DRC: Increase Fee Weight Parameter
AI summary
This proposal from Xenophon Labs suggests adjusting how dYdX's trading rewards are calculated. It aims to increase the importance of trading fees in the reward formula while reducing the weight given to open interest (the total value of open positions). Specifically, the 'fee weight parameter' would increase from 0.67 to 0.8, and the 'open interest weight parameter' would decrease from 0.28 to 0.15. This change is based on research indicating that incentivizing open interest hasn't significantly boosted protocol growth, whereas increasing the fee weight is expected to directly increase total fees paid by traders.
If passed, this proposal is expected to increase the total fees paid by traders (takers) by approximately 19%. Traders who generate more fees will receive a larger share of the trading rewards, while those primarily contributing to open interest without high trading volume may see their rewards decrease. The DAO benefits from potentially higher fee revenue.
Voting results
🐳 Whale votes
0 votes > 5% VPFull proposal
Summary
We at Xenophon Labs recently conducted research on the trader rewards mechanism. Among our findings were the following:
- Incentivizing open interest through the trader rewards formula has not shown a noticeable impact on long-term growth of the protocol.
- 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.…