You can now start earning rewards for trading on Injective!
This week, the Injective community voted to pass proposal #58 which introduced a maker fee rebates for the Axie Infinity spot market. Now, anyone who helps provide order liquidity for AXS on Injective will earn the highest maker fee rebates in the entire crypto industry. Overall, this will help to heavily promote liquidity on Injective while also incentivizing market making, arbitrage and development activity on Injective.
The maker reward that is available is comparable to those found in AMM DEXs. A market maker can distribute their orders in an AMM fashion or create a wide array of new market making strategies that can help to beat out the liquidity found on centralized exchanges (CEXs). In a nutshell, this implies that AMM style liquidity mining rewards are now available on a fully decentralized orderbook exchange via Injective.
The Specifics on Trading Rebates
Injective Governance Proposal #58 for the Axie Infinity Spot market enables makers to earn a 0.2% rebate for every trade.
In essence, the process will work as follows:
Let’s assume a maker posts up sell orders for the Axie spot market at $70.20. When a taker purchases AXS at $70.20, the maker will be able to earn an additional 0.2% rebate for the transaction. As a result, market makers are able to earn on every single trade!
How do rebates benefit traders on Injective?
Rebates will help promote liquidity and arbitrage opportunities on Injective.
Since the winning market maker for a trade earns the entire rebate, it is logical that rebates will lead to further competition among market makers which in turn would promote deeper market liquidity.
Due to rebates, traders can replicate the classic AMM curve (X * Y = K) which encourages traders to post up more orders in order to earn fees across a wider range of prices. Put another way, rebates incentivize market makers to post orders with tighter spreads. For instance, in the example above, Market Maker A can post up a sell order at $70.195 while Market Maker B can post up a sell order at $70.198. Basically, the market makers are incentivized by the rebates to post up multiple orders at the fairest prices possible so that their order gets taken. These tighter spreads in turn mean that there can now be competition to provide deeper liquidity on Injective.
On other DEXs today we often see users having to pay higher prices when attempting to make purchases or having to sell at lower prices than what is available on more liquid CEXs. The Injective community aims to solve this very issue with the rebate feature. Since market makers are posting up orders with tighter spreads, users can buy/sell at fair prices.
New DApps and Yield Farming Opportunities on Injective
Rebates can also encourage new development activity on the Injective Chain itself.
Since rebates now exist, market makers can dynamically adjust their orders using bots in order to collect fees from the rebates. Many of these bots can potentially use funds from a pool of assets in order to carry out trades. Therefore, the Injective community can earn more yield by staking into these market making pools. Similar to Uniswap V3 works, if a market making bot uses Pool A to trade and earn rebates, a portion of those earned fees would go out to the users who staked into Pool A.
Similar to market making bots, arbitrage bots and traders can take advantage of potential price discrepancies to capture arbitrage opportunities. For instance, let’s assume John (an arbitrageur) can find that Axie is trading on a CEX for a cheaper price relative to the one on Injective. John can then purchase Axie on the CEX in order to sell it on Injective for a higher price while also earning the Injective trading rebate on top. So, it’s increased profits for John who also helps to normalize market prices on the Injective exchange itself with the arbitrage!
Both market making and arbitrage bots would be built on the Injective Chain so traders can take further advantage of these rebates. In turn, this would encourage new DApps to be built on Injective. Moving forward, grants and bounties will be issued to further incentivize developers to build these new bots on Injective.
Injective: Trade, Earn, Repeat
The Injective community has voted to create a new future in which anyone can earn more while trading on an entirely decentralized exchange.
Institutions and retail traders alike on Injective as they take advantage of new yield farming, arbitrage and market making opportunities. While doing so users will be helping to bring more liquidity to Injective while tightening spreads across market pairs.
Give it a go yourself and try trading Axie on Injective. Not only will you have near-zero fees but you will also earn for orders that you post for market making.
Join the Injective community on Discord and let us know what you think!
Injective is a custom interoperable layer one protocol for building powerful exchange, DeFi, derivatives & Web3 applications. Injective was created using the Cosmos SDK and is able to achieve instant transaction finality while sustaining lightning fast speeds. INJ is the native deflationary scarce asset that powers the Injective Protocol and its rapidly growing ecosystem. Injective is incubated by Binance and is backed by Pantera Capital.