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Drift DEX
Market Makers

Maker Incentive Program

22min

Last updated: 11 Aug 2023

Introduction

๏ปฟ

To encourage market makers to provide liquidity on Drift, qualified market makers who opt into the Incentive Program will split reward pool up to 3000 USDC each week.

Who Can Join?

Anyone that can programmatically market make on Drift is invited to apply for the Program. Check out our protocolโ€™s SDK, our open sourced market making bots and our technical documentation to get started.

Eligible market makers will be qualified on application. Reach out to (https://t.me/cindyleow) to apply.

Program Length

  1. The Program will run each week starting on Monday, 00:00 UTC and concluding on Sunday, 23:59 UTC (โ€Program Periodโ€).
  2. Drift will notify participating market makers if the Program is paused for any particular week.

Rewards

The rewards for this program are split into a Volume Reward and a Score Reward.

Volume Reward: $1,500 USDC

Score Reward: $1,500 USDC

Reward Calculations

๏ปฟ

Volume Reward

All participating market makers make their pro-rata split of $1,500 USDC based on their relative maker volume across all markets, according to:

\mathrm{MMVolumeReward = \frac{MM_{volume}}{\sum\limits_{Maker} MM_{volume}} * VolumeRewardPool}
๏ปฟ

Score Reward

All participating market makers make their pro-rata split of $1,500 USDC based on their relative liquidity score within each market, according to:

\mathrm{MMScoreReward_{mkt} = \frac{MMScore_{mkt}}{\sum\limits_{makers} MMScore_{mkt}} * ScoreRewardPool_{mkt}}
๏ปฟ

This equation can be broken down into:

1. MM Score over period

This is the score for the market maker in a specific market with n snapshots over the period.

\mathrm{MMScore_{mkt} = avg(\sum_{i=1}^{n}{MM_{OrderScore,mkt})}}
๏ปฟ

2. MM Order Score per snapshot

The MM Order Score calculates the weighted sum of the size of the market maker's ask orders at various price levels. It takes into account the quantity (Q) of lower of liquidity available at that bid, ask bracket.

\mathrm{MM_{OrderScore, mkt}} = 
(MM_{OrderScore, mkt, bid}
+ MM_{OrderScore, mkt, ask}) * 100
๏ปฟ

๏ปฟ

MM_{OrderScore, mkt, side} = 4*\frac{ l_A}{Q_{A}}+2*\frac{l_B}{Q_{B}} + 0.75*\frac{ l_C}{Q_{C}}+0.4*\frac{ l_D}{Q_{D}}+0.3*\frac{ l_E}{Q_{E}}+0.2*\frac{ l_F}{Q_{F}}
๏ปฟ
\mathrm {l_{bracket,side}}
๏ปฟ

an individual MMโ€™s liquidity within a bracket for a side (bid or ask)

\mathrm {L_{bracket,side}}
๏ปฟ

all liquidity within a bracket for a side (bid or ask)

\mathrm {Q_{bracket}}
๏ปฟ

largest of an individual bracketโ€™s bid liquidity, ask liquidity, or $5000 worth of liquidity

Bracket

Distance from best order on side

A

within 0 - 1 bps

B

within 1 - 5 bps

C

within 5 - 10 bps

D

within 10 - 20 bps

E

within 20 - 50 bps

F

within 50 - 100 bps

Term

Distance from best order on side

Qa

max(L_{A,bid}, L_{A,ask}, $5000/price)

Qb

max(L_{B,bid}, L_{B,ask}, $5000/price)

Qc

max(L_{C,bid}, L_{C,ask}, $5000/price)

Qd

max(L_{D,bid}, L_{D,ask}, $5000/price)

Qe

max(L_{E,bid}, L_{E,ask}, $5000/price)

Qf

max(L_{F,bid}, L_{F,ask}, $5000/price)

Note: if a single market maker provided a best bid and ask with $5000 worth of liquidity, that would be a score of 400. If another MM provided the remaining liquidity of $5000*5=$25k at all the other brackets that would be a score of 2+.75+.4+.3+.2 * 100 = 365.

Scoring incentivises orders at the top of the book. Orders within 1bp of the best bid/ask have a weighting of 4x.

\mathrm {{ScoreRewardPool_{mkt}}}
๏ปฟ

mkt

ScoreRewardPool

SOL-PERP

500

BTC-PERP

500

ETH-PERP

500

SUI-PERP

0 (as of August 14 2023)

ARB-PERP

0 (as of August 14 2023)

Notes

๏ปฟ

This Program is an early iteration of an on-chain liquidity provisioning program the DriftDAO will eventually oversee.

Rewards will change as we move towards DriftDAO.

Additional Terms

๏ปฟ
  1. Any wash trading or self matching is strictly prohibited. If wash trading or self matching is observed in order to manipulate market share, then the incentives for that month are forfeited. This is at the sole discretion of Drift Protocol.
  2. Market makers will be able to track their performance here: ๏ปฟDrift Maker Performance๏ปฟ

Payment Options

๏ปฟ
  1. Qualified Market Makers will receive their payments in USDC.
  2. Payouts will conclude the week following the end of the Program.

๏ปฟ

Updated 15 Aug 2023
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TABLE OF CONTENTS
Introduction
Who Can Join?
Program Length
Rewards
Reward Calculations
Volume Reward
Score Reward
Notes
Additional Terms
Payment Options
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