DeFi Spring Phase 2 is starting soon!

After a successful phase 1, Starknet is kickstarting the DeFi Spring incentives program for Money Markets.

We are happy to announce that Nostra will receive an incentive allocation, denominated in STRK tokens, that will be shared with the lenders on Nostra Money Market.

Let's delve into the mechanics of this distribution and what it means for lenders.

Understanding the Distribution Mechanism

The incentive distribution process is designed to reward the most active and loyal participants in the Nostra money market.

The rewards, denominated in STRK tokens, are allocated based on users' non-recursive lending supply.

Here's a breakdown of how it works.

Determine the individual non-recursive supply

Given a token XYZ, the non-recursive supply is the amount of XYZ tokens a user has lent minus the amount of XYZ tokens the user has borrowed.

Let’s assume Alice has deposited 100 ETH for lending and collateral to borrow 50 ETH. Alice’s non-recursive supply can be determined with the following formula:

nonrecursive supply=max⁡(0, lending supply-borrowing supply)

In this case, Alice’s non-recursive supply equals 50 ETH tokens.

If Alice had deposited 100 ETH tokens together with 200 STRK tokens and borrowed 150 ETH tokens, the non-recursive supply of ETH tokens would have been zero, as the borrowing supply is higher than the lending supply.

Determine the individual share of each token’s total non-recursive supply

The second step in the distribution process involves monitoring the lenders’ activity over a lookback period of two weeks - the same period as the Starknet DeFi incentive campaign.

During this period, Nostra calculates the share of each user's non-recursive lending supply on a daily basis.

This calculation is done by dividing each user's non-recursive supply by the total non-recursive supply for each token.

This approach ensures a fair and transparent allocation of rewards, directly correlating the incentives with the level of participation and commitment of the lenders.

Distribution to Nostra Money Market

Nostra is set to receive STRK incentives determined by an objective function that evaluates KPIs indicative of organic user engagement, including TVL and lending APR.

These incentives will then be distributed to lenders across the respective assets, adhering to the same proportional allocation based on these metrics.

Users can earn STRK incentives by lending the following tokens:

✨ STRK

✨ ETH

✨ USDC

✨ USDT

Example

Alice has deposited $100,000 worth of STRK for lending and collateral and borrowed $ 10,000 ETH and $ 20,000 STRK for two weeks. Since the launch of the incentive program, the STRK non-recursive lending supply has reached $1m TVL in the first week and $2m TVL for the whole second week.

Alice’s share of the STRK non-recursive supply equals 8% in the first week and 4% in the second week. The calculation below shows her share for the first week:

Bob has provided $10,000 worth of ETH and $50,000 worth of WBTC for lending and collateral to borrow $ 20,000 worth of ETH for two weeks. Since WBTC is currently not included in the campaign, Bob would only be eligible for incentives on his ETH deposit for lending. However, his non-recursive supply is equal to zero since he borrowed more ETH than his ETH lending supply.

Let’s assume a hypothetical total incentive budget of 10,000 STRK for the first two weeks with the STRK non-recursive supply.

Alice would then receive the following:

Claiming the Incentives

After the initial two-week lookback period, lenders can claim their STRK incentives based on their activity during the previous weeks.

The first round of STRK claims for Nostra Money market will be live on 28th March for activity starting 14 March 2024.

DeFi Spring rounds are currently run every two weeks.

The Impact on the DeFi Ecosystem

The introduction of STRK incentives on Nostra not only rewards existing lenders but also attracts new participants to the ecosystem, bolstering liquidity and enhancing the overall stability of the Starknet DeFi market.

By aligning rewards with user activity, Nostra is paving the way for a more vibrant and robust DeFi future.

Join the DeFi Spring on Starknet by putting your capital at work on Nostra!