A rebate of 8% of trading fees is rewarded to all maker orders on Loopring Exchange going forward, and also is applied retroactively to all maker orders since April 29th. Maker fees were at 0% previously. There is also a new taker fee schedule, now spanning between 0.06%-0.2%. The previous upper bound was 0.1%. Also, there are now post-only orders.
Some definitions: Makers are those who place limit orders that rest on the order book. Takers are those who fill (remove) orders from the order book.
Beginning right now, every maker order that is filled on Loopring Exchange receives 8% of the trading fee that the taker pays. This reward is automatically applied to every maker, every order, whenever it gets filled. Maker fees on the exchange have always been 0%, and now they are effectively negative fees. Makers get paid when a taker fills theirs orders. Moreover, it is being applied retroactively to every trade made on Loopring.io since April 29th. These rewards update daily in a user’s dashboard at 11AM UTC, and are paid out monthly if the total reward is greater than $5. If not, it rolls over to the next month and is never lost.
While maker fees are going lower (negative), taker fees are being increased across most fee tiers. The taker fee range used to be 0.06% — 0.1%, and now it is 0.06% — 0.2%. The default taker fee is 0.2%.
All current VIP statuses are still in effect. If you were VIP4, etc., you still are.
Let’s run through a quick example.
Taker Tom fills an order, buying $1000 worth of DAI with ETH and pays the default 0.2% trading fee. Tom pays $2 worth of DAI as a trading fee (no gas). He filled Maker Marcia’s order. Marcia receives 8% of that trading fee, which represents 0.016% (1.6 bps) of the value of that trade, or $0.16 in this case. Marcia sees these rewards accrue daily in her dashboard, and are paid out monthly directly to her Loopring Exchange account.
Why We Made This Change
Bootstrapping liquidity on an exchange is a big, crucial task. It is the proverbial chicken-egg problem we are all aware of. It is easy to lose track with all the DeFi innovation going on, but ultimately, an exchange is a venue (virtual or physical) where people go to exchange one asset for another. Most people go to the venue casually, anticipating that there are other people already there — either fellow casual types or professionals — who are ready to facilitate the trade by taking the opposite side. If there is no one there, or if there is only one person willing to take the other side for an outlandish price, you are not happy.
Making sure there are people or programs there to facilitate the trade is the job of any exchange. How to ensure that happens is not trivial, especially in early days. Nobody wants to be there ready to trade when not many people are strolling through the venue. One battle-tested way to ensure these people/programs are there ready to facilitate a trade is to incentivize them. The exchange can pay them a percentage of the volume they facilitate: a rebate.
That is why we are reducing maker fees: because market makers ARE the exchange. They need to want to be there, making money. As for our taker fees, because they were and still are among the lowest of any DEX (especially with gas prices these days) or CEX, it is reasonable to raise them (which gives more to the makers). Takers much prefer to go to the bustling, voluminous exchange where makers stand ready to trade.
More Market Maker Moves
Besides this new few schedule and rebate, Loopring Exchange has been striving to incentivize market makers with other efforts.
- We launched liquidity mining, which incentivizes maker orders on certain trading pairs by paying out fixed rewards. For example, right now there are four trading pairs being incentivized with a total of $10k of rewards: LRC-USDT, USDT-DAI, renBTC-USDT, BZRX-ETH. Specifically, $13.88 is paid out every hour for 30 days, split among makers based on orderbook snapshots of resting limit orders — not filled volume. More will be coming.
- To facilitate liquidity provision by makers on the exchange, we created two open source trading bots. This allows makers to more easily plug in and get their strategies and capital deployed. Links: hummingbot and vnpy. Can read more about why we believe this is extra important in this thread.
- We are rolling out more advanced trading features and order types which market makers need to effectively execute their strategies, and provide the best service on the exchange. Post-only (maker-only) orders are now supported via the API.
So market makers, we hope you feel more welcome and appreciated on the Loopring Exchange. We’ve worked hard over the years to give you the zkRollup technical capability to execute your strategies in a high-performance environment, with low latency, no gas fees, and full Ethereum self-custodial guarantees. Now we are stepping up the economic incentives. Whether you are a professional firm or a hobbyist running your first bot, we need you to help jumpstart the virtuous circle of liquidity, and prove orderbook DEXs can outcompete the centralized incumbents.
Please join our Discord if any questions on market making, fees, and more.
Loopring is a protocol for scalable, secure exchanges and payments on Ethereum using zkRollup. You can sign up for our Monthly Update, learn more at Loopring.org, or check out an exchange/payment app at Loopring.io.