KIP-120: zkVIP Program

Summary

Create an onchain VIP program that provides fee rebates to high volume traders.

Abstract

To incentivize larger volume drivers to stick around on Kwenta -- introduce favorable fee rebate program for traders that meet specific volume tiers for a given month. Use ZK-coprocessing to run this rewards program fully onchain.

Motivation

Most other CEXs and DEXs have some sort of loyalty program that provides discounts to larger, recurring traders. To compete with centralized exchange and encourage platform loyalty Kwenta needs to offer fee rebates to high volume traders. Distribution through a VIP program can be more effective than a flat incentives program because it entitles traders to higher rewards as they drive more volume.

There are two ways to use historical data onchain. The first is to proactively push historical data to the chain as it's created (aka transaction time). However, this approach requires forward thinking (would have had to be done before the smart contract was deployed) and is also costly to store batches of data onchain that may only be used once or twice and replicated for each user.

The second way is to aggregate and pull historical data offchain, and use this to execute actions onchain. For example, claiming onchain rewards using historical fees paid aggregated by a subgraph indexed offchain. This is how Kwenta trading rewards works today. The downside of this approach is that requires honest actors (for example Kwenta) to provide data that hasn't been manipulated.

The third, and hybrid approach, is to still aggregate data offchain, but use recent advancements in Zero Knowledge Proofs (ZKP). ZKPs are used to prove the underlying data hasn't been tampered with, which then can be verified by the blockchain, and if valid, subsequent actions can be executed. This VIP program explores a new way to do trading incentives in a robust, transparent, permissionless way.

Specification

For more information, visit the: Kwenta State Log