Market Making Rewards Mechanism

Adjacent to Orderly Network’s trading rewards, the market making rewards program is designed to incentivize market makers that play an integral role in the liquidity of the DeFi protocol. 10% of the total $ORDER token supply (100,000,000 $ORDER) is allocated to market makers who support the liquidity of the Orderly Network’s trading infrastructure.

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Epoch distribution

Market making rewards will be distributed linearly on an epoch basis over 200 epochs incorporating a Provide Liquidity-to-Earn model capped within each epoch performance.

500,000 $ORDER is allocated for each epoch for all qualified Orderly market makers. From epoch 11 onwards, the market maker rewards will be distributed as escrowed $ORDER instead of liquid $ORDER tokens in epochs 1-10. Any further adjustment of the distribution mechanism will be formally assessed and communicated to market makers in advance.

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Allocation Mechanism

For every epoch, market making rewards are allocated among Orderly’s listed markets. Each market’s allocation will be based on the following formulas:

$PoolWeight_{market}=PoolMultiplier_{market}*\dfrac{activeDaysInEpoch}{totalEpochDays}$

$RewardPool_{market}=\dfrac{PoolWeight_{market}}{TotalWeight}$

• The pool weight takes account of new listing/delisting of markets with the number of active days in an epoch, prorating the pool multiplier effect.

• Each market’s pool multiplier will be maintained and periodically updated here by Orderly based on market conditions and other factors.

• The amount of market making rewards allocated to each market is determined proportionally based on the ratio across the total weight against all markets.

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Distribution Formula

For each market, $Q_{final}$ is calculated at the end of every epoch for eligible market makers and is determined by four main factors:

1. Quality of Liquidity (Bid Depth and Spread from each market maker’s mid-market price),

2. Liquidity Uptime

3. Staked Balance ($ORDER/esORDER)

4. Maker Volume

Market making performance is monitored and calculated on a minute-by-minute basis (using randomized sampling) and aggregated into a $Q_{min}$ for each market. Orders below a certain minimum depth size and/or over a certain maximum spread from each market maker’s mid-market price will be excluded from the computation of $Q_{final}$. Refer here for the updated values.

$Q_{final}=\sum_{N=1}^{totalEpochMinutes} \{Q_{min(N)}=[\dfrac{BidDepth_1}{Spread_1}+\dfrac{BidDepth_2}{Spread_2}...., \dfrac{AskDepth_1}{Spread_1}+\dfrac{AskDepth_2}{Spread_2}...]\}^{0.35} *[\dfrac{\sum_{N=1}^{totalEpochMinutes}Count(Q_{min(N)}>0)}{totalEpochMinutes}]^5 * [max(10,stakedORDER)]^{0.2} * [MakerVolume]^{0.45}$

$r_{market} = RewardPool_{Market} * \dfrac{Q_{final}}{Q_{total}}$

The amount of market making rewards a market maker earns from a market $r_{market}$, is proportional to their $Q_{final}$ against the $Q_{total}$ in that epoch.

$r_{wallet} = \sum^{markets} (r_{market})$

The total rewards a market maker earns in an epoch is the sum of all the rewards per market. The rewards are consolidated across the multi-wallet linking and are only viewable/claimable by the designated rewards wallet.