Transaction mining is a proposed rewards program that aims to incentivize trading by returning a portion of trading fees and funding payments to traders.

Motivation

• Reward early traders with part of the inflation rewards to attract more traders to the system

• Distribute PERPs into the hands of users

• Create a positive feedback loop for traders and stakers

• Prevent wash trading

Proposal

• Providing transaction mining rebates for 1) trading fees 2) funding payment.

• The Transaction Mining program will test run for 4 weeks after the mainnet launches and will be evaluated further at that point.

• 50% of the inflationary rewards will be used for this Transaction Mining program.

Reward Calculation Time

At the end of every week (Sun 00:00 UTC)

Off-Chain Process

1. Perpetual Protocol aggregates all the trading fees and funding payment paid by each network participants of the given week.

2. Each network participant is rewarded USD-denominated value of PERP based on 100% of their aggregated trading fees and 50% of their aggregated funding payments. The USD price of PERP is TWAP of that week.

3. The rewarded PERP tokens are capped at 50% of the inflation rewards for that week. Once the rewarded PERPs > the cap, the rewarded PERPs will be proportionally distributed to stakers.

4. 80% of the paid PERPs are locked on-chain for one year, and the remaining 20% is claimable right away. The locked rewards would not be staked in the Staking Reserve.

5. Perpetual Protocol pays each staker by submitting an on-chain (or several) transaction(s).

6. Perpetual Protocol will publish weekly trading stats to IPFS for anyone who wants to verify it.

Example

Alice pays $50 of trading fees to open a long position on Monday and also pays $20 of funding to shorts on the same day. At the end of the week, she would receive $60 of PERP to compensate her fees. She could claim $12 of PERP right away, and the other $48 of PERP one year after.

Funding Payment Reimbursement

• 50% of a trader's funding payments would be sent to the trader;

• 50% of the funding payments would be sent to the Insurance Fund instead of the receivers of the funding payment. This is to prevent wash trading.

Pros and Cons

• Pros

  • Traders earning PERPs → more fees → more Insurance Fund / more yield for stakers → more demand of PERPs → more traders earning PERPs

  • Perpetual Protocol is giving 100% taker rebates, and so it’s “free” for traders to trade, but it also disincentivizes wash activity because of the USD-denominated value of PERP and one-year locked-up

  • Off-chain process that’s easy to update

• Cons

  • Need a reliable TWAP price before it launches

Parameters Updatable by Governance

• The ratio of liquidity mining

  • 50% of the total inflation rewards

• The ratio of 1-year reward lockup

  • 80% will be locked-up for one year

  • 20% will be claimable after the epoch

• The ratio of PERP rewards

  • 100% of trading fees

  • 50% of the funding payment