Applying Makinomics to OpenMEV: +300mm daily volume

Makinomics: f.k.a Aggregation of Marginal Gains

“Happy families are all alike; every unhappy family is unhappy in its own way.” - Anna Karenina

In examining the performance of Sushiswap over the last 12 months, the most important factor has to be adjusting and optimizing Incentives. Below we detail the summary that account partially for Sushiswap growing so rapidly.

Onsen Bar Analysis

Onsen Improvements
“The effectiveness of token emissions in the first two rounds of SushiSwap Onsen has been opaque at best. Do rewards based on market cap make the most sense? Do these joint liquidity mining partnerships align incentives properly? Do the…” — Nicholas Cannon Optimizing Token Emissions for SushiSwap | by Nicholas Cannon | Gauntlet | Medium

Optimized Onsen

Yearn Pool optimizations
“In part due to the changes in incentive distribution, Sushiswap was able to increase the spending > efficiency in the Sushiswap from ~$2,000 in volume per Sushi spent in incentives to $10,000; a 5x increase in the impact of the Sushi…” — Gabe Pohl-Zaretsky SushiSwap increased liquidity mining efficiency 5x and added $300M daily volume with the Gauntlet Platform | by Gabe Pohl-Zaretsky | Gauntlet | Medium

In absolute terms, this result reflects an increase of ~$300M in daily trading volume without any increases in Sushi emissions. This represents a ~$55M increase in annual protocol revenue to Sushi holders .


Figure 1: Gauntlet Networks Feedback Control Model

Since Sushiswap has a fixed token emissions schedule we must maximize the impact. This can be achieved by diverting incentives from low-impact to high-impact pools.

Incentive Optimization

Above is a diagram of how the venue operates: Actors interface with the Exchange by specific actions.
Certain actions can not be changed, however as we have observed that adjusting or manipulating incentives growth rates are all we require to realize better performance.

Right now OpenMEV only uses one method for returning back arbitrage to end users:

  • Returns fees based on which function_calls are defined by the venue (i.e. sushi)

We think there are better potential ways in rewarding active traders.

For 2021, Sushiswap was responsible for around 14,158,833 USD in MEV in 2021 (YTD). Basically, we are examining which pools to give bigger weight to for rebating, as right now it technically covers every Sushiswap pool (which is obviously not optimal).

Summary

We have summarized previous successful improvements that have been carried out utilizing SUSHI for incentives for brining volume and liquidity. Depending on what actions the community would be in favor of would dictate which solutions we would want to generate (i.e. why propose a plan that will not pass).

Next community call I will be on discussing what plans we have simulated and necessary qualifiers for adjusting the existing gas rebate system. (Also discussing other potential assets, like tSushi). Similar to how ~$55m in value for Sushi was made just by moving incentives, we will be assessing if there are better assets to use instead of xSushi, or should it be made up of an additional asset (like a blend, 60/40 as an example), or something else entirely.

I leave you with this:

… If growth is what you’re after, stop watching your scores and start paying attention to your rank. The path to winning has always been the same. It’s not just how many points you score that matters—you need to score more than your competitors do.
-Customer Loyalty Isn’t Enough. Grow Your Share of Wallet

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