Reward Distribution

In a well-developed market, it is essential to ensure that participants are rewarded for providing valuable and accurate contributions, such as sharing their market making strategies and supplying liquidity. Thus, the design of the incentive structure should prioritize the distribution of rewards, which serves as the primary motivation for market makers. At Mount Exchange, market making profits stem from three key sources, which will be detailed in the next chapter:

1. Position profits generated by market making strategies

2. Fee rebates earned through market making activities

Position Profit

Position profit and loss (PnL) refers to the real-time gains or losses resulting from the price fluctuations of the positions held within an MM Pool. This profit represents a real-time indicator of the total capital value in the pool.

Fundamentally, market makers and traders engage in a zero-sum game, where one party's loss translates directly into the other's gain, excluding additional costs like trading fees. From the MM Pool’s perspective, if a trader's position is profitable, the pool's position profit will be correspondingly negative. However, because the pool acts as the market maker and benefits from advantageous opening prices, liquidity pools generally anticipate positive position profits.

Fee Rebate

The fee rebate system is designed to reduce market-making costs. In the early stages, Mount Exchange offers a relatively high fee rebate, providing greater incentives for market makers by allowing them to earn an additional share of the platform’s trading fee revenue.

To enhance market-making incentives, the fee rebate mechanism is structured as follows:

For each executed order, it is tagged as either Maker or Taker. The Maker is the passive party that fulfills existing orders, while the Taker is the active party initiating the order. Fee rebates apply to the market maker pools where orders are executed passively. For example, if Pool A closes a position and matches with Pool B, the fees will be rebated to Pool B as the Maker.

Over a specified time period, the platform’s total trading fee revenue is accumulated from both Makers and Takers. If the fee rates for Makers and Takers are identical, each contributes equally to the total amount. Initially, the total fee rebate will amount to 100% of the Maker fee plus 30% of the Taker fee. As the platform expands and trading volume increases, these ratios will be adjusted according to the platform’s growth stage and governance proposals.

Rewards will be distributed periodically. At the end of each period, a portion of the platform’s trading fee revenue will be allocated to the pools. Within each pool, market makers who participated before the start of the period can claim rewards, with the amount being proportional to their LP token holdings. Unclaimed rewards will roll over to the next distribution period.

Formula:

Contribution is quantified across several weighted dimensions, mathematically represented as follows:

Referral Program

To incentivize and reward our early adopters, we've launched a referral program during the initial stages. This program allows users to easily share Mount Exchange with friends, social media networks, communities, and more. Referrers can earn different tiers of rewards based on the actions of their invitees, such as connecting wallets, authorizing transactions, providing liquidity, and participating in perpetual trading contracts.

Details of the referral program are still being finalized. For those interested, please stay tuned by following our official channels and joining our communities for updates as we approach the official launch.