To incentivise a minimum level of incentives for Liquidity Providers to earn fees and compete for user flow, we have designed the Chainflip Protocol Liquidity Bootstrapping Program.
Unlike most liquidity incentive programs, this one is designed to promote competitive quoting from LPs for user swaps, even in low-volume environments. This program is designed to ensure that active LPs on Chainflip are guaranteed to earn rewards from day one, regardless of the amount of volume.
Although it may never get used, we are happy to announce that Chainflip Labs is committing up to $1,000,000 worth of FLIP to be made available for this program over the course of the first 6 months of operation.
- LPs are awarded a FLIP subsidy based on their share of LP fill volume at the end of each month.
- The amount of FLIP available is based on the total LP fees earned over the course of each month, with the amount of FLIP awarded scaled back as the target monthly fees are reached.
- This means that while volume scales up, LPs can guarantee a certain amount of revenue split between real fees earned and the FLIP subsidy.
As the volume in the Chainflip Protocol grows, this program will need to evolve as the fees will serve as a natural market incentive to offer competitive quotes, and the subsidies become irrelevant.
How It Works
At the start of each month, a fee target is set based on the previous month's performance. At the end of the month, any deficit in the fee target (denominated in USDC) is used to calculate the FLIP Subsidy Budget, using the market rate of FLIP determined at the beginning of the period.
FLIP Subsidies can then be claimed by LPs based on their share of the fill volume for that month. For example, here’s how a month in the program may look like:
October 2023 CLBP Subsidy (Example Only)
Target Fees: $120,000
FLIP Valuation: $1.83
The resulting Subsidy Pool can then be calculated at the end of the month based on the final liquidity fees earned across the protocol.
The Pool is then distributed to the LPs who make a claim based on their share of monthly fill volume. The target fees and FLIP valuation will be readjusted each month and announced on a rolling basis indefinitely. Unclaimed subsidies will be rolled into the following month’s subsidy pool as a bonus.
Any LP with more than $1000 USD of fill volume in a given month will be entitled to make a subsidy claim within 14 days of the end of the previous period. Any eligible LPs who do not submit a claim will not be granted a subsidy.
Because this program will be manually administered by Chainflip Labs during the initial periods, for legal reasons Chainflip Labs reserves the right to deny any claims for any reason.
- LP Account Address (State Chain Account)
- Proof of Ownership (A signed message from the account)
- Email Address
Although LPs are not generally required to provide additional information, it may be required in order to process certain claims.
Successful claims will be automatically distributed to subsidy recipients at the end of each claim window to the Ethereum Refund Address all LPs are required to link to their State Chain account.
If this program proves to be useful and/or popular, Chainflip Labs will automate this claims process, at first through a web tool, and then potentially as a permanent addition to the protocol.
How to Sign Up
The first month of Subsidy Rounds will be announced at Swapping Launch, anticipated for late November, just after TGE. Interested parties can stay in touch with this program by signing up for the Chainflip LP Email List using this link.
LPs can also join the Liquidity Provider channel on Discord.