dYdX V4 Launch Incentives Proposal

Proposals
41

Great to see community-focused initiatives aimed at incentivizing early adopters, facilitating user migration, and boosting protocol growth. Incentivizing desired behaviors and activities, including deposits, trading, staking, and governance, should result in a more vibrant and engaged early user community, a seamless transition to a v4 model, and the stimulation of trading volume.

It’s also encouraging to witness active discussions bringing numerous valuable points and contributing to a more transparent solution. However, there is still room for discussion around the formula being confidential and how to enhance transparency while mitigating risks by implementing some of the proposed ideas, such as introducing unpredictability, randomness, a live leaderboard, and bi-weekly reports.

1 Like
42

Hi @chaoslabs,

Now that the dYdX Chain is past the genesis launch and officially in the Alpha stage, we should consider how the dYdX community can encourage users to bridge their tokens onto the new chain and secure the network even though they can’t use the trading application and no staking rewards at this stage.

Does your program include the deposit incentives to be applied retrospectively from the staking at the Alpha stage or the incentives would be applied only after the incentives program launches?

3 Likes
43

CONTEXT:
As dYdX prepares for the launch of V4, @chaoslabs presents a compelling proposal. At Govmos (the governance arm of the PRO Delegators’ Validator), we recognize the challenges in transitioning and expanding the existing V3 user base and emphasizes the importance of liquidity and migration for the success of V4. The Launch Incentives program, supplementing the native V4 Rewards program, is designed to leverage the proven efficacy of Liquidity Mining and token reward programs in stimulating protocol growth and trading volume.

ANALYSIS:
While the proposed Launch Incentives Program carries the noble goal of amplifying incentives to encourage traders’ migration to V4, it is essential to address potential concerns related to transparency. The success of any incentive program relies heavily on clear communication and openness about its structure, execution, and outcomes.

  • Lack of Transparency Risks: One potential risk lies in the lack of detailed information regarding the specific criteria for reward distribution and the mechanism for evaluating the program’s success. To ensure the community’s trust and understanding, it is crucial to provide transparent insights into how Chaos Labs plans to assess adoption rates, modify distribution quantities, and adjust the program’s duration as necessary.

  • Importance of Rewarding Legitimate Action: Another critical aspect is the necessity of distinguishing and rewarding legitimate user actions from potential abuse, particularly by automated bots. To prevent malicious actors from capturing an undue share of the incentive pool, implementing measures to verify and reward actions executed through the frontend becomes paramount. This not only safeguards the integrity of the incentive program but also ensures that early users genuinely contributing to the platform’s growth are duly recognized and rewarded.

CONCLUSION:
In conclusion, while supporting the proposal for a Launch Incentives Program, it is crucial to address transparency concerns to maintain the community’s confidence. Regular reporting, clear communication, and a commitment to adapt based on real-time data will contribute to the success of the program. Moreover, implementing safeguards against potential abuse, such as rewarding actions through the frontend, will help ensure that the financial support intended for early users genuinely contributes to the growth and success of dYdX V4. Balancing transparency with proactive measures against abuse is key to fostering a fair and thriving ecosystem.

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2 Likes
44

It is a well proposal, and looking forward to it.

1 Like
45

@chaoslabs has published a blog about the comprehensive overview of the program :pray:

2 Likes
46

Thanks to ChaosLabs for introducing their formula for v4 Launch Incentives. We want to use the opportunity to provide some insights into what we see as valuable governance activity from our experience in 20+ DAOs.

We want to help incentivize productive and aligned activity in a way that ensures governance activity is not abused for exploits

Valuable governance activity:

  • Writing proposals, that get passed
  • Voting
  • Publishing rationales for voting
  • Staking

Governance activity not producing direct value:

  • Replies to forum posts
  • Forum posts
  • Likes
  • Discord activity

The ultimate goal of governance activity is to get the DAO to do something. Thanks to the token-weighted voting process, any proposal that gets passed is valid governance output, at least in the regard that it is an expression of what token holders want.

Writing proposals and convincing the community to vote is hard work and necessary for the DAO to evolve. It should be incentivized, especially since incentives would encourage actors who don’t stand to benefit from their passing to write proposals.

Malicious proposals or scam proposals shouldn’t be incentivized and shouldn’t pass. We think governance attacks are a real threat, but we want to keep it simple for this reply.

Voting should also be incentivized because the amount of the active token supply in governance increases the cost of a governance attack, making the protocol more secure. We would advise paying out further incentives to those token holders who publish the rationales for their decisions, educating others, and contributing to the dialogue.

Staking increases the protocol’s security outright and is already incentivized through staking rewards. Should not enough of the token supply be staked, we think it might be sensible to add further incentives, with a sharp eye on what can be maintained over a more extended period.

For the “not valuable” category:

While we think replies, Discord activity, and likes are essential for a thriving governance ecosystem and good decisions, these activities are too easy to farm. Furthermore, the farming activity would endanger the quality of the well-meant and meaningful authentic discourse, negatively impacting honest actors.

We don’t see a straightforward way to incentivize this behavior that doesn’t have adverse second-order effects. One prominent example is MakerDAO’s SourceCred system, discontinued because the community found the signal to noise ratio to leave a lot to desire.

We advise not to incentivize this category.

5 Likes
47

Be careful on this, since there is a nuance to it. It can be quite easy to make a lot of posts indeed, but making posts with content which add value to the discussion is another story. That is still a lot of work, which requires following the threads closely and staying in contact with the community and the direction the project is taking. A validator (or governator for that matter) does not always need to start a proposal itself to still be valuable for the governance process in general. I even think it is the other way around; if the person doing the governance is rewarded for starting a lot of small topics which could / should also be covered in a more comprehensive approach. It also might lead to heavy sub-optimalisation by trying to create a lot of small meaningful threads, where sometimes taking a step back and looking at the bigger picture is better.

So, to make a long story short, it will heavily depend on the way the role is executed whether you should incentive reactions of new threads imo.

2 Likes
48

In an ideal world, that’s very true, but at the same time, it would be hard to keep track of token holders who properly do the above or just vote for the sake of seeking incentives. Do you have any idea of tracking those behaviors for proper incentive distributions?

49

Agree 100%. Like we said in our response, this activity is very valuable.
Just super hard to distinguish farming from genuine activity in a way that’s easy to implement and isn’t subjective.

If you have suggestion on how to achieve this, we’re definitely interested :slight_smile:

50

We think voting can have a small reward per token that is voting. Just enough to offset gas costs and make participating more palatable.

If rationales get published, the reward can be multiplied.

In some ways, a vibrant governance ecosystem is a tremendous asset for the future of any protocol, so it would make sense to incentivize it.

2 Likes
51

That is a very good point you touch there. I was thinking about this based on your earlier reply on my post.

If we can incentivize rationales for voting which makes people eligible for a small compensation that would be a good way forwards. This can be done in retrospect, where we can also maybe implement AI or an algorythm to filter people only putting in “Yes” or other useless rationales. An AI or algorythm might discover true comments versus generic ones. I’m not so good at configuring such stuff, but it is maybe a direction to explore.

2 Likes
52

There’s pretty decent anti-spam forum software available, like CleanTalk and others…
IMO, the right thing to do here, is just to approve everything above a particular bottom line, otherwise, we enter the realm of taste… and then it becomes very subjective, and encourages gatekeeping.

53

True, subjectivity would be killing for the point we want to achieve. Every opinion and rationale (being a decent one) is valuable.

1 Like