Arbitrage Rewards

The arbitrage rewards program is designed with a clear objective of:
1.Incentivizing arbitrageurs to run arbitrage strategies on Polysynth protocol
2.Improve the trading experience by converging mark price to index price and reducing funding rate
The amount of POL tokens distributed to the arbitrageurs is based on a formula that rewards a combination of fees paid, converging arbitrage volumes and total converging volume in the epoch, and staked POL tokens held. Traders can earn up to 100% APR on their arbitrage fees alone.
These arbitrage rewards can be claimed and staked to earn 100% + APY via auto-compounding staking strategy, which is the primary value accrual strategy of Polysynth DAO.
Working Mechanism
The Cobb-Douglas function is used to compute how much POL is awarded to each trader during each epoch.
Rewards, r is equal to:
​
​
Where w is equal to:
If total stkPOL is not equal to 0
Else:
Here,
Terms used in the working mechanism of arbitrage rewards
Arbitrageur rewards are capped at 200,000 POL per 7-day epoch. It can be increased in the early days of protocol adoption to incentivize arbitrageurs and can be decreased to limit inflation. The community can decide on that via a governance proposal.
The following example illustrates arbitrage rewards earned by three arbitrageurs using the formula listed above:
An example how arbitrage rewards work
Note: In the above example POL-USDC price is assumed to be 1. POL-USDC price will be the latest oracle price. Pre-IEO, this will be equivalent to the latest sale price.
FAQs
Who is eligible for arbitrageur rewards?
All arbitrageurs who have achieved a minimum of 3% of convergent volume on Polysynth protocol in the epoch are eligible to receive POL as rewards in a given epoch.
The Polysynth protocol is not available to arbitrageurs in the United States or Restricted Territories, as defined in Polysynth’s Terms of Use.
How do I claim my arbitrage rewards?
Arbitrage rewards are computed and paid out weekly every Monday at 00:00 UTC timestamp. However, there is a 90-day lock-up period followed by a 90-day release period having a daily vesting schedule. Post-lock-up period, your vested rewards will be auto-staked and will earn staking rewards.
Why is my reward less than compared to the formula?
Arbitrage rewards are capped at 200,000 POL per 7-day epoch. As such, if total rewards across all arbitrageurs for the epoch is more than 200,000 everyone’s rewards are scaled pro-rata such that the total rewards remain capped at 200,000 POL per epoch.

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Contents

Working Mechanism

FAQs