Strips Liquidity Farming Reward Design Explained

TL;DR

  • This medium article explains the mechanism design behind our rewards.
  • Rewards will be distributed between traders and stakers, and traders who also stake will receive the most rewards.
  • Real-time Rewards Distribution. Staking and trading rewards are distributed in real time.

Trading rewards are distributed to each market in real-time. When each trader opens a new position, we calculate:

Trader cumulative notional += |notional| × (1 + Trader staked LP / Total LP staked)

AMM cumulative trading notional += |notional|×(1+ Trader staked LP / Total LP staked)

In the formula above, (1 + trader staked LP / Total LP staked ) is the trader boost multiplier. This is used to boost rewards for traders who stake in the same market. Traders who stake will receive the most rewards, hence we encourage everyone to trade and stake to get the most boosted rewards.

Wash Trading

In order to encourage a healthy marketplace and discourage wash trading, we have implemented a minimum trade holding period of 10 blocks.

When each trader closes or partially closes their position, or gets liquidated, we update: trading interval = current_block − block_prev_trade

Trader: if trading interval is less than 10 blocks, then we will classify this trade as wash trading, and the trading reward will be 0 for this trade. If the trading interval is greater than 10 blocks, the trader’s cumulative trading volume will be added as per normal.

AMM: The AMM includes all trades in its cumulative trading volume. As wash trading still pays trading fees to LP holders, these volumes are still valid. Hence, wash trading benefits LP holders while penalizing wash traders.

We will monitor the speed of token distribution: given we count wash trade volumes into market volume without rewarding STRP tokens to wash traders.

For each market, all traders will share the trading reward proportionate to their valid cumulative trading volumes.

On a monthly basis, we may reevaluate how each market will share the trading rewards. In general, reward pools will be distributed to Traders, AMM stakers and Insurance stakers with aratio of 1 : 1 : 1.5.

Traders will accumulate trading rewards proportionate to their non-wash trading volume. Total trading rewards across all AMM markets will be around 13,328,285 STRP tokens, which represents 13.3% of total STRP supply.

In each market, stakers will accumulate staking reward proportionate to their staked amount. Total staking reward across all AMM markets will be around 13,328,285 STRP tokens, which represents 13.3% of total STRP supply.

Total staking rewards allocated to Insurance Pool will be around 19,992,428 STRP tokens over 3 years, which represents 19.9% of total STRP supply.

The distribution schedule, as well as allocation proportion, is subject to change according to the development stage of the protocol.

Trading volume is accumulated each month and resets every day. At the end of every day, every trader’s accumulated trading volume, as well as the market’s accumulated trading volume, will be reset to zero. The reasons for this system are several:

  • Firstly, if we notice abuse with the rewards system, we can quickly readjust in the next period.
  • Secondly, we want to encourage fair use of our protocols, and build a level playing field on Strips. In order to do that, it is fairer to have daily reward epochs.
  • Once a trader stops trading on Strips for more than 1 day, the trader will no longer receive any trading rewards.

To conclude, the more a user trades and stakes on Strips, the more rewards he/she will receive. Traders will receive rewards as well as stakers, and traders who also stake will receive the most rewards. Not to mention that traders can use leverage to increase their trading volumes and hence trading rewards.

Disclaimer

Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment.
The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Strips Finance.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Strips Finance

Strips Finance

To build the largest fixed income trading platform for DeFi