Add Liquidity Providers' Incentive on Spread
AI summary
This proposal for the dYdX decentralized exchange aims to change how liquidity providers (LPs) are rewarded. Currently, LPs are incentivized based on the 'depth' of their orders, meaning how much trading volume they can support. This proposal suggests adding a new factor to the reward calculation: the 'spread,' which is the difference between the buy and sell price of an asset. The goal is to encourage LPs to offer tighter spreads, making trading cheaper for everyone.
If this proposal passes, liquidity providers who offer tighter spreads will receive more incentives, potentially leading to lower trading costs and better prices for all dYdX users. It could also shift the competitive landscape among LPs.
Voting results
🐳 Whale votes
0 votes > 5% VPFull proposal
In reference to https://forums.dydx.community/discussion/2519-incentivize-liquidity-providers-on-spread
Target - Incentivize market makers to provide liquidity that could be accessible to ALL traders by narrowing spread
Suggestion - Adjust the current Qscore formula to add Liquidity Providers' Incentive on Spread where each order gets Depth/(Spread^2) from current Depth/Spread to address higher importance to spread