PSP-IP20: Urgent Fix of Gas Refund

Keywords Tokenomics, staking, Gas Refund

Simple Summary Since early April - and following the guidelines set in PSP-IPΔ13 - the ParaSwap DAO started refunding PSP to ParaSwap users who staked on either the ParaSwapPools or the Safety Module. The main goal of this incentive is to grow our user base, increase the trading volume and encourage more participation in staking.

As of the time of writing, 9.5M PSP (equivalent to ~$460k) have been distributed. Overall, this initiative has gathered positive reactions from the community, as it has given PSP staking three main benefits in total: Making the ParaSwap Protocol more efficient & competitive Earning auto compounding rewards on ParaSwapPool staking Getting gas refunds on top of these two existing benefits

Unfortunately, since the release of the system we have begun noticing increasing instances of abuse from a minority of our stakers. Although the $30k limit has been enough to limit most of the damage, we’re seeing a few wallets getting around this limitation by farming and then market selling PSP the moment they get the gas refund.

To be more specific, here are the top 3 issues we found: Trading Bots can add a significant amount of sell pressure when claiming the PSP. For example: we found an address selling 736,000 PSP during this epoch start. While it is true that even these trades bring volume to the platform, a better designed distribution system would align the two parties’ interests closer: The ParaSwap DAO & those traders. Wallets can get around the $30k limit by recycling wallets. It’s a limited case since it requires moving all assets to the new wallet, but it’s doable given the incentive. Wallets can stake at the last few hours before the end of the epoch and make random trades to get relatively low-risk rewards.

Proposal To address those issues, we propose making emergency adjustments applicable in this current epoch with a two days vote instead of five. This is to give the developers enough time to implement the changes before this epoch end (as now that abusers have discovered that we are aware of their tactics), as well as give stakers enough time to prepare for the upcoming changes.

Overall, these are the changes being proposed:

Alter the limit to a epoch maximum of $1.25k USD in PSP. This will be applied to the current epoch, and may affect pending refund amounts. Introduce a 7 day virtual lockup: from now on, every transaction that is made, the system will take into consideration the amount of PSP that was staked throughout the previous 7 days. Any staked PSP that is not present for the entirety of the 7 day period will not be counted Commit to introducing a future governance framework for any other emergency proposals following this one.

Goals The proposed actions will limit over-gaming the system as well as cap the rewards in a monthly basis. Additionally , the virtual lockup time helps mitigate gaming the system for rewards.

Our main goal is to ensure the Gas Refund is healthy and contributes to the growth and sustainability of the ParaSwap DAO by ensuring that the incentives properly align with the original vision of the Program.

Voting Options For Against Abstain.