dYdX Chain Launch Incentive Program - Season 1 Review and Launch of Season 2

dYdX Chain
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We are thrilled to mark the conclusion of Season 1 in the dYdX Launch Incentive program and to announce the start of Season 2. This post is dedicated to summarizing the achievements of Season 1 and outlining the enhancements and expectations for the upcoming season.

Recap of Season 1

Comprehensive End-of-Season Report

Chaos Labs has meticulously reviewed the first full trading season on the dYdX Chain, focusing on evaluating the impact of the Launch Incentives Program. The detailed analysis covers all facets of the exchange’s performance and can be fully explored in Chaos Labs’ latest blog post here.
Key Stats:

  • The platform has seen more than $9.5b in trading volume spread across 34
    different markets.
  • Over 2265 traders and 1225 market makers are actively earning points through the
    Launch Incentives Program.
  • To date, there have been over $19m in total liquidations, contributing
    approximately $100k to the insurance fund.
  • Since November 28th, the majority of markets have experienced positive realized
    funding rates.
  • The dYdX Chain has attracted over 31m USDC in deposits.

Incentives Distribution Proposal

As presented to the community in our original proposal, the end of each trading season will result in a Chaos Labs recommendation for incentive distribution per account.

We plan to share this proposal for a community vote in the upcoming week, after a thorough analysis of the trading data from the season, with an emphasis on identifying and addressing any potential wash trading activities. Our objective in highlighting and countering such activities is to ensure the integrity and effectiveness of the program. By doing so, we aim to direct the trading incentives rightfully towards participants who engage in legitimate trading activities on the exchange. This approach is crucial in maintaining a fair and productive incentive structure, which not only rewards genuine contributions to the exchange but also discourages any practices that might compromise the program’s long-term objectives and success.

Launch of Season 2

Season 2 of the dYdX Launch Incentives program is now officially underway! Building on the foundation of Season 1, it continues to offer trading and market-making rewards and introduces a new component - performance-based rewards.

Duration and Structure

The season is slated to span 6-8 weeks, concluding in the 10-day period between 2/14-2/24.

Introduction to Performance-Based Rewards

In Season 2, performance-based rewards will represent 20% of the total trading rewards, amounting to $800,000 in DYDX tokens. This initiative is designed to incentivize profitable trading, particularly among leading retail traders. Performance is measured by percentage returns, with the top performers of each season earning a portion of this reward pool.

  1. ROI Calculation:
    The Return on Investment (ROI) for each trader will be calculated using the following formula:

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  1. Reward Allocation:
    Rewards will be allocated across different tiers, each with its criteria and prize pool, as illustrated in the provided charts.

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The breakdown of prize distribution per tier can be found in the sheet here

The accounts competing in each tier in the coming trading season have been determined based on their account equity during the first trading season and can be found here.

Because many traders were onboarded to dYdX v4 throughout season 1, the maximum of average equity and closing equity has been used to classify traders into the different leagues. Traders who either had average equity or closing equity in the equity threshold range of a tier are eligible to compete in that tier in season 2.

Promotion/Relegation criteria for season 3 will be based on top performance percentages. The top 50% of wallets, based on percentage return on investment, will be promoted to a higher tier, while the bottom 25% of performers will be relegated.

Going forward, new wallets will be assigned a tier in the following season based on their average equity in the current season.

Summary

We are eagerly anticipating Season 2 and the ongoing growth of the dYdX Chain! We encourage the community to keep sharing their valuable feedback, which we aim to integrate as the program moves forward.

We will continue maintaining our transparent communication with the community with consistent updates on the program’s progress through periodic in-depth reports and weekly updates on Twitter. Should there be any immediate modifications to the program, we will ensure prompt and clear communication.

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Exciting Start to Season 2!

As we embrace the commencement of Season 2 in the dYdX Launch Incentives program, we’d like to express our positive sentiments and commend the team, especially @chaoslabs, for the comprehensive efforts put into shaping this new phase.

ANALYSIS:

  • :dart: Well-Balanced Rewards Structure:
    The decision to introduce performance-based rewards, constituting 20% of the total trading rewards, showcases a thoughtful approach in incentivizing profitable trading. Striking a balance between encouraging profitability and maintaining the program’s integrity is key, and allocating a reasonable percentage for performance-based rewards is a commendable move. This ensures that while traders are motivated to maximize returns, the emphasis remains on ethical trading practices.

  • :bar_chart: Data-Driven Fine-Tuning:
    It’s fantastic to see a commitment to data transparency and a proactive stance on fine-tuning the reward distribution curve. Allocating this initial 20% allows for a testing ground, and gathering data throughout Season 2 will be invaluable in refining the program. We encourage @chaoslabs to continue providing detailed insights and data at the end of this season. This data-centric approach will aid in assessing any potential asymmetries and iteratively improving the incentive structure for Season 3.

CONCLUSION:
We look forward to the weekly updates’ release and advocate for their posting directly on this forum. Additionally, we hope that the compiled data will not only gauge the relative performances of the selected winners but also disclose the global statistical distribution of all participating accounts. Such transparency would significantly improve our ability to align the curves more effectively in the future.

Thank you for reading,
Govmos (The governance arm of the PRO Delegators’ validator)
pro-delegators-sign

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I love the use of incentives here. May the games begin.

Thanks to @chaoslabs for their thorough research and work to make the Launch Incentives Program as effective as possible.

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Are you confident in the formula that determines a leader? Looking at the leaderboard, it becomes funny. 1000% for a profit of 1k?

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it’s for the season two which can last 6 weeks, of course leaderboard will change

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ROI It should not grow if money is withdrawn from the account, I hope you will correct this.

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On dYdX, traders exhibit a range of strategies for managing their collateral. Recognizing the complexity inherent in evaluating a trader’s true efficiency of return, we believe that basing assessments solely on the initial collateral snapshot at the beginning of the trading season is not the most effective approach. Such a method could disproportionately benefit traders who start with low or zero profit and loss (P&L) but later deposit significantly more funds, thereby leveraging their returns on a substantially higher collateral base. Their P&L would mostly be earned on a higher capital base and their ROI needs to reflect that.

Moreover, it is not practical to consider only the additions to a user’s collateral, as many engage in multiple deposits and withdrawals throughout a season. It is essential that users feel empowered to interact with the exchange freely, without the concern of being disadvantaged by their transaction patterns.

Therefore, we propose that denominating P&L by the weighted average collateral over the season offers the most equitable and accurate measure of a trader’s performance. This approach ensures that a high ROI is contingent on actual P&L generation, thereby minimizing the potential for manipulation and ensuring a fair assessment of trading efficiency.

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I think I wrote it clearly. ROI is increased after all order by withdrawing funds from the account. Where are the risks?

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Following this discussion, we conducted a more focused analysis of our collateral calculation underpinning the trading league ROI. During this analysis, we identified several edge cases that arise when collateral is weighted by time. These scenarios can lead to inconsistencies and potential exploitation of the system, potentially compromising the fairness of the program.
To address these issues, we have decided to simplify the collateral calculation and exclude withdrawals from the calculation, measuring investment as gross collateral used over the season. This reduces the revised formula to:

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In addition, to ensure a level playing field for all traders in each league, we also include the criteria that the sum of collateral and P&L meets the minimum equity threshold in the current season. This prevents accounts from withdrawing and competing with much less exposure at stake.

The league section on the leaderboard has been updated to reflect these changes and incorporate the new formula.

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When will I receive the reward? It has been a long time

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I agree, that the process should be faster. I see the proposal tested on testnet so I believe it will be live soon. Next season should be faster

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I have a question.
If the score falls into 50% of the rating, based on the results of the second season. He is promoted to a higher league. What if the amount in the account has not reached the minimum threshold for this league?

Will the account promoted to a higher tier, or not?

Or is the minimum amount only for entering the league list?

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Hello,
Why are the season 1 rewards still not distributed?

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Hi @olegas
Thanks for the question. This is probably a good time to make the promotion and relegation criteria explicitly clear.
At the end of the season:

  1. All traders who did not trade in the previous season start in the Bronze tier as long as they have at least $250 in account equity. New traders with sufficient equity are also assigned to the bronze tier.
  2. The bottom 25% of each of the Platinum, Gold, and Silver leagues are automatically demoted to the league below. Traders whose account equity falls below the minimum threshold are also moved to the appropriate tier for the following season.
  3. The top 50% of the Bronze, Silver, and Gold leagues are promoted to the league above as long as their closing season equity is sufficient to qualify for their current league. For example, a top 50% trader from the Gold League would also need a minimum of $ 8,000 in their account at the end of a season to get promoted to the Platinum League. This incentivizes smaller traders to progress up through the leagues while maintaining a reasonably level playing field amongst traders. Large traders don’t have to worry about competing with trades, putting orders of magnitude less capital at risk, for example.
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