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Arbitrage promotion #69

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Hyung-bharvest opened this issue Nov 26, 2020 · 0 comments

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Long term conside...

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Hyung-bharvest commented Nov 26, 2020 •

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Arbitrage Promotion

appropriate arbitrage promotion can make pools having better consistent price discovery

Objectives

to encourage steady arbitrage activities

Arbitrage Rewards Calculation

frequency : calculate and reward every week
conditions : more than 50 swaps per week
reward score for each address : RewardScore = MedianSwapAmount * NumberOfSwaps * SwapFeeRate * 50%
- reward back half of paid swap fees
reward amount for each address : MIN(TotalWeeklyRewardBudget * (RewardScore / SUM(RewardScore)), RewardScore)
- total rewards do not exceed TotalWeeklyRewardBudget

Suggested TotalWeeklyRewardBudget

DemandedArbitrageVolume = NumberOfSwapsPerWeek * SwapAmount = 50 * TotalLiquidityPoolAmount * 0.5%
TotalWeeklyRewardBudget = DemandedArbitrageVolume * SwapFeeRate * 50%
for example
- when TotalLiquidityPoolAmount = $100M and SwapFeeRate = 0.3%
- TotalWeeklyRewardBudget = 0.25 * $100M * 0.3% * 50% = $37,500 = 7,500ATOM (at $5 per ATOM)

Hyung-bharvest self-assigned this

dongsam added this to the Long term considerations milestone

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