Proposal: OOKI Rewards For Traders & Borrowers To Increase Protocol Usage

Introduction

This is a proposal for the DAO to implement OOKI rewards for traders using the OOKI platform and paying fees in order to encourage more usage of the protocol. This is based on a liquidity mining proposal @jokerbra made several months ago with some updates, and is inspired by DyDx’s successful trader incentives model.

This is very much a first draft of a Trader Rewards Proposal and the details are tricky to get right across multiple chains so comments and suggestions are welcomed. In particular, suggestions to change or refine the system to mitigate traders gaming the system (by wash trading for example) and encourage real trading, are welcomed.

Although the DAO team can begin working on this proposal as soon as it is passed, it will ONLY be implemented and rewards will only begin to be paid after the OOKI platform is fully functional and the following milestones have been hit:

-The new Interest Rates Model is implemented
-There is adequate liquidity for traders on ALL chains that the product has been deployed
-The limit orders feature has been completed and implemented for users
-The deployment of the protocol on Arbitrum has been completed.

The reason for the wait until the above features are complete is because there is no point in incentivising traders to use the protocol with an incomplete feature set - we need to draw traders to use the platform when it is fully ready to be used by professional traders and not before.

NOTE: This Proposal only deals with OOKI rewards for traders and borrowers (who pay fees to the protocol). Rewards and liquidity mining for liquidity providers to ensure sufficient liquidity for traders and borrowers is a separate subject and will be addressed separately (and arrangements are likely to be different on each chain where Ooki is deployed such as Curve bribes on Ethereum L1).

We could actually add liquidity mining rewards quite easily to this model if we wanted to - just increase the total OOKI given out and make liquidity providers eligible for reward points in each season (for example, for chains that do not support Curve bribes and where there is no other alternative) but for now I have not included it here.

Rewards Structure - Basic Concept

The basic idea is for the DAO to allot a fixed amount of OOKI per month to be paid out as rewards, and for traders to earn reward points through their trading activity and share the rewards pot on a pro-rata basis, depending on the number of points each trader has.

The rewards will be paid out at the end of each rewards period, such as each month.

For greater flexibility, we could have shorter weekly seasons in which points accrue and rewards are paid out on a weekly basis.

It is important that the DAO fixes the rules for earning points and rewards in advance of each season and does not change them for THAT season, to give traders clarity and certainty about their rewards and how to earn them.

However, for flexibility, the DAO can change the rules for each new rewards season (either every week or every month) to ensure that the rewards are spent most efficiently for the DAO’s purposes, as long as the rules for any season are clear and unchanged at the time the season starts.

For example, it may be useful to increase or decrease the amount of rewards going to a particular chain on which Ooki is deployed, or to incentivise particular behaviours. It would also be possible to simply reduce the reward emissions if organic activity on the protocol is healthy or the OOKI token price grows significantly (increasing the rewards will require a DAO vote but the team can reduce rewards without a vote if needed).

One possible way to achieve this is to have a baseline set of rules for earning rewards points and then have a “booster” variable which can changed from season to season. But I am open to other ideas as well.

While the DAO will vote and approve the basic structure of rewards, and in particular the total amount that will be paid out each month or each season, the DAO Core Team will have the discretion to change the rules and points for each season without a DAO vote in the interests of maximising flexibility and speed.

Rewards Structure - Details

The simplest form of this kind of rewards program is to allot points according to the fees paid to the protocol by each wallet address (for borrowing and trading) and give rewards in accordance with that.

This means that users of Ooki who pay fees by borrowing from the protocol and paying interest (whether to margin trade or borrowing for other reasons), OR by trading through the protocol and paying trading fees will be given rewards points (more fees paid = more points proportionally), and at the end of a season, they will share in the OOKI rewards pool for that season in proportion to the number of rewards points they have (and be able to claim the rewards for that season at the end of each season).

In order to discourage wash trading and gaming the system, it is important to NOT give rewards points for the payment of loan origination fees, because then anyone can open very large loans, pay an origination fee, and close them immediately and collect huge rewards (because the loan was so big) for taking zero risk.

My understanding is that the latest updates to the protocol and the new interest model removes origination fees completely, so this is not an issue anyway.

For the same reason however, it is likely a good idea to not give rewards to people who take out flash loans (even though they will pay a fee), and this will need to be specifically excluded because the protocol will still include flash loans.

Specific Features/Points

  • A Dashboard for users to see the (estimated) OOKI rewards and rewards points accruing for their wallet in realtime is vital. One of the reasons a similar rewards program in 2020 failed was because traders had no way of knowing how much rewards they had earned and it was basically a surprise whenever it was paid. It will make a huge difference in UI/UX terms if a trader can look at a dashboard showing their fees paid in realtime for the current season and an estimate of rewards likely to be earned (based on numbers from the previous season). DyDx does this very well.

  • How much allotment per month/per week aka season? As a starting point, I suggest that 30m OOKI per month be allotted, which should be fairly sustainable given that 70m OOKI vests into the Treasury each month from vBZRX (which means each weekly season will have roughly 7m OOKI in the rewards pool - around $120k at current OOKI prices).

  • Multichain split - how should the rewards be divided between the chains on which OOKI is deployed? I think this is a tricky question and while we can have a starting split, the team should be given the discretion to adjust it each season depending on volume and the protocol’s needs. However, as a starting point, if the DAO allots 30m OOKI per month, Then I think 12m should go to Arbitrum, 10m to Polygon, 6m to Ethereum and 2m to BSC for the first month (or proportionately for the first season) and the team can adjust between chains after that. This is on the basis that Arbitrum and Polygon are the highest priority chains for us, and BSC is the least important, while we still need to have some presence on Ethereum L1 (despite high gas fees discouraging use) because of the amount of capital and volume there).

5 Likes

So some notes for clarifying technical limitations.

  1. Fees paid for lending are not per individual loan but instead are aggregated with all loans so not the easiest thing to have it included for a rewards program as it would require some work to be done on the protocol
  2. Origination fees have been removed (or will be removed in near future, depending on the chain), and flash loan fees can be easily voided from receiving rewards
  3. Trading fees are likely best to count for rewards only so as to encourage trading activity. This will benefit protocol the most and likely has a stickiness effect if the experience is enjoyable and semi-comparable to a CEX.
  4. Weekly seasons are likely too short of a timespan so if there is a desired change, we would not have ample time to test and make sure there are no bugs. Monthly is likely the better plan.
  5. Lenders can (potentially) be incentivized as the fees charged on interest paid is actually on the lenders, not the borrower so that is a way to incentivize lending (it will not amount to a major boost).

Comments on reward system:

  1. Would it make sense to stick rewards on a short-term lock up or just give it outright? I have no input either way but just want to propose the question.
  2. The reward system should work to attract users but I do agree with only employing this when the protocol has those improvements listed implemented.
  3. The reward amount of OOKI might be a bit aggressive and I would prefer a slower start that can be ramped up. The main reason for this is the OOKI vesting although can be viewed as a new stipend to spend, it is of utmost importance that a sufficient amount is kept to ensure sustainability in the future. Now it can be argued that the protocol fees gained should be near the OOKI expenditure so this should not be an issue but it’s something to keep in mind.
  4. A dashboard would make sense, but would the reward system be proportional to the $ value of fees or proportional to the % of fees a user paid? If the latter it is hard to estimate before the end of the season.
  5. Multichain split is an important thing to keep track of and is of utmost importance to structure well. From my estimates, Arbitrum and Polygon will see the most trading volume and Ethereum may trail slightly behind (unless whales want to start trading then Ethereum will likely be quite huge). It is also important to look at the volume and liquidity of the DEXes on these chains to see if it can actually support the volume that would be incentivized to trade as we are reliant on the DEXes on each chain.

Concluding Thoughts:

This proposal is well put together but there are things to specify to make sure there is little to no ambiguity from what the intention was and what is actually implemented as well as to make the development process simpler. I agree that some sort of reward program makes sense with the launch of the trading features as it should attract a new onslaught of users that will (hopefully) stay even after the rewards end, even if the users that stay amount to 50% of the total users then it is successful as the incentives paid out will likely (almost) match the fees paid so it will be a minor net loss or even a net profit.

4 Likes

Hi Badr,

This proposal is well written and i completely agree there is a need to incentivize traders and borrowers to get more demand on the Ooki protocol. I think i’m not the right person to calculate al the reward system points, since im not that technical in the crypto/trading space. In my opinion is 30m OOki allotment a bit to much. i think 25%-33% allocation is more reasonable. This would be an allotment between 17,5m Ooki - 23,33m Ooki per month.

I agree on having seasons in this program. Seasons are a great way to flexible adjust parameters to what is the best need for the Ooki protocol. In this i agree with Drypto to have montly seasons.

Because of the monlty season, i think the rewards need also be paid out monthly, preferably with a month lockup. This prevent of straight away selling pressure. a real-time dashboard is definitely needed, as traders can visualize the rewards and motivate the user.

as regards the multichain split i agree the focus needs to be on polygon and arbitrum. I also think we only activate this program on the chains that support the multichain fee bridge feature, so stakers of Ooki and the protocol itself can benefit from the paid fees. Assuming ALL chains have the multichain fee bridging feature. i think a allocation of 30% polytgon 30% arbitrum 20% ethereum and 10% bsc should be fine. Adjusting these parameters could be in the future with a simple forum discussion in my opinion.

At last i agree the implementation of this program STARTS when all necessary features are implements. I repeat those features here:
-The new Interest Rates Model is implemented
-There is adequate liquidity for traders on ALL chains that the product has been deployed
-The limit orders feature has been completed and implemented for users
-The deployment of the protocol on Arbitrum has been completed.

2 Likes

Hey, some great points here -thanks for the clarification on the technical issues.

Let me go through some of them and ask some more questions for stuff I didn’t understand:

  1. When you say “fees paid for lending are…aggregated with all loans” - am I correct in understanding this to mean, that the way the system is structured, it is not easy to give individual rewards to borrowers who pay interest fees, without doing extra work? This was done back in 2020 though - I assume it was only possible in 2020 because the team did a lot of extra work to create a list of borrowers and calculate rewards for them etc?

  2. Irrespective of the above, now that you mention it, I think it could be a good idea to restrict OOKI rewards to trading only (not borrowing). It will mean that a bigger pool of OOKI will be available to reward traders, and incentivize more trading and more volume on trading. It will also indirectly incentivize more borrowing (in order to trade) and therefore increase interest rates for lenders and incentivize more liquidity. The main downside is that the incentives for “pure” borrowing (ie, borrowing for a reason other than trading on OOKI) will be much lower - the product that used to be called Torque. But if our focus is on trading - which it should be - then that tradeoff is likely worth making. If we do this, then flash loan fees will automatically also NOT receive rewards (because they are a form of pure borrowing).

  3. Good point regarding Season length. We can keep it at a month (will also mesh nicely with the allotment of 30m OOKI per month by the DAO - no need to divide it into weekly amounts).

  4. Not sure what you mean by “lenders can be incentivized as the fees charged on interest paid is actually on the lenders, not the borrower”?

  5. I don’t see the point of a short term lockup for rewards. It’ll just be dumped at the end of the lockup anyway, unless we give them a reason to hold the token and give it a use case. Which brings us back to long term staking/lockup with a veOOKI token model. Combined with growing fees from trading volume, we should be able to do that (some rewards will always be dumped but we can try and minimize the amount).

  6. Re the amount of OOKI given as rewards, I was also thinking originally of starting with a smaller amount and ramping up, but the traders I’ve spoken to say that from their perspective as users of the platform it would make a lot more sense to start with a bang with higher rewards and grab attention from big players and get more users, and then slowly wind down the rewards.

  7. Dashboard would show fees which would indeed be proportional to the percentage of fees paid (because the traders will be sharing a fixed pot of 30m OOKI per month) and not USD value. You are right - this means you cannot calculate an estimate for the current season until it is complete. I assume it will have to be an estimate based on the previous season’s volume. Something like “Your trading volume till date in the current season is $XXXXX. If the total trading volume in the current season is the same as the last season ($YYYYYYYYY), then you will receive an estimated XYZ OOKI in rewards, which is a XX% share of the total pot”.

  8. I agree the multichain split is crucial but I am not too worried about getting it right at the start since the team will have the flexibility to adjust at the end of each Season. So we can start off with the numbers suggested for the first month and then change it around as required.

  9. As for trading volume, agreed that we need to make sure that the underlying DEXes can support the volume (if they can’t, the team will have the discretion to ramp down rewards on a particular chain).

For comparison, GMX on Arbitrum is doing something like $60 million in daily trading volume on Arbitrum alone, with far fewer trading pairs than we have (although they have limit orders which we don’t - that will bring in more pro traders), and I see no reason why we can’t match or exceed that kind of volume (of course GMX are a perps platform so they don’t have to worry about underlying DEX liquidity for margin trades, but nevertheless I think we can easily cross $50 million a day with sufficient liquidity+new interest rates+limit orders+good marketing).

Badr i agree on all above’s answers! looking forward for the final proposal :slight_smile:

  1. I am not sure how it was done in the past but I do not believe lenders were incentivized as it was borrower focused.
  2. Restricting to trading only is the best bet IMO.
  3. lender fees could be included for rewards and those rewards could be used to buy the underlying loan token immediately as a way to juice lending rewards. I am not supportive of this though and think just incentivizing trading is better
  4. Starting with a bang is a risky move but if we start heavy-handed for 1 season then re-adjust the next one I don’t think it’ll be bad. A proper assessment of the state of liquidity on each chain is needed to gauge what is our literal cap on incentivizing activity as liquidity is a huge concern.
  5. I think this will work but cannot commit to it

As long as the incentives paid out are less than the fees accumulated then it shouldnt be too bad. One thing to remember is only 20% of fees accrued are going to treasury as it stands so there will still be a net value loss of treasury.

Thanks Drypto.

  1. Okay cool. If we’re not planning to give rewards for lending now, it doesn’t matter anyway.

  2. Agreed about restricting to trading fees only.

  3. I am not sure I understand what you mean by “lender fees” - you mean the interest paid by borrowers to lenders (from which the protocol takes a small cut as a fee), right? So when you say “lender fees”, you mean the protocol’s cut of the interest paid from borrowers to lenders? If the protocol’s share is then used to buy iUSDC (or whatever) on the open market, this will then drive up the price of iUSDC, which will effectively increase the interest rate received by lenders and juice the supply rate and increase liquidity? This is what you are talking about right? I agree we should not bother with this for now, but perhaps worth considering at some future point.

4&5 Agreed.

I think in the short term it’s okay to have a net value loss to the treasury and pay incentives that cost more than the fees received. We should just be very careful not to become reliant on it and not let it become the default. But for a short period to gain users and hype and volume it’s fine. Other protocols become enormous by doing this almost permanently (or for years) - that’s not sustainable in the long term. But if we do it for a few weeks or a few months as a way to acquire users and organic trading volume (not chasing vanity TVL metrics), then I think it’s fine. It needs good governance to scale it back when it is no longer needed though.

One more thing I want to add: someone suggested adding a new use case for the OOKI token:

Basically the idea is that holders of OOKI (or we could even say staked OOKI or veOOKI when that is implemented - but just staked OOKI or OOKI in wallet for now) will get a discount on trading fees and can pay fees in OOKI.

Perhaps something like “if you have OOKI in your wallet and pay fees in OOKI, your trading fees will be 30% discounted”.

This is similar to what BNB allows you to do on Binance and gives a new use case.

It means we will lose a bit of fees (that 30% discount) but the trade off in giving the token a new use case and encouraging people to hold their OOKI instead of dump it is probably worth the trade off.

What do people think?

3 Likes

Badri, anything that helps the OOKi token gain use case we should implement, so 30% discounted trading fees for hodlers sounds fine. Also, what do you think about the notion of OOKi getting ported over to Cosmos via Evmos? I don’t know the technicals but from what I gather, the Inter-Blockchain Communication protocol, a.k.a. IBC allows a project like OOKI to go from Eth into Cosmos. Would this be something realistically team could do? I’m just imagining OOKI LP pools with Osmosis etc. and can’t imagine how that wouldn’t be great for the protocol. I have no idea what this would involve though, but perhaps @Drypto could comment on the complexity as far as time and energy?

Yes. Incentivizing trading activity is a positive development looking a bit further into the future of margin trading on Ooki.com after the next steps/activities have been completed:

-There is adequate liquidity for traders on ALL chains that the product has been deployed
-The limit orders feature has been completed and implemented for users

The new use case for the Ooki token created by paying fees with Ooki and then getting a big discount on trading is a practical and effective way to have people holding their Ooki. It will benefit both the traders and the Ooki protocol.

I do support this proposal.

2 Likes

Guys, please let’s have more comments on this if anyone has anything more to say.

Otherwise I will think about finalizing the proposal (including the additional use case for OOKI) and getting it ready for voting soon.

I support this proposal.

In principle it’s a good idea. More exposure plus the DAO may be able to get a grant from EVMOS - I’m sure they will want a margin trading dApp on their platform.

But we’ll need Chainlink price feeds to be available there, plus the same issue that developer time is limited and they can’t do everything at once, and in my opinion the top priority should be finishing implementation of the new interest rates and related new features (DEX selector etc) on all chains, followed by limit orders as a top priority, which is needed to make the dApp really competitive.

So I’m not too keen on anything which delays too much from that (that is why this current Trader Rewards proposal and the upcoming veOOKI tokenomics change proposal are all designed to be implemented AFTER limit orders).

2 Likes

Absolutely, we need more use cases and incentives for users to buy & hold OOKI.

OK everyone, I think there is a lot of consensus for this proposal so I am going to put this up for a Snapshot vote (and eventually an onchain vote).

This will be the text of the Proposal:

Proposal: OOKI Rewards for Traders and Discounted Trading for OOKI holders

The following proposal will be implemented ONLY when all of the following are complete:

-The new Interest Rates Model is implemented on all chains
-There is adequate liquidity for traders on ALL chains that the product has been deployed
-The limit orders feature has been completed and implemented for users on all chains

Under the proposal, traders on Ooki Protocol will receive rewards paid in Ooki as follows and the following features will be implemented by the dev team:

-A Dashboard for users to see the (estimated) OOKI rewards and rewards points accruing for their wallet in realtime, similar to DyDx. Dashboard would show fees which would be proportional to the percentage of trading fees paid (because the traders will be sharing a fixed pot of 30m OOKI per month) and not USD value. This means you cannot calculate an estimate for the current season until it is complete. It will have to be an estimate based on the previous season’s volume.

-30m OOKI per month in total (across all chains) as rewards will be approved by the DAO ( can be changed by future DAO votes). Each month will be a “season” and rewards and trading will be calculated on the basis of each season. Rules once implemented will not change for each season but can change for the next season.

-For the first month, 12m will go to Arbitrum, 10m to Polygon, 6m to Ethereum and 2m to BSC. However, the DAO team will have the authority to adjust the split between chains at the end of each rewards season/month without a DAO vote after Month 1, to maximize protocol usage and fees, including reducing total rewards (but increasing total rewards beyond 30m will require a further DAO vote).

-There will be no lockup on rewards - those who receive rewards can stake them or sell them immediately.

-Rewards will only be paid to wallets who trade on Ooki and pay trading fees and will be calculated on the basis of trading fees only (not to borrowers or those who pay origination fees and interest for loans, including flash loans - of course, most traders will also be borrowers, but the rewards will be calculated based on trading fees alone).

-In essence the monthly reward pot of 30m OOKI will be paid out at the end of each month to traders on Ooki who paid trading fees, in proportion to the amount of trading fees paid - each wallet will receive OOKI rewards and share in the monthly pot in proportion to the percentage of trading fees it paid in the relevant month.

-In addition to this, to give the OOKI token more of a use case and utility, a new feature will be implemented to give discounted trading to those who pay trading fees in OOKI (similar to how BNB can be used to pay discounted fees on Binance). Anyone paying fees with OOKI will receive a 30% discount on all fees (borrowing, trading, everything). If this is technically difficult to implement, it may be necessary to implement this as a 30% rebate paid at the end of the month to wallets that held sufficient OOKI for fees and traded in the previous month (but in that case, the 30% rebate is a separate calculation and will be in addition to the 30m OOKI trading rewards pot).

-This rewards proposal relates to OOKI use case and trading fees only. Rewards for increasing liquidity (in OOKI/ETH or any of the OOKI liquidity pools) are a separate matter and to be dealt with separately as needed.

very clear en detailed information badr. great job, i fully support this proposal

1 Like

Trading Rewards Proposal which has been discussed on the Forum is now up for Snapshot vote - all OOKI holders please go vote - it’s gas free, and you just have to sign a message with your wallet (if you have staked OOKI)

https://snapshot.org/#/ooki.eth/proposal/0x879a88f0a6bf14f7ac85d83926e449993aad83e6b9f2a37a72f60137865b3ec3

1 Like