Mangrove’s Incentives Program rewards users with MGV tokens for trading volume and liquidity provision. Designed to encourage competitive pricing and consistent activity, the program supports makers, takers, and liquidity providers, driving growth and engagement across the platform.

The Core Philosophy: Rewarding Absolute Effort

Mangrove’s incentive program rewards users for the effective trading volume they generate. Through a straightforward farming model, participants earn MGV tokens—Mangrove DAO’s governance token—for each dollar in trading volume which they generate (either as maker or taker). This document describes the process for calculating MGV token rewards.

The parameters affecting MGV’s yield may change over time, and any changes will be publicly announced regularly. At the beginning of each epoch—spanning two weeks—the total amount of MGV available for claiming will be updated.

However, the principles behind the MGV incentives program are set.

Our program marks a shift from rewarding relative effort (comparing users against each other) to rewarding absolute effort based on actual trading volume. This approach ensures:

• Predictable rewards, unaffected by other users' activity

• Earnings based directly on your contribution to the ecosystem

• A reward structure that scales with market growth

Note: MGV incentives are exclusively available for transactions on Arbitrum.

How Rewards Are Calculated

Reward Rate ρ

The reward rate (ρ) is the conversion rate between the effective trading volume and the amount of MGV tokens earned. This rate serves as the foundation of Mangrove’s transparent and balanced incentive system, ensuring participants are rewarded for their genuine contributions to market activity.

The ρ is subject to adjustment based on the volume to meet the target of total MGV distributed per epoch and per user type. In general, the ρTaker is typically assumed to be 10 times smaller than the ρMaker (meaning makers can receive up to 10 times more rewards than takers).

The traded volume—whether adjusted or not—is expressed in the quote currency of the market. For example, on the weETH/WETH market, the volume is measured in ETH. The ρ coefficient (taker or maker) serves as a conversion factor, expressed in MGV per quote, translating the traded volume into MGV rewards. This simple conversion mechanism ensures a transparent link between user activity and the rewards earned, aligning incentives across the ecosystem.

Volume-Based Taker Rewards

Taker rewards are directly proportional to the volume of trades they generate (i.e., the offers they consume). For example, if during a specific period where ρTaker remains constant, a taker generates V (in quote), their reward will be calculated as:

$Reward=ρTaker×V$

Adjusted Volume for Makers

Incentive programs in DeFi often face  a key challenge: ensuring high-quality orders for a healthy market with competitive prices.

The core of our reward system uses an adjusted volume calculation that considers both the quality and age of orders. Adjustments are critical to ensure that makers who provide competitive, high-quality liquidity receive the most rewards, aligning incentives with market health and sustainability.

The adjusted volume calculation incorporates the following elements:

1. The historical spread quality:

Orders placed closer to the mid-price receive higher rewards due to tighter spreads. Tighter spreads improve market competitiveness and favor makers who offer the best prices for takers.

1. The historical volume consistency:

The system evaluates whether the maker’s historical activity aligns with the effective volume generated over time. Consistent contributions are rewarded proportionally.

1. Historical Window (Historicity):

A “window” is used to assess past activity. This window can be adjusted (made narrower or wider) to more or less account for long-term contributions or adapt to specific users (like Kandel’s Makers).

How to Maximize Your Score

To maximize your rewards, focus on:

1. Keeping offers active: Longer live offers before execution earn more rewards.

2. Competitive pricing: Tighter spreads near the mid-price earn greater incentives.

3. Consistent order volumes: Regular activity over time ensures higher scores.

Together, these factors foster a healthy, competitive market where genuine participation is naturally rewarded.

MGV Token Allocation per User Type

Mangrove allocates rewards differently across its three main user types:

• Makers: Users who post offers to the market.

• Takers: Users who accept existing offers.

• Kandel’s LPs: Liquidity providers using Kandel strategies, which involve placing orders across various price points.

Each group receives MGV tokens based on their contribution to the market, with special attention given to Kandel’s LPs for their role in providing liquidity across price ranges.

Mangrove DAO's Ecosystem Council defines the total amount of MGV allocated during an epoch and how it is distributed to each type of usage. This announcement is public and shared on our social channels.

Specific Allocation for Kandel users and vault managers

Because the core principle of MGV's incentive program is the effective volume traded, particular attention is given to Kandel users. Kandel is a market-making strategy that involves posting orders along a price range, providing liquidity across various price points. To support this, a parameter in the reward calculation for Kandel makers differs from that of general makers.

To account for the influence of historical data, we have established a "historical window" that determines how past activity impacts reward calculations. To maintain the quality of offers on Mangrove’s DEX, this window is typically wider for makers, giving more weight to past data in the calculations. However, this approach can unintentionally reduce the eligible volume for rewards in the case of Kandel makers, as their orders often remain far from the mid-price for extended periods. To address this, the window for Kandel users is narrower and specifically adjusted to ensure they are not unfairly penalized while still upholding the integrity of the reward system.

Considering this, Kandel benefits from an additional reserve of incentives and specific parameter adjustments to ensure that vault managers and LPs are well rewarded for their efforts.

Community Contributors

Mangrove has launched and will maintain social quests on Galxe and other platforms. Our "community contributors" who participate in these quests and other activities that promote the Mangrove community will also be rewarded in points, leading to a future allocation in MGVs.

Epochs and Updates

Time is divided into epochs for several purposes:

• Distribution and Claimability: Rewards in MGV are continuously calculated and accrue over time. Users will be able to claim their earned MGV tokens at the end of each epoch, and once the MGV token becomes transferable.

• Rewards page: Earned MGV tokens are shown on the dApp's "Rewards" page.

• Announcements: Any changes to incentive parameters—including the allocation to types of usage and the reward rates ρ—are announced at the start of a new epoch.

• Core principles remain unchanged: While the Mangrove’s DAO Council may adjust allocations and parameters during each epoch to respond to market conditions, the core principles of fairness, transparency, and rewarding genuine activity remain steadfast.

The distribution will consist of 6 epochs lasting 2 weeks each. Here are the dates with the unix timestamps (in second) :

Date: Tuesday, 11/19/2024, 12 GMT+1 - Timestamp: 1732014000

Date: Tuesday, 12/3/2024, 12 GMT+1 - Timestamp: 1733223600

Date: Tuesday, 12/17/2024, 12 GMT+1 - Timestamp: 1734433200

Date: Tuesday, 12/31/2024, 12 GMT+1 - Timestamp: 1735642800

Date: Tuesday, 1/14/2025, 12 GMT+1 - Timestamp: 1736852400

Date: Tuesday, 1/28/2025, 12 GMT+1 - Timestamp: 1738062000

Each epoch will have a budget of 1.6M MGV.

Summary

Mangrove's incentive program is carefully designed to:

• Adjust dynamically: By varying the reward rate in response to changes in platform trading volume.

• Encourage quality orders: By rewarding orders close to the market price.

• Differentiate incentives by use cases: By allocating rewards differently among makers, takers, and Kandel's LPs, adjusting parameters as needed while keeping the core principles unchanged.

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