PIP-55 Reward Mechanism Automation, WakeUp Labs Update Thread

TL;DR:

WakeUp Labs is collaborating with ParaSwap to automate its Reward Mechanism. This initiative is designed to streamline ParaSwap’s incentive programs, reducing manual work, minimizing the potential for human error, and enhancing the overall user experience by automating the distribution processes for both the Reward Program and the Gas Refund Program, focusing on the Ethereum Mainnet transactions.

Incentive programs are critical to fostering engagement in any DeFi ecosystem. However, managing these processes manually, in a DAO, introduces operational complexity and increases the risk of human error.

Our collaboration began with key insights of ParaSwap’s Gas Refund Program:

  • 95% of refunded gas fees were tied to Ethereum Mainnet transactions, despite these representing only 22% of valid operations.
  • Transactions on other networks, such as Polygon and Optimism, accounted for 78% of the volume but yielded minimal refunds, averaging $0.06 per address.

These findings led to a decision: streamline gas refund calculations to focus exclusively on Ethereum Mainnet activity, where they generate the most impact, while maintaining the ability for users to claim refunds on the network where they stake their PSP.

What Does Automation Involve?

At WakeUp Labs, we are delivering a fully automated reward mechanism with several features. Scripts will automate data handling by gathering transaction data, calculating rewards, and allocating tokens based on ParaSwap’s incentive structures, such as those outlined in PIP-53. Reward allocations will be proposed automatically on Snapshot, enabling DAO members to approve or reject them through governance. Seamless execution will be achieved through third-party protocols like UMA and oSnap, which will handle on-chain execution without requiring manual signatures. The Gas Refund Program will continue to reward users, but calculations will now prioritize Ethereum Mainnet, where the majority of impactful transactions occur. Additionally, the entire development will be open-source, with comprehensive documentation available on GitHub to ensure transparency and foster trust within the community.

Phased Implementation

The rollout will follow four key milestones:

  1. Architecture Definition, and Technical Specifications
  2. Build Scripts to Gather Data and run them
  3. Configure Snapshot, submit proposals, and set up everything to avoid manual signatures
  4. Documentation, testing, deployment to production, and release

What This Means for the ParaSwap Community

This collaboration brings tangible benefits to ParaSwap and its community:

  • Efficiency: Automation eliminates manual overhead, allowing the team to focus on strategic priorities.
  • Decentralization: Tools like UMA and oSnap reinforce ParaSwap’s governance model.
  • Transparency: Open-source code and regular updates foster trust and community engagement.

Next Steps

This is just the beginning. As we move through the implementation phases, we will share updates and invite feedback from the ParaSwap community. Together, we aim to set a new standard for efficiency and decentralization in DeFi.

Stay tuned for updates on our X (Twitter) and LinkedIn!

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Milestone 1: Technical Research Completed

Key Highlights

This milestone involved defining the internal architecture for the solution, validating system flows with the Laita Labs and WakeUp Labs technical teams, and developing a Proof of Concept (PoC) tested with third-party protocols like UMA and oSnap. The process also included designing a database and establishing technical integration details for smart contracts, as necessary.

For more details, refer to the PIP-55 Research document: PIP-55 Research.

Next Steps

Upcoming milestones include:

  1. Automating Reward Computations: Finalizing scripts and APIs for seamless data handling.
  2. Snapshot Proposal Integration: Implementing governance automation.
  3. Deployment and Testing: Ensuring a smooth transition through rigorous QA.

Together with ParaSwap, we are redefining DeFi.

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