zkSync Contest Goes Full Degen Reaching $112 bn Trading Volume!

Our latest testnet trading contest on zkSync produced a marked increase in trading volume compared to the first one on Arbitrum. Other metrics are more in line: the contest fared better in terms of active users and trades recorded.

Innovating on the format

We changed a few things coming into the second contest. Most notably, the team leaderboard had been replaced by a referral program. It included prizes for top 30 referrers as well as a 10% bonus for all referred traders who ended up winning prizes in the individual leaderboard. The leaderboard rewarded top 150 individual traders by cumulative balance. On top of this, top referrers stand to receive Marginly Rocket NFTs for extra future allocation.

The second contest turned out to be even crazier than the first one in terms of results. This time, the top trader sits at $248 mln profit while 150th boasts $29k in earnings. Given a starting portfolio value of $10k this means that +200% in 2 weeks was the minimum requirement to get into the prize spots on the leaderboard. How is this possible? Keep reading to find out!

The top 150 traders stand to collect the impressive $40k in airdrop allocations ranging from $6.9k to $69. Additional allocations await the top 30 referrers who are eligible for prizes between $1k and $100. Moreover, those who registered via referral links and found themselves in the top 150 traders get an additional 10% in rewards as explained in our referral program article.

The memecoin effect

The three assets chosen for the contest were ETH, WBTC and BITCOIN. One of these is a memecoin while the other two are blue chip assets. Unsurprisingly BITCOIN proved much more volatile over the duration of the contest leading to the vast majority of trades being done in this pool: $110 bn out of $112 bn cumulative volume with $34bn and $62 bn recorded in the last two days of the contest.

This has happened due to a number of factors. It is important to understand that the testnet trading contest differs from real life trading in two significant ways. Namely there is unlimited liquidity and no slippage. This combined with a significant memecoin price decline opened an easy path to victory: take out max leverage and short the falling memecoin. This allowed traders to make exponential gains.

By the end of the contest top traders had accumulated huge portfolios that allowed them to drain the pool entirely. Huge volume trading introduced multiple imbalances to the pool along the way, providing valuable information on behavior of the system in the imbalance mode. This information will help our engineers design a failsafe self-reinforcing system for smooth real market operations.

Daily user activity chart confirms the findings based on trading volume:

There is a clear pattern here with user activity being much higher in the BITCOIN pool in the middle part of the contest from day 3 to day 11. This correlates with the fact that BITCOIN saw the vast majority of trading volume and price volatility during the entire contest duration. Most importantly, top traders mainly shorted BITCOIN making the trading volume distribution even more skewed.

The winning strategy

As we already described, the winning strategy was simple this time around: it was to short the rapidly falling BITCOIN. An unexpected limitation top traders faced was lack of liquidity in the pool because user positions scaled so fast they depleted liquidity in the last days of the contest. The team seized this opportunity to explore the limits of degen and added $1B + $1B to the pool which led to crazy volumes in the final two days of the contest. Here’s what top trader’s trading volume looked like by day and BITCOIN price:

We can see that the spike in volume occurred in the final days of the contest when liquidity was added to the depleted BITCOIN pool. High price volatility is also conducive to trade volume increase. Days 1–3 do not feature in this chart because of the scale: contestants were given $10k to begin with and ended up trading tens of billions. Trading volume was at 0 for days 9 and 10 due to lack of liquidity in the BITCOIN pool.

Trading tips and insights

We’ve gathered some feedback from our top contestants. One of the techniques they were using is simple yet effective: utilizing DEX screener to look for large trades in pairs with assets involved in the contest to get an idea of where price is going to move next.

Another tip is to approve maximum spending so that spending limits don’t get in the way of trading. This means that our contests remain accessible to non-professionals, and enthusiastic community members can still win top prizes.

However, for the next round we will amend our Uniswap mock to account for slippage and set some reasonable price limits to better emulate real market conditions. This should make the next contest more realistic and challenging for users.

Looking ahead

The team continues to improve Marginly constantly as we gear up for yet another contest and coming mainnet launch. Interfaces and the desktop app are getting some love, while the backend team is busy with the ongoing Quantstamp audit. Expect plenty of new features for trading ease and convenience. These will be highlighted separately in future announcements. Our goal is to finish testnet with a bang and go into mainnet on the back of a successful campaign and with a full-featured V1 of the protocol.

While there are no specifics confirmed yet regarding the third testnet contest, rest assured that it will be announced on our socials as soon as we confirm details. We would like to thank everyone who joined our community and took part in the trading contests. The Marginly testnet has been bustling with activity helping us improve the protocol and prepare for mainnet.

Get in touch on our socials or just follow along with the updates. There’s plenty of exciting announcements right around the corner!