Rewards program for CoW Solvers in Gnosis Chain

General
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Reward Program for CoW Solvers in Gnosis Chain

Executive Summary:

This post creates a rewards program for CoW solvers to incentivise their deployment and active engagement in Gnosis Chain. The program will have a budget of 180,000 xDAI to be paid on a weekly basis (7,500 xDAI) for 24 weeks (~6 months), after which it might be adjusted and extended based on the program’s performance.

Specification

The CoW team will be in charge of implementing this program and continuously advising on how to streamline and optimise it over the six-month duration.

This program will replicate the currently running program as defined by CIP-38 and CIP-27 with the following differences:

  • 20% will reward price estimation

  • 30% will reward performance.

  • 50% will reward consistency, rewarding 20% more to the top 3 consistent solvers.

The parameters of the mechanism (i.e., the various caps included in the mechanism) will be adjusted so that the total rewards match the allocated budget.

Since Gnosis Chain is in continuous development as a DeFi ecosystem, new routes will keep surfacing that should be quickly added to the solver dilemma which is why the proposed program will reward consistency over performance at the start.

At the moment there are not a lot of routes and it might be hard for solvers to bring large price differentials vs the second one. As more solver integrations happen this should change which will in turn require solvers to maintain and update their routing paths.

The starting date will be Thursday 18th of April at midnight UTC.

Rationale

Gnosis Chain has seen a substantial increase in liquidity in the past 6 months, but volume has been lagging behind. While liquidity has improved, the price that users can get has not, and the main reason is due to inefficient routing. Here’s an example:

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*Pictures taken on April 3rd at 10:48 UTC +2

As can be seen in the pictures, swapping 100 GNO for xDAI directly results in the receiving of 31,013 xDAI. However, if instead one swaps for wstETH, then for sDAI and finally for xDAI, it results in the reception of 32,831 xDAI: an improvement of 5.9%.

Budget

The required amount is 180,000 xDAI which will be distributed on a weekly basis, which will be taken from the incentives budget awarded on GIP-24.

6 Likes
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I will not argue against this, but seeing this proposal made by Karpatkey and not by the the COW DAO itself, which has become a separate entity, confuses me a bit. Despite all the different entities that has been incubated by the Gnosis DAO and spun out (or in the process thereof) there still seems to be much personal overlap between these, which makes me question if these shall be really seen as independent authorities.

But ofc, it is also in the interest of Gnosis DAO to attract traders, and I agree that this is the weak point of the gnosischain ecosystem. But I am not sure if it’s only cause of the routing problems. To me it seems, compared to other chains, we have a different kind of user base that is aware that too much trading don’t let you reach your goals and often patience is more important. And actually I don’t like to see this changed, although this might be give us more fees. But besides this I don’t have an idea how to attract heavy traders, most likely by pump and dump projects.

Regarding this proposal I will support it but reading:

imo the criteria for judging the performance should be specified in advance.

2 Likes
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Thanks for the proposal.

Two suggestions:
a) maybe do rewards in GNO?
b) I think it is reasonable to ask CowDAO to either replace some of the rewards with CoW Tokens or add them on-top.

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This program is being proposed by karpatkey because we are pushing forward improvements for Gnosis Chain DeFi ecosystem. A separate CIP in the CoW DAO forum can (and should) be proposed to match up the incentives and if the feedback is positive it will improve the program impact.

Regarding the expectations of this program, we agree that the long term strategy of Gnosis Chain shouldn’t be pump and dump projects. However, there’s a need to improve the price impact on trades being executed on chain for the existing tokens (that are not pump and dump schemes).

The criteria should be number of solvers on Gnosis Chain and the amount of trades that are solved by the external solvers vs the baseline/Gnosis solvers. There are currently 2 external solvers that have solved 20.2% of the total trades in the past 30 days. This can be tracked here.

For reference, in Mainnet there are 13 external solvers which amount up to 92% of the total trades.

We propose doing it with xDAI so that we don’t generate additional selling pressure for GNO. Also, using xDAI will create more stability in what the solvers can expect to receive.

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For full disclosure; Does Karpatkey currently run CoW solvers or plan to in the future, thereby potentially profiting from this proposal?

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No, we don’t run any solver and are not planning to do so in the foreseeable future.