💸Distribution Types

Merkl different distribution types

Merkl supports various distribution methods, allowing campaign creators to choose how rewards are allocated based on participant activity and liquidity contributions.

📈 Variable APR Campaigns

In Variable APR campaigns, rewards are distributed proportionally based on time-weighted liquidity within the eligibility pool.

This is the most classical form of campaign.

Key Characteristics

• Constant reward rate for campaign creators: A fixed amount of tokens is distributed per second, regardless of liquidity changes.

• Variable rewards for participants: As more users join, rewards per user decrease (like slicing a fixed-size pizza into more pieces).

• Prefunded & fixed duration: The full campaign budget is deposited upfront, and the campaign runs for a set time.

Example: Liquidity Pool Incentives

Imagine an incentive program targeting liquidity in a pool:

• Day Start: Two LPs each contribute $100 (50%/50%).

• Midday: A third LP adds $200 (total pool: $400).

As a result:

• The first two LPs each get 50 tokens for their contribution in the first half of the day, then 25 tokens each for the second half.

• The third LP, who contributed $200 in the second half, receives 50% of the rewards for that period, which is 50 tokens.

Result: Early participants earn more rewards before new LPs enter, while later participants dilute the total yield for others.

Anti DoS Measures

To prevent excessive computational load and spam, Merkl applies an anti-DoS filter to Variable APR campaigns.

• Users earning less than 0.000001% of total campaign rewards per engine run are excluded.

• This prevents micro-distributions that could disrupt system performance.

Example: Uniswap V2 Liquidity Pool Campaign

• Campaign Duration: 14 days

• Total Value Locked (TVL): $1,000,000 (on Arbitrum)

• Merkl Engine Run Frequency: Every 4 hours (6 times per day)

For this campaign:

• Each reward distribution releases 1/84th of the total rewards (1 / (14 days × 6 runs per day)).

• If a user provides $10 of liquidity, they represent 1/100,000th (0.001%) of the total TVL ($10 / $1,000,000).

• Per engine run, their potential reward would be 1/8,400,000th (0.000012%) of the total rewards (1/100,000 × 1/84).

• Since this is above the 1/100,000,000th (0.000001%) threshold, the reward would be distributed.

However, if the TVL increased to $20,000,000, the same user’s share would drop to 1/2,000,000th (0.00005%), and their per-run reward would be 1/16,800,000th (0.0000006%), below the threshold. As a result, they would not receive rewards.

🔒 Fixed APR campaigns

In Fixed APR campaigns, users earn a predefined amount of rewards per unit of liquidity at a set rate.

Key Characteristics

• Constant reward rate per users: Users receive a fixed APR regardless of total liquidity.

• Variable cost for campaign creators: As more users join, the overall cost increases, but individual earnings remain stable.

• Budget-constrained: Campaigns end when funds are depleted or when the scheduled duration expires. If a campaign runs out of funds before its end date, rewards are split proportionally (like a Variable APR campaign) in the final run. If the campaign ends early, unused rewards are returned to the campaign creator.

Example: Fixed APR Campaign

A campaign offers $1 in rewards per $100 in liquidity per day.

• If TVL = $100, the cost is $1 per day.

• If TVL = $100 million, the cost for the campaign creator scales to $1M per day.

🎯 The Special Case of Points

This distribution method is widely used in point systems. Traditionally in points systems, users earn points for completing a specific action (like providing $1 of liquidity in a pool for a day), regardless of how many other people did.

The main difference here in fixed APR campaigns for points is that when distributing points, the budget is effectively unlimited; and so campaign creators can allocate as many points as they want, allowing the campaign to last indefinitely.

Coming Soon: Max APR campaigns

These campaigns are variable APR campaigns which become fixed APR campaigns when they start distributing too much.

⚠️ Important Note

While Merkl distribution types vary in how rewards accrue and distribute over time—whether linearly or non-linearly—one key factor remains the same:

• New rewards only become claimable after a Merkle root update.

• These updates occur at fixed intervals, which vary by chain (typically every 4 to 12 hours, with an average of 8 hours).

Example in a Variable APR campaign:

• You create a 14-day campaign with a $42,000 budget.

• Merkle root updates occur every 8 hours (3 times per day).

• Total updates during the campaign: 42 runs (14 days × 3 runs/day).

• Rewards per update:

  • $42,000 ÷ 42 runs = $1,000 per run.

  • Users can claim $1,000 from the allocated rewards at each update.

Although rewards are continuously calculated, they only become available for claiming when the Merkle root is updated onchain.