believe this amount should have prompted a recalculation before proceeding on-chain.

We will vote NO on this proposal based on the aforementioned reasoning process. Even though most validators seem to support the proposal, we want to express a different position. A 20% volatility spread might be a detail to most people, but to us, details like this matter a lot and should be noted to avoid repetition in the long run. The chain operates as a global community, and we all have different levels of details to pass our screenings. Regarding PRO Delegators, a 20% shift does not pass ours.

Of course, it is obvious to say that we fully support the disbursal proposition itself; we are simply asking for amount adjustments, as the shift seems significant enough to warrant attention.

pro-delegators-sign

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Its in favor of the traders. At season 1 distribution the price fell from twap so traders got less

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We want to make it real clear that we’re only taking this stand based on a statistical basis. We don’t oppose the distribution, as we think it will pass with a large majority. What we do here is simply applying an operative governance framework, and this volatility spread is one of the factors we pay attention to. This isn’t regarding the proposal itself, we will apply this same mechanic to every fund disbursal proposal.

We hope the community understands our position on the matter and doesn’t confuse our attention to details with a rejection of the disbursal itself, which we clearly support.

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The primary issue I perceive is the time gap between the end of the season and the voting on the distribution. In my personal opinion, the objectives we are trying to achieve with these rewards are more important than any statistically refined mechanism. Suppose another validator also adopts this stance and votes no, we will postpone the award distribution for at least another four days (the duration of voting). Moreover, those who receive the rewards are directly contributing to the protocol’s revenue, as well as to stakers and validators. Any delays in award distribution equate to a diminished service for our clients. Additionally, there is a price risk for both parties involved, which is why I referred to the example from last season.

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Unfortunately this is far from a realistic probability. On the contrary, we think each validator should have its own relative framework, some might be more sensitive than others. The essence of a decentralized system is to have divergent standpoints which weight little individually and balance globally.

Secondly, if it ever came down to a global no vote at some point in time, that would reflect a global community agreement, certainly this would force another proposal to be posted on-chain and induce a delay. BUT this would also send a strong message about the limit the system is accepting globally. Assuming this threshold is ever crossed, then there’s little to no chances that we don’t learn out of this event.

Lastly, other proposals in other chains, have opted for solutions to mitigate the potential short-term volatility, therefore avoiding this kind of issues altogether. To achieve this they use a provision in the initial proposal, which is accounting for volatility potential, and then set the definitive amount as the proposal goes on-chain. In the even of provisions, they use a mechanism to refund excessive funds (ex: Mintscan).

In the context of this particular proposal, the disbursal is made directly through a json file, making provision hard to execute. On the other hand, we would have liked to see a re-calculation before going on-chain regarding the significant price shift at the time. This is the only point we have raised in this regard.

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And when you share the DYDX token, will you also vote against the distribution? It would be fair to count upward before voting.

Let me update: by the end of voting the token will be below 3.12

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well done, and thank you sir!

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I really disagree with this Distribution Proposal because my account is not included in the qualifying list.
In season 2, I made a trade and held onto it until a few days ago, resulting in approximately 20% profits and $300 in earnings. I am actually a very active trader, monitoring my positions multiple times a day. I chose not to change my position because it continued to generate profits.
The Distribution Proposal does not take long-time traders into consideration. However, this kind of long-term holding is beneficial to DYDX and should be rewarded.

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Hi @ccc Please reach out to clr_ml on telegram and we’ll look into this for you.

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How does one claim rewards from season 2? Should they just get deposited into the associated dydx account? Thanks.

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Yes, rewards gets sent to the account, no separate claim needed

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If I read it correctly the rewards are taken from the CP for a fixed amount of dollars?

So I don’t really understand the problem, since the proposal can go on chain with the price of DYDX at that very moment. It is true that prices can change along the way, but that is sadly how crypto works. If it would have been given to people and they would have held on to it for the length of 4 days the result would be the same.

Another option could be to make a DAO or multisig available and ask for a surplus of funds.
If the price goes up, the surplus can cover the rise.
If the prices stays the same or goes down, then the excess can be put back in the CP.
And the DAO or multisig is there for security reasons to limit the risk of losing funds along the way in personal wallets.