We know that total trading volumes on dYdX have dropped in recent epochs. We think the reason for this drop is due to the inactivity of the market and the inappropriate use of the dYdX incentives. The market maker rebate program, which was proposed in February, is presently running well.
- Currently, top market makers receive incentives in two forms: a rebate on their trading fees and LP rewards each epoch.
As it is mentioned in the proposal, market makers profit through LP incentives and trading fee rebates. While LP incentives are important, we think there is no risk in decreasing them. Market makers earning a trading fee rebate will both reward a larger audience and incentivize traders with big budgets to use dYdX. Market makers that provide LP will earn a reduced reward but charge lower trading fees. If the proposal passes, we believe that the work will improve the platform in the future dYdX era as trading volume increases and more active users join. We have chosen to support this proposal in hopes of widening the incentives and providing a reward structure that would be suitable to market makers in general. We would like an update on how the new epoch has passed since the incentives were cut with proposal acceptance.