The major positive community feedback from the PSP 2.0 research post showed large community support for transitioning from the current tokenomics system to one with reduced native emissions and fee redistribution. As we move toward this system, what would be the best way to redistribute fees while maximizing the growth and efficiency of the ParaSwap Protocol?
We propose to introduce a system where the rewards are not escrowed just from the locking of the vote itself but rather by actions done to improve the protocol: A social escrow (se) system.
This system would help ParaSwap get closer to becoming a community public good, as accrued fees would automatically go towards rewarding protocol-positive actions.
The se-system will boost the stake of users that perform ParaSwap Specialities, which are actions that generate positive externalities.
Here are some examples of the ParaSwap Specialities that might be boosted:
The PSP token needs to have a healthy level of liquidity to grow sustainably.
Users pool-pairing PSP with another asset are directly contributing to the system, and the longer the staking period, the more stable level of liquidity.
Thanks to the se-system, we can synergize different staking strategies while boosting the ones that give the most positive rewards to the protocol. For example, we could have a hybrid system with pure PSP staking, a Balancer 80/20 LP token, or other strategies the DAO finds most effective.
By trading on ParaSwap, spot traders allow the protocol to grow through the volume they generate. Thus, trading volume can be considered a positive externality. As long as thorough anti-abuse rules are put in place, traders could receive a boost to their initial stake by consistently trading using our protocol.
In addition to spot trading, ParaSwap has many other features that help the Protocol grow further. Some examples include P2P orders, NFT trading, and RFQ provision (such as that used by private market makers).
Users executing these functions also contribute to driving volume and should be considered for the social escrow system boost.
ParaSwap’s Referral system recognizes those who share ParaSwap with others. These users are constantly helping the protocol by driving product discovery for new users.
Since referral fees can be tracked on-chain, we propose incentivizing the usage of referral codes through the se-system by boosting both referer’s and referral’s stake based on the volume they generate.
Going forward, we can refine this system to ensure that it remains as fair as possible and work on the specific weights of each boost, but for now, let’s discuss the possibility of adding more dimensions to the social escrow model!