PSP 2.0 is a complete overhaul of the PSP tokenomics model. PSP 2.0 radically reduces PSP token emissions and incentivizes users who add value and perform services to ParaSwap by compensating them with a portion of the protocol fees in the form of native gas tokens (such as ETH).
PSP 2.0 was the result of months of community engagement and deliberation. The full details of PSP 2.0 can be found in the PSP 2.0 forum proposal, which was voted and passed by the DAO.
Replacing the previous ParaSwapPool staking method, PSP 2.0 introduces a “Social Escrow” staking system for PSP (sePSP), a novel model in DeFi that incentivizes users who perform actions beneficial for the protocol and DAO growth.
PSP 2.0 staking mechanisms
PSP 2.0 introduces sePSP1 and sePSP2: two ways of staking PSP that seek to maximize the utility of the PSP provided while offering a streamlined staking experience compared to the previous method of staking.
For more details about the differences between sePSP1 and sePSP2, click here.
For more details about how to stake PSP, click here.
Protocol fee incentives
PSP 2.0 introduces the distribution of 80% of the protocol fees to stakers and 20% to the DAO treasury. These are the fees from all the chains ParaSwap is deployed on and will be distributed every epoch in the gas token of each network where staking is available.
At the end of each epoch, fees will become claimable by users after a grace period of one week. This period ensures the incentive distribution is accurate. After becoming available, incentives will have to be claimed within the following six epochs; otherwise, unclaimed incentives will go back to the DAO treasury.
Social Escrow System and ParaBoost
Social Escrow PSP (sePSP) is a novel system designed to allocate the accumulated protocol fees to the users who add value and perform services to ParaSwap.
The ParaBoost represents the incentive boost users receive on their stake from performing value-adding actions and providing services for the Protocol. To understand how it is calculated, click here.
ParaBoost categories
As of the time of writing, the value-adding actions considered for sePSP are:
Trading: the more volume a user trades through ParaSwap, the bigger the boost.
For stablecoin to stablecoin trades, we propose the following boosts:
Market Making: market makers, including limit orders participants, OTC, and RFQ (PMMs), are eligible for stake boost depending on filled orders volume.
Pooling: liquidity provision through sePSP2 for when an asset is kept without requesting a withdrawal. A minimum amount of 60k PSP staked is required to qualify for the boost. The boost will be calculated using averages of the stake, and triggering an unstake request will reset the boost timer.
PSP Balance Booster: holders of a minimum of $100 worth of PSP in the user’s wallet on a single chain receive a 10% boost.
Referrals: as an incentive to users who bring new users, ParaSwap has a special referral system in which, by using a referral link, the referrer and the person referred can receive a greater part of the positive slippage of a trade. Trades made using a referral link will provide a 20% boost to the referrer, while those referred will receive a 10% boost on applicable trades.