Liquidity Mining Proposal

Motivation

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

  • Distribute PERPs to the hand of users

  • Create a positive feedback loop for traders and stakers.

  • Prevent wash trading

Proposal

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

  • The Liquidity Mining program will test run for 4 weeks after the mainnet launches and see how it goes.

  • 50% of the inflationary rewards will be used for this Liquidity 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 into a spreadsheet

  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 payment. The USD price of PERP is TWAP of that week.

  3. The rewarded PERPs are capped by 50% of the inflation rewards that week. Once the rewarded PERPs > the cap, the rewarded PERPs will be proportionally distributed.

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

  5. Perpetual Protocol pays each network participant by submitting an on-chain (or several) transactions.

  6. Upload the spreadsheet to IPFS for everyone 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.

Updates to the Funding Payment

  • 50% of the funding payment would be sent to 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 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 raito of PERP rewards

    • 100% of trading fees

    • 50% of funding payment