[RFC] Launch Vega's First Trading League

Hey everyone, I’d like to propose using the Vega CAF to launch a 3-season Trading League to boost Vega awareness, activity, and user count.

This is meant to be treated as a first step towards planning a strong incentive program that is conscious of mercenary users and I welcome all feedback and contributions.

Rationale

Currently, Vega suffers from a lot of issues:

  • Lack of awareness
  • Lack of trading volume
  • Lack of users
  • Lack of liquidity
  • Lack of markets
  • Lack of governance input

A lot of these issues have stemmed largely from technical issues that have caused apathy among users and liquidity providers.

With the launch of Palazzo Mistero a lot of these technical issues have been addressed. Now it’s time to spend a bit of money on creating hype, attracting users and hopefully better liquidity providers.

As mentioned above, The “Vega Perpetual Trading League” will consist of 3 trading seasons with major VEGA rewards that ramp up each season.

This proposal only focuses on the first season, acting as the trial run. Assuming it is approved and successful, we will use the learning from the first Season to inform the remaining 2 seasons.

Season 1: The Layer 1 Battle

Total cost: 50,000 VEGA

Theme: The Layer 1 Battle

Markets in scope: BTC, ETH, BNB, SOL

Season 1 will kick off the beginning of the Vega Perpetual Trading League with the theme “The Layer 1 Battle”. The objective of this season is to incentivise BTC, ETH, BNB (when live on Vega), and SOL perpetual markets activity on Vega. These markets are heavily traded on a day-to-day basis and should hopefully be easily supported by liquidity providers. If users have a good time trading these major L1s on Vega there is a chance they might stay.

Season 1 is focused on onboarding users to Vega and getting them familiar with trading. It is purposely kept to be rather simple in terms of incentives and requirements.

User action objectives:

  • Deposit to Vega
  • Join a referral set
  • Trade one of the 4 Layer 1 markets (BTC, ETH, BNB, SOL)

Reward Structure

When looking at available reward structures it’s hard to prevent mercenary capital that farm rewards through wash trading.

Thus, Season 1 will use a ranking reward system that rewards users based on the most profitable traders over a 30-day average.

The “Most Profitable Trader” metric essentially rewards the highest relative PnL. Users are then be ranked according to their 30 day avg. relative PnL.

Such a metric is relatively robust against mercenary capital. However, one area it does fail in is accounting for the size and volume of a user. For example, a user trading with $100 that makes $1000 in profit is equal to someone who trades with $1000 and makes $10000 in profit (if i understand the specs correctly).

One way to create a lower bound for this is by using Vega’s “Activity Streak Reward Multiplier” which will reward users with a multiplier based on how many epochs they have consistently traded in as well as setting a minimum trading volume & OI for each epoch to earn the respective multiplier.

Given the major prize pool will only be distributed at the end of 30 days, we can reward users with a multiplier if they have an activity streak of 25 (and an inactivity limit of 2).

This means that a user will earn a multiplier if out of the 30 epochs, they have successfully traded $X amount of volume or had a minimum open interest of $Y for 25 epochs without missing 2 consecutive epochs. If a user fails to trade across 2 consecutive epochs their activity streak will be reset and they may not be able to achieve a multiplier.

To achieve this I propose to set:

  • Inactivity Limit = 2
  • Min. Open Notional Volume (OI) = $5,000 ($Y)
  • Min. Trading Volume = $30,000 ($X) [Could be increased further to prevent gaming]
  • Min. Activity Streak = 25
  • Reward Multiplier = 10.0
  • Vesting Multiplier = 1.0

Notably, a $5k min OI should be relatively accessible to most users and if not they can still qualify for their streak through the min. Trading volume. The 10x reward multiplier ensures that traders not reaching the program requirements will be heavily diluted.

One downside to such a reward structure is that there is little incentive for traders to use position sizes greater than $5k. Once again, I’m not to sure how to account for this given the available reward structures, maybe we can also reward largest traders by position size but this is easily gameable.

Reward Pool:

Season 1 will have a 50,000 VEGA prize pool.

As described above, Season 1 will go for 30 days after which users will be ranked according to their avg. relative PnL over those 30 days. Users will also receive a multiplier on their rewards if they are eligible for the 10x multiplier.

50,000 VEGA will be distributed accordingly:

Reward Eligibility:

The only requirement for a user to be eligible for rewards is that they need to join a Referral Set/Team.

Note: The referrer will need to convert their referral set into a Team!

By imposing this requirement, users will learn how to:

  1. Use Vega’s referral system
  2. Create their own referral set/team

Hopefully, this will also encourage people to spread the world about the trading competition to increase their referrals and referral benefits.

Final Comments:

This proposal is my best guess at a first iteration of trading leagues on Vega. I have many more ideas, but just need to explore if there are better ways to construct these reward schemes.

I’d love feedback from the Vega team and other community members, I’m sure I haven’t got everything perfect on the first try.

Thanks - Jubi

5 Likes

Nice proposal. I like your idea on highest relative PnL fairness.
I would however like to wait on the implementation of Bridge to another chain/network · Issue #20 · vegaprotocol/roadmap · GitHub so users can participate more efficiently/democratically. That would also align with PnL fairness.

It would be nice to hold a competition, but I don’t think it’s right now.

If the competition is held with the current liquidity, who will participate?
Traders will not participate and take risks just to earn $20,000 in winnings.

I think the priority now is to find ways to improve liquidity. Vega’s LPs are receiving a lot of rewards, but liquidity is still miserable.

@DukeNukem thanks! This is a good point although I’m not too sure how long we will have to wait for this. If it’s 2 months+ I think it’s too long in the current market environment

@olympus I know it seems like it doesn’t make sense but we need to start somewhere. Unfortunately, there is barely any retail flow on Vega (meaning the rest is pretty much all toxic flow). If we don’t do anything to encourage more retail flow, LPs won’t want to quote tight anyway. We pay a lot of vega every day for LPs and it’s already not working, so I think its reasonable to give this a try and instead reward traders

2 Likes

Cool to see this ideas being discussed!

On liquidity the sense I have is that it will be driven by users coming and competition between LPs for their volume, not just paying out LP rewards. Every LP I’ve heard from has claimed to be able to scale up liquidity but they are only going to do this is they see the value, and that has to come in part from users and flow, especially given the opportunities for that sort of firm to make money in current market conditions.

We could consider features such as allowing the protocol to be configured to pay out only a fraction of the reward pool based on the actual depth/spreads that are provided, so that LPs could not sit back at wide spreads and collect the same rewards. Let us know in a new thread if you think something like that might be a worthwhile addition to the protocol.

Regarding the bridge and timing, I’d suggest starting to try things out and iterate them sooner rather than later even if initial interest might be lower. The reality is it takes a while to get these things right and building momentum is important. There is not a magic switch to go from zero to dYdX volumes and liquidity, but everything helps.

1 Like