While the Liquidation Rebate Program has strong potential to improve trader retention, the proposed leaderboard-ranking distribution model introduces structural inefficiencies and fairness issues.
First, leaderboards inherently concentrate rewards into a very small subset of users, disproportionately benefiting the highest-volume or most aggressive traders. This contradicts the stated goal of improving retention across the broader population of liquidated users. Under the current structure, hundreds or thousands of affected traders would receive no meaningful rebate, despite contributing fees, open interest and liquidity to the protocol.
Second, leaderboard systems encourage perverse incentives. A competitive ranking mechanism may unintentionally motivate traders to take excessive or artificial risks to climb the leaderboard—introducing moral hazard, unnecessary volatility, and worse overall trading behaviours. A rebate mechanism should stabilize user experience, not gamify liquidation severity.
Third, tying rewards only to top-ranked addresses reduces the program’s ability to measure its true impact. A pilot designed to test retention should emphasise breadth of participation, not just depth among the top 1–5% of users. A narrow distribution provides weak signal on whether the program benefits the wider trader base, making post-pilot analysis less reliable.
A pro-rata distribution model—rebates paid proportionally to each user’s liquidation loss—directly aligns incentives with actual impact. This approach:
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ensures fair compensation for all participating users, not just a small elite cohort
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mitigates competitive or risk-seeking behaviour
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provides a cleaner, more representative dataset on user retention across segments
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aligns with the pilot objective: evaluating whether a rebate reduces churn and improves loyalty at scale
In short, the leaderboard system dilutes fairness, introduces behavioural risk, and limits the program’s evaluative value. A proportional-rebate model is more equitable, safer, and better aligned with the stated purpose of the pilot.