[LRFC] Update to Lyra Trading Incentives - Incentivize Maker Volume

Simple Summary

Revise Lyra Economics V2

Abstract

This proposal suggests modification to the Ecosystem incentives proposed in Lyra Economics V2, transitioning from rewards based solely on taker fees paid to rewarding both maker and taker fees paid equally.

Motivation

The current incentive structure is not producing the competitive markets necessary to maximize Lyra’s incentives and generate organic trading volume. The taker only incentives force traders to cross wide spreads from market makers, or interact with existing orders in order to get rewards or to place resting limit orders and receive no rewards for their liquidity. By rewarding both maker and taker volume equally, we aim to enhance liquidity on the order book and improve the user experience for everyone.

Specification

Ecosystem incentives

Effective immediately from the start of the next epoch, the LYRA DAO will continue distributing 15% (150,000,000) of incentives to traders based on both maker and taker fees paid, excluding any base trade fees. This distribution serves two main purposes:

  • Governance alignment: To establish a strong connection between early adopters of Lyra v2 and the DAO, aligning incentives between key stakeholders by granting ownership and governance rights in the future of the protocol.
  • User & liquidity acquisition: To attract new traders to Lyra v2 that will generate volume and fees for the protocol.

150,000,000 LYRA will be distributed over 96 epochs, with each epoch lasting 7 days.

Rewards Specification

Traders are allocated a pro-rata percentage of the rewards pool based on fees paid:

The rewards pool will consist of 150,000,000 LYRA distributed over 24 months

  • Rewards are to be determined at the end of each 7 day epoch
  • Rewards will be delivered in full as LYRA after the end of each epoch.
  • In the special case of the “launch season”, all rewards will be delivered at the end of epoch 12.
  • Market Makers engaged in other liquidity mining or fee discount programs on the exchange will not qualify for LYRA rewards based on maker fees but can still earn rewards for taker fees paid.
  • Note: “Fees paid” does not include any minimum or base trading fees.

Growth Experiments

Up to 15% of each epoch’s allocation of LYRA rewards will continue to be diverted to bespoke incentive programs for traders.

Rationale

Incentive Structure
The revised incentives are designed to reward all traders and create organic order flow to the V2 protocol and attract new participants. Market Makers are ineligible for Maker fee rewards because they are re-imbursed for maker fees paid in other programs.

Test Cases

Test cases are required for code-related proposals (i.e. non treasury actions).

Copyright Waiver

Copyright and related rights waived via CC0 .