Incentive Marketplace

Proof-of-Liquidity (PoL) enables protocols to bid for validator $BGT emissions to Reward Vaults using whitelisted incentive tokens. In doing so, protocols attract users to their protocol with $BGT rewards.

In a nutshell, here's how Incentives work:

1. A protocol sets an incentive rate for their reward vault (e.g., 10 protocol tokens per 1 $BGT)
2. When a validator directs $BGT emissions to this vault, they receive the corresponding amount of Incentives (e.g. 10 protocol tokens for directing 1 $BGT)
3. Validators can take a commission on these Incentives before distributing the remainder to their $BGT delegators
4. The amount of $BGT a validator can direct (and thus Incentives they can earn) depends on their delegation weight

Incentive Marketplace Operations

Token managers are the only ones entitled to 1) add incentive tokens and 2) control incentive parameters on a Reward Vault. The key entrypoint is the addIncentive function on the Reward Vault contract:

function addIncentive(address token, uint256 amount, uint256 incentiveRate) external;

Rate Adjustments

Each time incentives are added to a Reward Vault, the manager sets the rate (r) for the next distribution (until $BGT is depleted).

Example: Setting rate r=10 means:

• 10 protocol tokens exchanged per 1 $BGT
• 1000 incentive tokens deposited enables 100 $BGT worth of emissions flowing to vault

Rate modifications follow these rules:

1. Empty vault: Can update to any rate above the minimum

   $$r\ge r_{min}$$

2. Non-empty vault: Can only increase rate

   $$r^{\ast }>r$$

The rate cannot be decreased until vault incentives deplete (reverting to scenario #1)

Parameters

Parameter	Description
p	Incentive rate - Protocol tokens given per BGT
minIncentiveRate	Minimum allowed exchange rate between protocol token and BGT
p*	New incentive rate (when updating)

Distribution Flow

1. Validator emits $BGT to protocol vault
2. Validator receives (r × $BGT) protocol token incentives
3. Validator expected to share portion of incentives with delegates (this will be an on-chain operation in the future)