Better Incentivize Quality Liquidity On The SDEX By Making A Simple Change To The Current Rewards Formula
Aquarius governance proposal 102 adjusts the SDEX rewards formula to concentrate incentives near the orderbook spread. The new SpreadWeight calculation distributes nearly all AQUA rewards within 2% of the best bid/ask, encouraging tighter spreads and higher-quality liquidity provision instead of passive offers far from market prices.
Proposal 102 adjusts Aquarius's SDEX rewards formula to better incentivize quality liquidity provision. The current approach spreads AQUA rewards across the entire orderbook, including passive offers far from market prices that are unlikely to execute. The new SpreadWeight calculation—0.5^(100x distance)—concentrates rewards within 2% of the spread, doubling the penalty for each percentage point away from market. This change avoids the downsides of a previously proposed hard 1.5% limit, which risked reward instability and enabled new exploits. Instead, the formula adjustment cleanly concentrates incentives: orders 1% from spread get half the rewards of orders at spread, orders 2% away get a quarter, and so on.
