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Summary

We at Xenophon Labs recently conducted research on the trader rewards mechanism. Among our findings were the following:

1. Incentivizing open interest through the trader rewards formula has not shown a noticeable impact on long-term growth of the protocol.
2. There is evidence that total fees paid by takers will change proportionally with a change in the fee weight parameter; for instance, an increase of 10% of the fee weight parameter is expected to lead to an increase of 10% in the total fees paid by takers.

We propose increasing the fee weight parameter from a=0.67 to a=0.8, while decreasing the open interest weight parameter from b=0.28 to b=0.15. This should constitute a 19% (.8/.67) increase in taker fees.

Voting Options

• Yes: increase the fee weight parameter from a=0.67 to a=0.8, and decrease the open interest weight parameter from b=0.28 to b=0.15.
• No: do nothing.

Links

• Trader Rewards Formula Docs
• Forum Discussion
• Research Paper
• Blog Post