Currently, ParaSwap smart contracts accrue surplus revenue for every trade in which this event occurs, regardless of the token pair on which this trade happens. Because of this surplus event, the gas spending of the trade increases, which leads to lower trade efficiency and, thus, lower overall volume.
After analyzing the last 365 days of the amount of revenue generated by the thousands of tokens traded through ParaSwap, we have noticed that the top 461 tokens account for 97.94% of the total fees generated. However, even with the large majority of fees concentrated in a few tokens, ParaSwap checks and takes surplus from every single token, increasing gas consumption and making ParaSwap’s quotes less competitive than its competitors.
This proposal aims to amend the community token list into the tokens responsible for 97.94% of the revenue generated by the DAO and only to take surplus fees from these tokens. Additionally, we aim to simplify the ParaBoost volume metric, increasing the amount of overall trades that will be eligible.
We expect this new list to not only significantly affect volume thanks to the increased gas efficiency but also reduce the amount of $PSP emissions in gas refunds per trade compared to prior methods. Thanks to these efficiency improvements, we expect to increase ParaSwap’s competitiveness in the market.
The main objective of this proposal is to increase the gas competitiveness of ParaSwap contracts and thus bring more volume thanks to this increased efficiency. To do this, it is essential to remove any unnecessary gas spent whenever possible, such as the changes done in PIP 32
The justification for this change in whitelisting comes from an analysis of the fees generated in the last year. In this graph, we can see the distribution of the ~$1.45M of fees generated over the last year over each of the tokens that have been processed:
As we can see above, there is a ‘long tail’ distribution of fees happening, where of over ~21,400 tokens accruing fees by ParaSwap, the vast majority of them do not constitute a significant share of the total accrued and are very hard to convert to ETH without losing a big part of the amount in gas and slippage. Additionally, unusual tokens, such as rebase tokens, are not supported by our Fee Claimer but are still collected, which leads to reverts on swaps.
As these unusual tokens tend to be paired with more common ones, we also suggest a simpler system for counting Paraboost which will make many trades more eligible: destTokens will be checked for sell orders, and srcToken for buy ones.
In addition to the long tail, another trend we see is a few tokens driving the vast amount of fees generated by the protocol. To clarify, only 461 out of 21,467 (2.1%) accounted for 97.9% of fees generated. In addition, we decided to include a new token list for Base and zkEVM, which previously did not have community token lists. Due to the relatively recent deployments on these chains, we propose to add the major tokens from each chain.
Outside of these tokens, the additional gas intensity caused by the action of fee collection generates a higher opportunity cost from volume missed than any fees accrued from it.
Because of this, we wish to increase the efficiency of the protocol by enabling fee generation only when the benefit outweighs the gas cost.
The following proposal is a technical upgrade similar to PIP-32, which successfully led to gas efficiency improvements and revenue growth.
We propose to implement a whitelist feature to the ParaSwap protocol contract consisting of the following tokens list and to add a security measure by capping the surplus at 1% max to ensure that users won’t suffer any significant loss due to exceptional pricing bugs, as well as excluding rebase tokens from this list, as in the past fee claiming of rebase-type tokens has lead to issues claiming it from the Fee Claimer contract.
Future tokens can be added through a governance proposal to ensure that tokens are added swiftly if needed.
Additionally, to ensure partners do not suffer a hit from this efficiency improvement, they will not have any changes compared to their prior experience.
- Implement a smart contract update to allow whitelisting
- For ParaBoost calculations, only check eligible tokens on the destTokens for sell orders and srcTokens for buy orders.
- Introduce the following tokens onto the community token lists
- Allow for the repository maintainers + governance proposal to amend the list as needed, as long as the token is not a rebase-type token nor a well-known scam
- Cap the surplus at 1% maximum
YES, let’s upgrade
NO, let’s not upgrade