Market Maker Incentives
Market makers provide liquidity to the exchange by placing orders which are not executed immediately. These orders make it easy for traders to trade against provided market maker orders without waiting.
Any Crescent address can apply as a market maker for selected market pairs. A governance process decides inclusion, rejection and exclusion of registered market makers.
Registered market makers can earn CRE as incentives for providing liquidity. These incentives are calculated for each month by the off-chain market maker scoring system and distribute incentives based on the allocation suggested by governance proposals.
Because Crescent DEX has the orderbook system, we have a possibility of providing much more capital-efficient liquidity compared to the liquidity provided by the traditional AMM model. The disadvantage of AMM is that it requires too much liquidity to be pooled to provide the same level of effective-liquidity compared to traditional financial markets. In other words, in the case of major tokens that are easy to hedge, if the incentive system for market makers is well designed, they will show capital efficiency comparable to that of the traditional financial market in providing liquidity.
Through the incentive policy for market makers, we will incentivize them to bring a more tokens to our DEX, reduce the spread as much as possible, and provide liquidity to both bids and asks evenly. Market makers who maintain stable liquidity within the valid range on the orderbook will get relatively high score.
There are two sections for market maker incentive program. First, the module manages the list of registered market makers and distributes incentives via governance process. Second, scoring system for off-chain evaluation of market maker performance.