Proposal: Not Distribute Trading Mining Rewards to Wash Trading Bot in Epoch 0

Similar to epoch 0 in dydx, wash traders were present to pump volume up to ridiculous levels prior to closure on MCDEX. Now, I don’t think we should sniff every wash trader because it will be logistically difficult and cumbersome, but we should do so when obvious wash trading occurs, especially on such large and obvious case. Otherwise it would significantly hurt the spirit of fair and decentralisation values, pushing a large amount of MCB to for-profit actors that would harm the long term value of MCB.

Now, let me bring your attention to a specific timeframe:

During the last hour prior to the end of Epoch 0, and in this case, on the ETH-BUSD pair there were activity that we should consider as ‘wash’ and remove them from receiving eligible rewards. I hope you would hear my case and inform me if it is wrong. As you can see in the graph above, there is unusual volume traded despite only 18 unique addresses who traded during the time period.

Firstly: The timing. It was no coincidence that specific addresses decided to trade at this particular hour. It was the final hour of the first epoch. I don’t think we can determine such trading activity is in line with normal trading because the volatility and volume of ETH traded on CEX during this hour was no different from the prevailing or succeeding hours.

Secondly: 2 pairs of address both have very similar fee generated. Of the 18 accounts that traded during this hour, only both pairs had such similar trading fees, with delta percentages of only 0.05%. No other address have such similar deltas. The closeness of the trading fee will denote the closeness of the trading VOLUME as well. This means that during this hour long period, both pairs of address have VERY similar volumes traded.

Thirdly: Now in terms of trading observation, both pairs utilise different strategies.
(A) For the yellow and pink pairs, long and shorts from each respective pair were opened at very close times apart, with the SAME notional. Few minutes later, both pairs were then closed, again, at very close times apart, SAME notional as well. They racked up $4.4mil+ in volume.

(B) For the blue and green pairs, this one is interesting. A long and a short is opened one address at the same time. Few minutes later, this address will close this position, while the other address will open a long / short with a Different notional. This happens several times over the hour. Over $600m+ of volume was racked up from this two address, constituting more than 90% of the volume during this HOUR. Now, i only investigated for the hour prior to end of epoch 0, but it highly suggest they also faked volume for the DAY prior to the end of epoch 0, around the same time as well. This is serious as it constitutes to almost 50% of the volume for the ETH-BUSD pair over 1 WEEK, which is HALF an epoch. This is Massive. I don’t think it is fair to distribute a LARGE proportion of the MCB rewards to a single sole individuals / EOA. I have strong suspicions that they also manipulated the BTC-BUSD pair as well in similar fashion.

Proposal: Look, its hard to deal with every wash trader that comes along the team’s way. There will always be actors looking to game the system. It isnt worth the effort when it doesnt significantly harm the system of fair distribution. I don’t want to penalise the pink and yellow addresses because while it is obvious, the material impact is not large. For the blue and green addresses however, which are likely bots (as they utilise a smart contract to trade and not directly via the UI), we should penalise them and not distribute them rewards. We will be distributing Too Much rewards to a concentrated individual where I feel there is material impact. I hope @jie and @jean1 , can make an exception to this bot because it is harming the MCDEX protocol so early on.

谢谢

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Good research done!

It looks like a clear and obvious effort to game the system.

Its really to the benefit of the smaller member that we remove rewards for this user.

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@jie i saw what you said in the other thread. I agree we can define rules that can be made effective from epoch 2. But this is different case - clearly there is a magnitude of wash-trading that is so large that action needs to be taken prior to that. The blue and green address above fits such criteria, I hope you can see the logic in this. I feel the community will also back me up on this to isolate this EOA. The rewards should be voided for them.

good work. as one of the larger traders/stakers during Epoch 0 this last hour wash trading had a large impact on my rewards. if the team doesn’t exclude the wash trades (like what DYDX did), a big part of the community that participated in Epoch 0 will definitely lose faith. the team has done well since the start of MCDEX, why lose the goodwill now?

will stop trading in future Epochs should the team not take any action. it’s just not worth the risk - aka paying high fees/slippage to trade on MCDEX when the MCB subsidies can be gamed in the last hour and put most of the community in the red (after fees).

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Good job rune20! Well done research!

A judge said he could not use words to describe pornography but “I know it when I see it.”

The user may not know the standard definition for wash trading, but we all know it when we see it.

To build a great project or to make someone a short term money maker, that’s a test to the team.

why would anyone pay $250k in fees? this is clearly one of the team member

The fee is paid to the DAO and LP. will they still have the motivation to do that?

Why not? the benefits outweigh the cost. as long that holds true, it doesnt matter if paying $250k or $10million in fees.

Thank you rune20! Evidence in the proposal for last hour wash trading is clear enough. We are all waiting for team’s action to do the right thing, to restore the lost faith in the community.

@aimbot69 @Trigger Glad to see you two here, from my proposal! @betel_one in tg chat also seems to have switched camp after the last hour. We all traders should be fighting the one wash trading bot that is stealing from all of us.

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No matter who it is, he is so certainly that his fee in would get him MCBs out, or in other words, his scores will be included.

All the more to void it right? If the team can turn a blind eye to such blantant wash on such a large scale, I would be more worried that it points to a greater issue (e.g. done by a team member).

I agree with your proposal that we need to take measures, and that decentralization does not mean letting evil go unchecked.

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Yeah it’s definitely wash trading. we should avoid it in the game.

Just that one more thing to notice, this address is a large holder of MCB, staking 80k MCB. I don’t think he will dump hard on himself.
Just worried that if he doesn’t get the reward, he will act aggressively and dump what he already staked. that would be horrible.

I’m not supporting wash trading either. suggesting makes rules for the following. but for this epoch, be careful with that whale.

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Team may address on this.

It’s a game of cost & benefits. Now everyone is paying more to get reward. This whale staker paid a lot. so I assume he will do the calculation when dumping. If excluded him, those who get reward with low cost will dump hard IMO. The worst thing I can imagine is the price dump since my token will lock for a while

First making judgment solely on the likelihood of who is going dump is wrong. It’s turning a blind eye to the fact who is doing evil here. If team is concerned about dump, then add a vesting period for all rewards. Simple fix.

Second, even go by your logic, the bot paid less fee to MCB ratio than most of real traders (see details in my proposal), so your argument is false.

So to the bot, this is a direct fee to MCB rewards exchange .

Roughly it looks like this: MCBs = Fee(wash trading incurred) * multiplier

In this case, bot has no reason to stop wash trading until multiplier is <= 1

Real trading involves risk to capital. Statistically you can’t beat the market with the fees paid, that’s how AMM model (or other forms of MM) can make profit in long run.

not a single comment from the team? it seems outcome is already decided. No transparency whatsoever, i’d dump this shit but unfortunately they are staked and locked but i still have some 4-5k left ready to dump

There is couple more days till the distribution of the MCB tokens for epoch 0. I want to give the team benefit of the doubt that they are seriously considering my proposal before making any hasty decision. The data is all on-chain and for them to analyze. I hope I am not disappointed by what the community seems to be agreeing with me on.

Hey Maczombies,

First of all, thank you all for your contribution to the community and ecosystem!

Community members have recently shed some light that several addresses were involved with potential wash trading behaviors just as Epoch 0 ended. After we noticed it, the team started to investigate and provide solutions for dealing with such behaviors.

  1. We discourage wash trading firmly, but we also realized that there were loopholes in Epoch 0 rules that were previously approved by the community. There weren’t time-weighted factors in the Trading Mining V2 Formula, and this eventually led to some users utilizing this loophole to wait until the end of the epoch to boost their trader scores.

In order to make corrections and prevent similar incidents from taking place in future epochs, we are proposing to improve trading rules by adding anti-washing mechanisms. Additionally, we are also working on new setups that can help to protect the traders’ benefits. We also welcome all MCDEX users to take an active role in the community votes and the conversations that help define our future path every day in our community channels.

  1. Should we exclude these addresses when distributing rewards? Although these addresses utilized the loopholes, the activities still happened within the Epoch 0 rules that were previously approved by the community. As a crypto native team that abides by “code is law,” we cannot simply go back to change what has happened due to a loophole in approved rules; if so, we believe this will lead to greater governance risks. What we should do is to learn from this incident and improve the rules to prevent similar issues from happening again in the future.

  2. We have also noticed some assumptions that those two addresses were from the team members.

We can firmly guarantee that the addresses are not from any team members, and please feel free to track the addresses since all data is on-chain and transparent.

Since its inception, MCDEX has been evolving in the decentralized derivatives exchange sector for more than two years, and the team has proved that we are here to build a fully permissionless DEX for the long-term vision. Therefore, there is no motivation and reasons for us to do such things that deviate from our vision. The product and rules are not perfect at Day 1, and we believe we can continuously improve the product together!

how much mcb did the wash trader gave you? I bet its a a lot. Have fun, enjoy some chinese noodles

@jean1 @jie @tc-mcdex, take a look at the list of people in support of this proposal here. Many of them are your earlier adopters, invested in the project since earlier days of MCDEX.

I know the Bot owner’s mainnet addresses (0xA5828, 0x88f29) were involved since early liquidity mining round XIA, and being a whale probably invested more than rest of us, but that doesn’t mean we should not be treated as equal as members in this community.

Should we exclude these addresses when distributing rewards? Although these addresses utilized the loopholes, the activities still happened within the Epoch 0 rules that were previously approved by the community. As a crypto native team that abides by “code is law,” we cannot simply go back to change what has happened due to a loophole in approved rules; if so, we believe this will lead to greater governance risks. What we should do is to learn from this incident and improve the rules to prevent similar issues from happening again in the future.

I think your “code is law” argument is weak, and untenable when contested.

  1. “code is law” can be applied to almost any DEFI exploits. We would still be on ETC and not see the success of Ethereum network today, if Vitalik Buterin agrees with your point of view.

  2. When this happens to your team’s funds, maybe in a less severe degree, you may apply “code is law” argument and it’s your team’s discretion to allow it. But this time is different, the bot is stealing from the rewards pool shared with all the rest of real MCDEX users. Do you have the consensus of the community to approve it?

    Why would you not open a snapshot to let community vote for this choice? I think the consensus is overwhelmingly in support of this proposal.

  3. Many counter examples can be found in space, dydx disallowed wash trader’s rewards in the midst of their mining epoch draws a direct parallel in comparison.