Summary
This proposal seeks community approval to distribute $100,000 in DYDX as rebates for the first two weeks of the Liquidation Rebate Pilot Program. Rewards will be allocated proportionally to the top 100 traders who incurred the largest realized losses due to liquidations.
Abstract
Following the launch of the Liquidation Rebate Pilot Program, this proposal outlines the first biweekly distribution of incentives to partially offset liquidation losses for the most impacted traders. The goal is to improve user experience, enhance trust in the protocol’s liquidation mechanics, and validate whether targeted rebates can sustainably support trader retention.
This proposal seeks to distribute $100,000 in DYDX across the 100 highest-loss accounts as of December 15, 2025, using a proportional allocation method based on realized liquidation losses.
Motivation & Rationale
Liquidations, while necessary for protocol solvency, can create significant negative user experiences, particularly during periods of heightened market volatility. The Liquidation Rebate Pilot Program aims to assess whether partial compensation for liquidation losses can improve trader sentiment, support retention of active users, and reduce churn, without undermining the protocol’s risk framework.
We propose distributing $100,000 in DYDX for the first distribution tranche, allocated proportionally to the top 100 addresses with the largest realized liquidation losses. Based on observed loss data, this distribution would recover approximately ~8% of losses for eligible traders, which was assessed to strike a balanced outcome between meaningful relief and broad coverage.
The selected rebate amount of $100,000 also represents an initial, conservative tranche of the $1M earmarked for the month-long pilot. This sizing strikes a balance between the desire to meaningfully reduce trader losses and ensuring sustainability throughout the program’s entire duration.
Program Report
This report summarizes liquidation activity and rebate eligibility for the first distribution period of the Liquidation Rebate Pilot Program.
- Total realized liquidation losses: $1.7 million between December 1-15, 2025. The leaderboard can be found here (on ‘Rebates’ tab).
- Eligible addresses: 100 addresses, representing the largest realized liquidation losses for the first two weeks.
- Rebate allocation: $100,000 in DYDX, equivalent to 526,315.87 DYDX, calculated using a 7-day TWAP of $0.19.
- Distribution method: Rewards will be distributed proportionally based on realized liquidation losses among eligible addresses, subject to successful claim submission as outlined below.
Data as of December 1-15, 2025, suggests that a top 100, proportional rebate structure provides meaningful loss recovery (~8%) while maintaining broad coverage across impacted traders. This reinforces the intent to balance fairness, incentive alignment, and program sustainability.
Details for the second distribution, including:
- the number of eligible addresses, and
- the total rebate amount,
will be announced on January 5, following completion of the next reporting cycle.
Specification
We request $100,000 in DYDX (equivalent to 526,315.87 DYDX, based on the 7-day TWAP of $0.19) from the Community Treasury to be distributed to the top 100 eligible addresses, as detailed here.
To increase engagement and visibility for the Liquidation Rebate Program, we are working with frontend contributors to implement a claim-based distribution flow on dydx.trade. Eligible users will be notified via an in-app/web notification and directed to a dedicated claims landing page to verify eligibility and submit their claim.
For operational simplicity, we will submit a community spending proposal to transfer the approved funds to an account controlled by the CLC (dydx1lxjqtqzsnnxygkax03d8ygxrm7er23xjqpg4e6) for the purpose of executing the distribution. Community members will be able to independently verify all transfers between this account and eligible addresses via a public block explorer, such as Mintscan.
Eligible users will receive their DYDX rewards within 48 hours of submitting a valid claim. Users will have 30 days from the claim window opening to submit their claim. Unclaimed rewards after 30 days will not be paid out, and any unclaimed DYDX will be returned to the Community Treasury once the claim period has elapsed.
Next Steps
We invite the community to provide feedback on this proposal. If there is no significant objection, we are planning to submit the on-chain proposal on December 17, 2025.