Surplus & Free Streams

TL;DR

  • Surplus = the extra value a trader gets when our solver beats their minOut (and/or captures MEV that would’ve hurt them).

  • We split surplus automatically into three free streams—no staking or farming required to earn the first one:

    1. Trader Rebate (instant) — cashback to the trader

    2. LP Flow Earnings — a stream to LPs of the pools actually used

    3. Locker Stream — a stream to stXPGN / veFlow lockers

  • These streams are independent of emissions and run every time orders settle through Paragon Flow (intents + batch auctions).

What is “Surplus”?

When a user signs an intent, they provide minOut (their worst acceptable price). Our solver batch-routes orders across Paragon and external venues, then returns a settlement that often achieves actualOut > minOut and/or avoids MEV loss.

We define Surplus as:

Surplus=(actualOut−minOut)×markPrice+MEV_saved_value\textbf{Surplus} = (\text{actualOut} - \text{minOut}) \times \text{markPrice} \quad + \quad \text{MEV\_saved\_value}Surplus=(actualOut−minOut)×markPrice+MEV_saved_value

  • Price Improvement: better pathing than a naïve router (multi-hop, crossing orders, netting flows).

  • MEV Saved: batch auctions reduce sandwich/front-run leakage; the solver also backruns its own flow to bring value back on-chain.

  • Gas-normalized: the system accounts for gas costs used to secure/execute the settlement.

If Surplus ≤ 0, there’s no stream (the trade still executes if it meets minOut).

Default Split (governance-tunable)

After a tiny protocol take (e.g., 5%), the net surplus is split:

  • 60% — Trader Rebate (instant)

  • 30% — LP Flow Earnings (claimable by LPs of the used hops, pro-rata)

  • 10% — Locker Stream (periodic drip to stXPGN / veFlow voters)

The exact percentages are parameters the DAO can update. The aim is to reward the maker side (LPs) and align lockers with order-flow quality—without taxing traders.

The Three Free Streams

1) Trader Rebate (Instant Cashback)

  • Credited at settlement into a TraderRebateVault.

  • One-click claim in the swap UI, or auto-compound (optional):

    • Auto-stake to stXPGN for compounding governance yield, or

    • Leave as XPGN to keep liquidity.

  • Traders see “You saved X — claim now” after each swap.

Why it matters: visible, immediate value → stickier order-flow and a real “best execution” narrative.

2) LP Flow Earnings (Utilization-Based)

  • Credited to an LPRebateVault by pool and block for the pools used in the winning path.

  • LPs claim pro-rata by liquidity actually touched (based on pool snapshots around the settlement block), not just by TVL.

  • Combines naturally with fees and farm APR—it’s a third rail of earnings that rewards utilized liquidity.

Why it matters: emissions and fees alone don’t capture execution quality; flow earnings do, and they’re non-dilutive.

3) Locker Stream (stXPGN / veFlow)

  • A portion of surplus continuously accrues to lockers.

  • veFlow votes can direct the weight of which routes/pairs share more of the locker stream (bribes are possible in the Order-Flow Market).

  • Claimable in XPGN; auto-stake to stXPGN toggle recommended.

Why it matters: lockers earn from execution quality & demand, not only emissions. It’s a durable yield source as volumes grow.

Example (Walk-through)

  • User signs intent: sell 10,000 USDT for XPGN with minOut = 8,900 XPGN.

  • Solver batches & settles at actualOut = 9,000 XPGN (price improvement = 100 XPGN).

  • MEV saved worth $20. Mark XPGN ≈ $1 for simplicity.

  • Gross surplus ≈ $100 + $20 = $120.

  • Protocol fee 5% → $6. Net surplus = $114.

Split:

  • Trader (60%) → $68.40 instant rebate

  • LPs used (30%) → $34.20 to LPRebateVault (claimable by LPs of those hops)

  • Lockers (10%) → $11.40 to stXPGN/veFlow stream

UI & UX

  • Swap Preview: “Expected savings: ~0.28% → you keep ~60% instantly.”

  • Post-Trade Banner: “You saved $68.40. Claim or auto-stake to stXPGN.”

  • LP Dashboard: new Flow Earnings row (separate from fees & farm APR).

  • Lockers Page: Surplus Stream APR module + epoch claim.

Dev Notes (Integrators)

  • Events

    • SurplusCaptured(tradeId, gross, protocolCut, traderCut, lpCut, lockerCut)

    • LPFlowAccrued(pool, tradeId, amount)

    • TraderRebateCredited(user, tradeId, amount)

    • LockerStreamAccrued(epochId, amount)

  • Vaults

    • TraderRebateVault: instant balances + gasless permit/claim.

    • LPRebateVault: pool-keyed accrual; snapshoted distribution to LP token holders at settlement block.

    • LockerVault: epoch-based distribution to veFlow/stXPGN lockers.

  • Math

    • Computation done in FlowSettlement with on-chain checks for minOut, signature validity, and solver bounds.

    • Pricing uses TWAP/oracle guards (see Pricing & Oracles) to prevent wash surplus.

    • Negative surplus → no stream; trade executes if minOut met.

Governance Switches

  • Percentages (trader / LP / locker)

  • Protocol fee on surplus

  • Eligible venues (which pools/DEXs can be used)

  • Minimum per-trade surplus to stream (dust filter)

  • Epoch length for lockers, snapshot lookback windows for LPs

  • Auto-stake defaults (opt-in/out)

Limits & Safety

  • Surplus spoofing protection:

    • Oracle/TWAP bound checks; reject pathological routes.

    • Batch auction netting must improve aggregate value.

  • Paused mode: streams can pause without disabling basic swaps.

  • Cap per trade/epoch: configurable to avoid pathological distributions.

Testnet (Next 3–4 Weeks)

  • Enabled: full Trader Rebate flow with live claims and swap banner.

  • Enabled: LP Flow Earnings accrual + per-pool claim page (simple snapshot model).

  • Enabled: Locker Stream accrual to stXPGN; weekly epoch claims.

  • Observability: Surplus events shown in “BestEx Leaderboard” + per-pool analytics.

Why “Free Streams”?

Because they’re earned by activity, not by emissions dilution:

  • Traders earn for showing up (best execution).

  • LPs earn for being used, not just being parked.

  • Lockers earn from demand/quality, not just inflation.

This converts execution excellence into a perpetual, sustainable yield engine for the entire ecosystem.

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