PSP 2.0 : Social-escrowed PSP (sePSP)

sePSP Lite paper

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:

Liquidity Providers

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.

Traders

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.

Makers

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.

Ambassadors

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.


What are the next steps?

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!

9 Likes

Awesome idea! Always important to keep liquidity moving, especially in bear markets.

As one of my biggest concerns with this proposal, what anti-abuse measures do you have in mind?

5 Likes

I am super excited about PSP 2.0 and this new idea is a welcome dimension to the already awesome ideas being discussed about PSP 2.0.

Every single actions that helps the protocol to grow as mentioned above is important and should be rewarded. We might also consider rewarding actions like long term stakers of PSP 1.0 (a minimum duration of say 6 months). Also, actions like repeat voting, valid proposal submission, social media engagement and forum contribution are all public good that directly helps the protocol and should be considered.

Conclusively, the reward doesn’t necessarily have to come directly in form of a boost. We might consider other ways to reward such actions without creating sell pressure on PSP. One way to achieve this is through NFT or time locked reward.

2 Likes

Of course, we need to be careful on how to implement these anti-abuse measures, but some ideas that come to mind are token whitelists and sybil clustering analysis and anti-washtrading measures. It’s difficult to predict how these abuses can happen, so it will be important to have an active community locating these issues. Maybe we could even set up bounties for people who discover such cases?

A migration process that rewards PSP 1.0 is definitely going to be needed! It is important to make the migration as fair as possible for people who are in the old system, so I like the idea of considering something for old stakers.

Repeat voting, valid governance and social media engagement are interesting ideas, but might be harder to qualify in a trustless way. What qualifies as ‘valid’ governance? It is a lot more difficult than something like volume created. If we manage to find metrics of someone who engages well in governance it can definitely be included!

Finally, PSP 2.0 is going to work on distributing native protocol fees converted into a certain token, not PSP. But alternative rewards like NFTs and vested PSP could also be interesting distribution methods for other parts of the upgrade!

1 Like

I agree with this !!!