Chainflip Protocol Liquidity Incentive Program Rollout

Chainflip Protocol Liquidity Incentive Program Rollout

Back before launch, we announced a program to provide a minimum level of incentives to motivate LPs to set up systems to compete for volume on Chainflip.

Unlike most liquidity incentive programs, this was designed to promote competitive quoting from LPs for user swaps, even in low-volume environments. As it turns out, we didn’t need to use this model in the end due to the agreements already put in place, requiring LPs to provide a minimum level of liquidity for Market Making and Token Presale deals, and a minimum level of demand has been achieved with over $30m in monthly volume at the time of writing. With under $10m in active liquidity, we are already competing on swaps up to ~$300k in size quite regularly.

However, we can do better. Right now, the base level of volume isn’t enough to incentivise new players to enter the space, or for existing ones to put up more capital. If we can give a good enough reason to start this, we think we can induce a very high level of swap demand consistently.

Thus, we will be moving ahead with our incentives program with some modifications.

High-Level Features:

  • LPs will be awarded a share in a fixed FLIP reward based on their share of LP fill volume at the end of each month.
  • This will give LPs a stronger incentive to compete for fill volume, either by tighter quoting or by having more assets available.
  • If a threshold of monthly volume is reached, a bonus will be added to the overall bounty
  • This also gives LPs a stronger focus on helping Chainflip itself win more volume. If they can figure out how to provide liquidity in a way that brings volume to the platform as well, they will win a greater amount of rewards.

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, Chainflip will post a reward amount.

FLIP rewards can then be claimed by LPs based on their share of the fill volume for that month.

The rewards are 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 rewards will be rolled into the following month’s rewards.

Rewards for May

To start this program off, Chainflip is offering a total maximum reward for the month of May as 12,000 FLIP, with 8,000 FLIP as a base reward and a further 4,000 FLIP if the monthly protocol volume exceeds $250m.

As an example of how this would look for an individual LP:

End May monthly volume: $300m (Taker Incentives)
Liquidity Provider A’s total fill volume: $75m

Liquidity Provider A’s reward: 3000 FLIP (75m/300m of total 12,000 FLIP reward)

Making Claims

Any LP with more than $1000 USD of fill volume in a given month will be entitled to make a 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 reward.

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.

Required Information:

  • LP Account Address (State Chain Account)
  • Proof of Ownership (A signed message from the state-chain LP account(s))
  • Email Address
  • Entity KYC information and compliant invoice

Although LPs are not generally required to provide additional information, it may be required in order to process certain claims.

Successful claims will be distributed at the end of each claim window.

Future Iterations

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

Claimants should keep their eye on the Liquidity Provider channel on Discord.

A form will be provided to commence the signup process.