Rewards Mechanism

Reward Mechanism

Whenever rewards are allocated to a pol, the distribution takes place using our natively designed "Linear Decay" model. This mechanism encourages users to open positions early and stay into the pool for longer.

For example, consider a lending/borrowing pool with a 45 day duration and a TIME reward pool of 1.88 million tokens. The linear decrease in reward emissions is illustrated here:

Time Decay

Rewards in a pool decrease every second, encouraging users to engage in Lending, Borrowing, or providing Liquidity as early as possible and for the longest duration.

Since Timeswap pools are not perpetual, their utility decreases over time. Therefore, the most valuable period in a pool's lifecycle is its initial days. Users adding liquidity in the early stages contribute the most value to the protocol. In contrast, it doesn't make economic sense to provide equal incentives for users to lend/borrow one day before maturity.

Rewards APR

The rewards APR for each pool is calculated as follows:

Reward APR for lenders = (USD value of Rewards allocated to lenders at that second) / (USD value of total amount lent at that second) * 100% * seconds in a year

Reward APR for borrowers = (USD value of Rewards allocated to borrowers at that second) / (USD value of total amount borrowed at that second) * 100% * seconds in a year

Reward APR for LPs = (USD value of Rewards allocated to LPs at that second) / (USD value of total amount LPed at that second) * 100% * seconds in a year

The Rewards APR will decrease linearly due to the time decay in rewards.

Here's how the Rewards APR changes over time:

Rewards per Action

The reward pool for each market further distributes rewards among Lenders, Borrowers, and Liquidity Providers. The size of the reward pool for lenders and borrowers may vary depending on the type of underlying market and the specific actions being incentivised.

For example, in a market where the supply side needs incentives, the reward pool for lenders and Liquidity Providers will be more substantial than that for borrowers.

Typically, pools with yield-bearing tokens (e.g., sJOE, PT-GLP, GM (ETH/USDC), etc.) as collateral require more liquidity for borrowers to maximize their yields through looping. Consequently, the reward pool for borrowers may be smaller compared to lenders and LPs.

Incentivised Pools

The list of incentivised pools can be found in this spreadsheet.