BackgroundThe current incentive program which is scaled to interest paid has, in my opinion, not done much to generate the organic activity on the trading side that would lead to a self sustaining level of protocol activity.
Currently the borrowing APR is 60%+ which is offset by the interest spent being (at least in part) paid back by vBZRX weekly rewards. However, this high APR seems to have negative affects on the usability of fulcrum from an end user trader’s perspective.
Due to the set-aside that is done to ensure a trader meets interest payments without accidental liquidation, the more leverage they use the more collateral is set-aside to cover interest. Because this is not intuitive (it seems the UI even gets confused when calculating profit) and lowers the amount of capital actually put to use in a position, I believe this is a deterrent to users.
Idea: Volume-Weighted Incentives
It seems fine to use the interest-based incentive for Torque users. For fulcrum traders, I propose moving to volume weighted incentives which would be more attractive to traders.
The idea would be to allow the rates for traders borrowing on margin to reach a more natural equilibrium, simultaneously diverting a portion of the weekly vBZRX rewards to Volume-weighted incentives - pay out vBZRX weighted to the amount of trade volume any user puts out.
Due to gas costs and originations fees, volume-weighted incentives seem like a low risk incentive that would also make more sense to traders than farming does.
- Yes, interested in seeing a detailed proposal
- No, not an idea worth pursuing