Just dropped an analysis with @tnorm on the impact of @PolynomialFi's OP incentive program that ultimately led to the protocol's cumulative trading volume surpassing $3.8B 🧵

data @ scroll | prev. @boostxyz, messari | having the best day ever 

OP trading rewards on Synthetix, Kwenta, and Polynomial drove massive increases in usage metrics on the protocols.

We saw incentives lead to a 23x surge in volume but only a 2x in daily traders, indicating a massive increase in the presence of either power users or wash trading.

Incentives proved highly effective for Polynomial, but optimizing for actual usage is key. Creating an environment ripe for wash trading risks generates inorganic trading volume and has proved unsustainable.

Incentives proved highly effective for Polynomial, but optimizing for actual usage is key. Creating an environment ripe for wash trading risks generates inorganic trading volume and has proved unsustainable. https://twitter.com/hildobby_/status/1603763322012041217

Looking ahead, while a powerful way to drive growth, incentives require thoughtfulness to build sustainable ecosystems, not just short-term spikes. Future programs should optimize to balance growth incentives while discouraging exploitation.

Observing Polynomial's retention after incentives end will reveal the program's sustainability, but with intelligent design, programs can catalyze organic growth for emerging protocols.

Check out our full post on the forum here:

Check out our full post on the forum here: https://gov.optimism.io/t/incentive-impact-analysis-polynomial/6796

Key takeaways:
• Incentives can drive short-term spikes in usage; however, tapering and strict vesting could sustain activity further
• Wash trading remains an issue in trading incentive programs
• Incentives led to a 23x surge in trading volume but only doubled daily traders

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Thank you! And yes, feel free to use however you like!

Love your analysis by the way.

Thanks for sharing this.

If u don't mind, i will use your analysis in my next newsletter aout the Optimism superchain (@theoptimist),quoting you ofc

Don't hesitate to ping me here, on X or on optimism gov forum for your next research.

That will be really interesting for the community

Very interesting.

I also think the shift of trading volume between kwenta and polynomial has been
1) organized between the 2 protocols as kwenta has been radio silent during the 2nd half of the incentives program

2) driven by Polynomial airdrop (recent seed round + NFT received during the trading comp)