tl;dr Market makers are a critical component of the dYdX exchange, and to compensate them for the liquidity provision service that they provide, they receive incentives. Currently, top market makers receive incentives in two forms: a rebate on their trading fees, and LP rewards each epoch. We sugg…

Dear @max-holloway and the dYdX community, We appreciate your detailed proposal regarding the shift from LP rewards towards market maker rebates. Your understanding of the dynamics at play within the dYdX exchange ecosystem is clearly reflected in the rationale and methodology of your recommendatio…

Thank you, Max, for the proposal. We should have reduced trading rewards more aggressively long ago , so I think this proposal is overdue. By now, I would argue that we should eliminate trading rewards completely. The majority of users trade on dYdX not due to trading rewards but because they have se…

About time. if it’s going to affect some important future metrics, then I think this should be looked into in details. Kudos to the author.

Hey Max, thanks for the proposal! We support this proposal and agree that these changes are net beneficial for the protocol and strike a good balance between the two reward mechanisms. Ultimately, LPs should be able to quote better based on fixed rebates instead of accounting for a fluctuating DYD…

Overall, positive. However, I still have a question. @max-holloway , how would you respond to those who claim that such a change in LP rewards supports concentration of liquity providers by removing smaller ones and bolstering larger ones? Finally, a less diversified and more concentrated LP base …

Hey @max-holloway great proposal, I like it for a number of reasons Simple is better than complex. It naturally scales the cost of liquidity with the amount of trading activity. It incentivises competition amongst market makers. I have a few questions on the implementation: Firstly, I’m not rea…

Max, Great to see you again here. Xenophon Labs has been diligent in its process, research, and investment into protocols such as dYdX. We have been impressed by their quality of work in Aave and elsewhere. This proposal seems to introduce key benefits into dYdX’s operations: increased rebates,…

Thank you everyone for your thoughtful responses. I’ll address some of the questions that popped up. [image] she.trades: @max-holloway , how would you respond to those who claim that such a change in LP rewards supports concentration of liquity providers by removing smaller ones and bolstering …

DRC - Shifting from LP rewards toward market maker rebates

Proposals

RealVovochka July 7, 2023, 4:39pm 4

@Nascor Max is proposing to reduce LP rewards, not trading. I raised the problem about reducing rewards in general in other topic. Happy if you leave your comment there

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DRC - Shifting from LP rewards toward market maker rebates

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