PIP-XX - ParaFam Program

Governance Proposals
1

PIP-XX - ParaFam Program

Abstract
Trading volume is one of the main and most important KPIs for Dex aggregators, and ParaSwap’s volume has been an essential part of its consolidation as one of the top aggregators in the space. It has helped build confidence in the protocol and unlock further integrations and partnerships.
Besides its front end, one of ParaSwap’s main volume sources is protocols that integrate through the ParaSwap API that look for aggregation services across external and internal liquidity sources. These protocols are ParaSwap Partners and play a key role in the ParaSwap ecosystem.
With this proposal, we aim to increase the number of partners integrating ParaSwap API and incentivize the growth of their volumes through ParaSwap with the final goal of increasing the total volume traded through ParaSwap.

Goals & review

Goals

  1. Increase the volume coming from partners integrating the API by:
    a) Increasing the number of partners integrating ParaSwap API
    b) Incentivizing new and existing partners to use ParaSwap as their exclusive aggregator
    c) Encouraging and rewarding volume from new and existing partners
  2. Boost ParaSwap visibility through co-marketing with Partners integrating ParaSwap API and participating in the Program.
  3. Increase partner engagement in ParaSwap DAO
  4. Raise the ParaSwap DAO and Socially-Escrowed PSP awareness to users of integrated partners

Review
In 2023, Partners integrating the ParaSwap API generated over $8B in volume. Some of these major partners include Aave, Quickswap, LlamaSwap, and Camelot, all of which contributed significantly to the growth of the ParaSwap ecosystem.
The uses for ParaSwap integrations differ greatly from one partner to another. Some use the ParaSwap API to optimize trades through their own liquidity sources, while others prefer to use all those available. Additionally, while some integrate ParaSwap exclusively as their liquidity source, others integrate multiple liquidity sources or aggregators, splitting their trade volume.
To continue encouraging integrators to choose ParaSwap as a partner and incentivize volume and exclusive integrations, we propose the ParaFam Program, described in more detail in the next section.

Means
The ParaFam Program seeks to incentivize API partners with sePSP1 rewards. These rewards will be allocated quarterly amongst trading-volume categories and then split for all partners falling into each category while also considering the reward limits and exclusive integration allocations in place.

Each partner will be classified based on their trading volume, calculated based on the USD value at the time of the swap.

We propose the following to be the Categories a partner can be eligible for depending on their quarterly volume:

Category Quarterly volume range
A > $1,000,000,000
B $500M to $999,9M
C $100M to $499,9M
D $50M to $99,9M
E $15M to $49,9M

Each category will have a different pool of allocated sePSP1 rewards, of which 20% are only eligible for partners who have integrated ParaSwap as the exclusive partner for their solution. The following are the proposed allocations for categories A to E:

Category Total sePSP1 incentives % Exclusive Partners Allocation sePSP1 Exclusive Partner Allocation
A 2,850,000 20% 570,000
B 1,725,000 20% 345,000
C 1,200,000 20% 240,000
D 975,000 20% 195,000
E 750,000 20% 150,000

Each Category budget will be split among all partners falling into the category.
To address the hypothetical case that only a few partners qualify for a certain category, we also propose the introduction of an individual partner limit to prevent them from getting most of the category budget, as the Program’s goal is to increase the number of participants partners in each category.
Note that the exclusive partners limit is higher to incentivize exclusive partnerships through the exclusive partner boost:

Category sePSP1 incentives Non-exclusive Partner limit per quarter (sePSP1) Exclusive Partner limit per quarter (sePSP1)
A 2,850,000 456,000 570,000
B 1,725,000 276,000 345,000
C 1,200,000 192,000 240,000
D 975,000 156,000 195,000
E 750,000 120,000 150,000

Implementation Overview
The Program will run for a year, with a budget of 30M sePSP1, which will be divided equally into quarters:

Category sePSP1 Quarter incentives
A 2,850,000
B 1,725,000
C 1,200,000
D 975,000
E 750,000
TOTAL 7,500,000

To minimize abuse potential, the ParaSwap Foundation will assist with Partner volume tracking and reserves the right to veto rewards to participating partners for any reason, including fraudulent transactions, volume activity, or the overall well-being of the ParaSwap ecosystem.

Any unused budget at the end of the year will be returned to the ParaSwap DAO treasury.

2 Likes
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This is not the wei to ParaSwap API adoption.

Partners shouldn’t adopt ParaSwap API based on token incentives.
They should adopt it because it’s the best available product.
ie we have to make ParaSwap API better than yesterday, everyday. Not make it artificially more appealing through token incentives.

And you know the drill : once sePSP1 stops flowing, partners will fly away.

Against.

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I like the approach and see it as a way to kickstart and incentivize B2B growth which can really help capture market share and close the volume gap btw 1inch and PSP. If we think the value that this program brings to the ecosystem in terms of volume exceeds the 30m PSP at current prices, I think we should absolutely do this.

I would see this is as marketing spend. Many of the B2B projects are bringing large flows to Parswap but their end users may have notheard of them. This program can cleverly help raise awareness. We can review the results after a year and decide if worth continuing or refining the program.

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@0xAlxruf, thanks for your feedback; I partially agree with your thoughts

ie we have to make ParaSwap API better than yesterday, everyday. Not make it artificially more appealing through token incentives.

I agree 100% that ParaSwap should build the best product by efficientizing routing, expanding available liquidity sources, and improving gas efficiency to get the best quote for each trade. This proposal doesn’t go against this idea.

Partners shouldn’t adopt ParaSwap API based on token incentives.
They should adopt it because it’s the best available product.

Yes, however, for several reasons (think of partner’s resource allocation, prioritization, team availability, and many more), having the best product is not always sufficient for partners looking to integrate their first aggregator/liquidity source, add an additional aggregator, or switch from one aggregator/liquidity source to another.

And you know the drill : once sePSP1 stops flowing, partners will fly away.

I don’t think partners will fly away once integrated, mainly for the reasons stated above, partners will not integrate ParaSwap just because of token incentives. ParaSwap product is great, and there is proven evidence of it improving partners’ pricing. So, I don’t see any reason a partner would remove an integration that works efficiently and improves its user pricing.

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I don’t see the value to incentivize partners who have already integrated ParaSwap API, if I’m not mistaken they are already receiving positive slippage incentives for doing so.

If the goal is to attract new Partners to integrate ParaSwap API, then I think a One-time incentive/grant through the DAO vote approval or delegated to the Governance Committee (GovCo) is the right way to do it.

I agree, partners won’t remove an integration that works, so again, there’s no point to distribute continuous incentives and diluting $PSP investors for nothing.

To conclude :

  • I’m FOR incentivizing via one-time grant on a case-by-case basis to attract new partners who integrate ParaSwap API.
  • I’m AGAINST continuous farming of $PSP (sePSP1)
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First, can you elaborate on why ? “for several reasons” is not a sufficient explanation.
Second, do we have the best product ? If no, then focusing on that should be priority over short-term incentives.

Again, what reasons ? Please elaborate, I can’t read any on your post.
Note that i’m referring to potential new partners, only attracted by incentives, not the already established ones.
What would be implemented to avoid that / gaming the system ? Can I just fork any partner solution, participate in ParaFam program, wash trade on my own, with my own newly created token, and grab a chunk of sePSP1 ? How do we track that ? What are the rules ? What are the tokens, or token lists, concerned by the program ? And so on… I’m sorry but this seems a bit botched tbh.

This seems more appealing to me. Specific grant to each new partner who applies for it, each with their own target KPI etc

About already established partners, i’m thinking about strategic token swap like Aave x Balancer back in 07/2022 (https://governance-v2.aave.com/governance/proposal/87/) or like QiDAO x Beefy… plenty of examples.
This would reflects the ongoing collaboration and shared vision through governance in each other’s community, make the relationship stronger & diversify holdings of both parties.

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That says it all.

Partners come to you because your product is good.
The focus must be on the product (a V7 with no hacks, for example).

The rest is just defi summer techniques that will only lead to success. Dilute the holders.

When can we expect a V7 without a hack?
The product was ready, but has the code been reviewed?

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It’s great to see the discussion here and to read others’ POVs.

A proposal that incentivizes both existing and new partnerships has the effect of not only attracting new partners but also protecting existing ones and motivating them to trade more volume through ParaSwap (by turning into exclusively using ParaSwap or discouraging the addition of other liquidity sources)

A one-time incentive/grant was considered when crafting this proposal. Still, it was discarded because it is not scalable: discussions with partners for integrations will be delayed as the request goes through the formal DAO process. Partners interested in integrating will not have any visibility on the chances of their grant approval until the process moves forward, and we will have to publicly disclose possible upcoming partners on the forums, which would open an opportunity for competitors.
Also, a one-time grant doesn’t incentivize partners to use ParaSwap exclusively other than when receiving the grant.
From my perspective, having a fixed amount of sePSP1 tied to the volume each partner generates is better. This gives participating partners visibility from the beginning of the process and encourages them to drive more volume through us.

Finally I’d like to remark on my thoughts about improving the ParaSwap product or releasing new versions.

Being this a partnership proposal, it is entirely unrelated and does not affect the processes related to improving the product or releasing new versions

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This is my personal opinion, but based on my experience with modern governance design, a key part of being able to grow our community and protocol growth comes from incentives for using and growing the protocol. This is why, when @agrosso reached out to me with this proposal I agreed it was a very good direction to assist with the growth of the protocol.

The emergence of retroactive funding in key communities has become an ingrained part of modern decentralised communities. Optimism’s Retro Funding, for example, has lead to entire developer communities building on their stack compared to others in an environment where more and more L2s are becoming common. The choice of one’s API integration is similar to the choice of a stack to build in, both of them are working in delivering the best product and iterating with new features, but it cannot be denied that Optimism’s Retro Funding is a strong incentive that adds to building here. This is why we’ve also started seeing Arbtrium DAO deploy their own incentives mechanisms afterwards.

The community has previously mentioned introducing a marketing proposal, and this is a very effective way to bring marketing to ParaSwap DAO while also incentivising new, continuous volume and exclusive integration growth for the duration of the Programme. Users of these protocols will have a direct exposure to ParaSwap and its DAO now , all while building a stronger rapport with partners.

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That’s not the kind of marketing or initiative the $PSP token holders are waiting for.
They wait for their investment ($PSP) to increase in value, not further diluted to rewards partners who are already rewarded with the positive slippage.

6 Likes