Redefining DeFi: ParaSwap’s Automated Reward Mechanism

Why Automate Reward Distribution?

Incentive programs are critical to fostering engagement in any DeFi ecosystem. However, managing these processes manually, in a DAO, introduces operational complexity and increases the risk of human error.

Our collaboration began explaining key insights of ParaSwap’s Gas Refund Program:

• 95% of refunded gas fees were tied to Ethereum Mainnet transactions, despite these representing only 22% of valid operations.

• Transactions on other networks, such as Polygon and Optimism, accounted for 78% of the volume but yielded minimal refunds, averaging $0.06 per address.
  
  

These findings led to a decision: streamline gas refund calculations to focus exclusively on Ethereum Mainnet activity, where they generate the most impact, while maintaining the ability for users to claim refunds on the network where they stake their PSP.

What Does Automation Involve?

At WakeUp Labs, we are delivering a fully automated reward mechanism with several features. Scripts will automate data handling by gathering transaction data, calculating rewards, and allocating tokens based on ParaSwap’s incentive structures, such as those outlined in PIP-53. Reward allocations will be proposed automatically on Snapshot, enabling DAO members to approve or reject them through governance. Seamless execution will be achieved through third-party protocols like UMA and oSnap, which will handle on-chain execution without requiring manual signatures. The Gas Refund Program will continue to reward users, but calculations will now prioritize Ethereum Mainnet, where the majority of impactful transactions occur. Additionally, the entire development will be open-source, with comprehensive documentation available on GitHub to ensure transparency and foster trust within the community.

What This Means for the ParaSwap Community

This collaboration brings tangible benefits to ParaSwap and its community:

• Efficiency: Automation eliminates manual overhead, allowing the team to focus on strategic priorities.

• Decentralization: Tools like UMA and oSnap reinforce ParaSwap’s governance model.

• Transparency: Open-source code and regular updates foster trust and community engagement.
  
  

A Look Ahead

At WakeUp Labs, we believe that automation and innovation go hand in hand in creating resilient DeFi ecosystems. By leveraging technology, we simplify complexity while amplifying impact.

We look forward to seeing the community reap the benefits of this automated solution.

We’re redefining DeFi.