VMP-013 - Create market - BTCUSDT Perpetual
[Create market [BTCUSDT]
This proposal outlines the introduction of a Bitcoin (BTC) to Tether (USDT) perpetual market on the VEGA Protocol, designed to leverage the full capabilities of the latest update of the protocol’s decentralized derivatives infrastructure.
Market Summary:
name: BTC.PERP
Settlement asset: USDT
Market/Update Details:
BTCUSDT PERP
Risk model:
Log-Normal
Data source definition for the settlement data oracle:
Chainlink Oracle
As part of this proposal for the BTCUSDT perpetual market on the VEGA Protocol, I am actively seeking community feedback on the proposed liquiditySlaParameters . These parameters are designed to encourage strong liquidity provision by establishing clear performance benchmarks for market makers.
EDIT:
After carefully studying the current market state and how the fees and the rewards are accrued I think is beneficial to adjust those SLA parameters. I do believe that with perp thing should work better.
For these reasons I would adjust:
Price range: reduced to 1.5%. This is to promote competitively. The protocol and the users benefit from liquidity. Users want to trade with fair pricing. Moreover, we want to avoid “lazy” market makers who post liquidity at 5% range just to “farm” fees and reward.
CommitmentMinTimeFraction: reduced to 60%. Penalties for not meeting this parameter are really high. It would risk to lose market makers just because they have a technical problem or their setup works differently from the uptime rules (for example quoting only one side when needed). 60% it’s a fair start to attract more player but keeping them at 1.5%. So that more MM can experiment the protocol even though they don’t have the tool to be live 100% of the time. If the protocol loses liquidity, loses users.
PerformanceHysteresisEpochs: reduced to 0. In my opinion, one should be penalised only for the epoch one deserves to be penalised. The risk is the same. Losing good MM because they messed up one day only.
slaCompetitionFactor: reduced to 20%. If you earned fees it means that your liquidity is one of quality. I find unfair to give away more than 20% when penalties apply.
The refined SLA parameters represent a strategic evolution towards fostering a healthier and more competitive market environment, emphasizing incentive-driven competition over punitive measures. By implementing these adjustments, the my aim and hope is to attract and retain market makers through a balanced approach that rewards competitive pricing and acknowledges operational realities, thereby enhancing liquidity and overall market stability. So incentivising better pricing rather than punishing time on the book but having wide prices.
With this settings I seek to
- Discourage passive market-making strategies that contribute less value to the ecosystem.
- Attract a wider array of market makers, including those who may not have the capabilities to maintain a 100% uptime but are still capable of contributing significantly to the liquidity and robustness of the market.
- Create more dynamic environment where market makers are encouraged to improve and optimize their strategies continuously, without the overhang of previous mistakes.
- maintain MMs’ motivation to provide quality liquidity, as excessive penalties could otherwise lead to a loss of valuable participants in the market.
"liquiditySlaParameters": {
"priceRange": "0.015",
"commitmentMinTimeFraction": "0.60",
"performanceHysteresisEpochs": "0",
"slaCompetitionFactor": "0.2"
Full Proposal JSON:
{
"rationale": {
"title": "BTCUSDT Perp",
"description": "## Summary\n\nThis proposal requests to list BTCUSDT Perp as a market with USDT as a settlement asset"
},
"terms": {
"newMarket": {
"changes": {
"linearSlippageFactor": "0.001",
"quadraticSlippageFactor": "0",
"decimalPlaces": "1",
"positionDecimalPlaces": "4",
"instrument": {
"name": "BTCUSDT Perp",
"code": "BTCUSDT.PERP",
"perpetual": {
"settlementAsset": "bf1e88d19db4b3ca0d1d5bdb73718a01686b18cf731ca26adedf3c8b83802bba",
"quoteName": "USDT",
"dataSourceSpecForSettlementData": {
"external": {
"ethOracle": {
"address": "0xF4030086522a5bEEa4988F8cA5B36dbC97BeE88c",
"abi": "[{\"inputs\":[],\"name\":\"latestAnswer\",\"outputs\":[{\"internalType\":\"int256\",\"name\":\"\",\"type\":\"int256\"}],\"stateMutability\":\"view\",\"type\":\"function\"}]",
"method": "latestAnswer",
"normalisers": [
{
"name": "btc.price",
"expression": "$[0]"
}
],
"requiredConfirmations": 3,
"trigger": {
"timeTrigger": {
"every": 30
}
},
"filters": [
{
"key": {
"name": "btc.price",
"type": "TYPE_INTEGER",
"numberDecimalPlaces": "8"
},
"conditions": [
{
"operator": "OPERATOR_GREATER_THAN",
"value": "0"
}
]
}
]
}
}
},
"settlementScheduleProperty": {
"internal": {
"timeTrigger": {
"conditions": [
{
"operator": "OPERATOR_GREATER_THAN_OR_EQUAL",
"value": "0"
}
],
"triggers": [
{
"every": 1800
}
]
}
}
},
"dataSourceSpecBinding": {
"settlementDataProperty": "btc.price",
"settlementScheduleProperty": "vegaprotocol.builtin.timetrigger"
}
}
},
"metadata":[
"base:BTC",
"quote:USDT",
"class:fx/crypto",
"perpetual",
"sector:defi",
"enactment:2023-11-11T08:00:00Z"
],
"priceMonitoringParameters": {
"triggers": [
{
"horizon": "4320",
"probability": "0.99",
"auctionExtension": "300"
},
{
"horizon": "1440",
"probability": "0.99",
"auctionExtension": "180"
},
{
"horizon": "360",
"probability": "0.99",
"auctionExtension": "120"
}
]
},
"liquidityMonitoringParameters": {
"targetStakeParameters": {
"timeWindow": "3600",
"scalingFactor": 10
},
"triggeringRatio": "0.9",
"auctionExtension": "1"
},
"logNormal": {
"tau": 0.00000380258,
"riskAversionParameter": 0.000001,
"params": {
"mu": 0,
"r": 0,
"sigma": 1.5
}
},
"liquiditySlaParameters": {
"priceRange": "0.015",
"commitmentMinTimeFraction": "0.60",
"performanceHysteresisEpochs": "0",
"slaCompetitionFactor": "0.2"
}
}
},
"closingTimestamp": 1699599600,
"enactmentTimestamp": 1699686000
}
}