How to Earn Drift Points
You can earn Drift Points on Drift Protocol by providing liquidity and engaging in perpetuals and spot trading, along with providing Backstop AMM Liquidity, where you act as a counterparty to other Drift traders.
Key Takeaways
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Drift Protocol is an open-source decentralized exchange built on Solana offering transparent and non-custodial trading products.
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This year, Drift Protocol raised $23.50 million in a Series A funding round led by Polychain Capital and other notable investors.
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The protocol is rewarding users with Drift Points for participating on the platform through various trading activities.
Drift Protocol is a decentralized exchange (DEX) that is open-source and built on the Solana blockchain. It offers transparent and non-custodial trading for users by ensuring all deposits, withdrawals, and trades are executed on-chain. This provides users with full custody of their assets and peer-to-peer trading through its integration with the Phantom wallet. Based on information from DefiLlama, Drift Protocol has a TVL of almost $340 million. According to information from Drift Protocol, it also has a cumulative trading volume of $18.98 billion and over 169,000 users.
The DEX platform has various trading options including spot trading, perpetuals trading, borrowing, lending, staking, and providing liquidity. On top of that, Drift Protocol provides features like automatic yield on deposits and leveraged staking with annual yields up to 10%. Drift Protocol employs liquidity mechanisms such as Just-in-Time (JIT) Auction Liquidity, Limit Orderbook Liquidity, and Automated Market Maker (AMM) Liquidity in order to enhance trading efficiency and liquidity provision.
Users who provide liquidity are referred to as Market Makers and can use the Just-in-Time (JIT) Auction mechanism to facilitate liquidity provision to users who take liquidity from the exchange, also known as Takers. Orders are routed through the Just-in-Time as a five seconds Dutch auction where market makers compete to submit quotes to the user within the time period.
Drift Protocol is the first perpetual swap exchange to leverage a Dynamic AMM (DAMM) which introduces repegging and adjustable k mechanisms to recalibrate liquidity in a trading pool based on demand. As a result, DAMMs are more flexible, leading to better capital efficiency and reduced slippage.
In January this year, Drift Protocol successfully raised $23.50 million in a Series A funding round led by Polychain Capital and notable investors including Solana founders Anatoly Yakovenko and Raj Gokal, Ethereal Ventures, Bixin Ventures, and Folius Ventures. Previously in 2021, the protocol raised $3.80 million in a seed funding round led by Multicoin Capital and Jump Capital.
Drift Protocol is focused on providing a world class trading experience which includes improving orderbook liquidity. As part of this effort, Drift Points are rewarded to Market Makers and Liquidity Providers as incentives to increase liquidity on the exchange. Users can earn points when they provide liquidity on the order book, participate in Backstop AMM Liquidity (BAL), and provide perpetuals and spot trading volume. With Drift Protocol positioning itself to become one of the largest DEXs on Solana, now is a great time to start earning Drift Points!
Do note, at the time of writing, Drift Protocol has not made an official announcement for a token airdrop. Participating in the Drift Points program by following the steps below does not guarantee a token airdrop.
Steps 1: Connect to Drift
Visit https://app.drift.trade/ and Connect your wallet.
You will need to agree to the Drift Terms and Conditions before proceeding to connect your wallet.
Choose your wallet to connect to the protocol. In this example, we are using the Phantom wallet.
Do note that you will need a minimum amount of 0.06134784 SOL to cover account creation. If you do not have enough, you can choose to deposit SOL tokens in this step.
Once you have enough SOL tokens, you can create your account. This will cost 0.0413 SOL and you need to acknowledge the below terms before the connection is completed.
Step 2: Adjust your Settings
At the bottom of your screen, click the toggle to engage Pro mode. This will display the Orderbook.
You can also select Margin Trading Disabled which is indicated with the left arrow in the image above. This will let you set your margin and leverage settings in the pop-up window. If you prefer the safest option, you can opt for None under max leverage while the highest and most aggressive option is 15x.
Step 3: Provide Liquidity and Perform Perpetuals and Spot Trading
Under Trade in your top menu, you can choose between Perpetuals and Spot.
Our first example will be with Perpetuals. Here you can choose to place Long or Short orders, input the limit price, and the size of your order. Place your limit order as close to the market price, in order to have it filled quickly.
A method to keep your order in the Orderbook for longer is with Oracle Limit orders. Under Order Type select Oracle Limit and you can then input the oracle price offset.
The offset represents the price above or below the current Oracle Price you want. Therefore, if your order has an offset of 1, you want to be filled at 1 dollar above the oracle price. For a short order, you typically want to use a positive offset and vice versa for long orders.
Do note that these orders will be filled at any time the offset is met as long as the account collateral is sufficient.
Next up is Spot trading which orders can be placed similarly to Perpetuals by inputting your limit price, and the size of your order.
Again, you can choose to perform Oracle Limit orders just like with Perpetuals.
Step 4: Provide Backstop AMM Liquidity (BAL) – Optional
Providing Backstop AMM Liquidity brings on additional risks and we recommend that you thoroughly consider if you are comfortable taking these on.
Click More for the dropdown menu and select BAL. As shown in the image, this is considered an Advanced activity.
There are featured markets which are comprised of SOL, ETH, and BTC.
There are also low liquidity markets available. As shown in the image below, the 30 day performance can vary greatly from one another.
After selecting your preferred market, click Add Liquidity. In this example, we are adding to the SOL-PERP market.
Before you can proceed, do thoroughly read and understand the short intro to BAL provided by Drift. By agreeing to provide liquidity to BAL, you will essentially be trading against other Drift traders. Therefore, if Drift traders on a specific perpetual market, such as SOL-PERP, lose money, your BAL position will be profitable. However, this applies vice versa, hence the heightened risks involved.
After that, accept the terms to continue.
You can choose to create a BAL subaccount or use an existing account. We are using our existing Main Account.
Enter the amount of collateral you want to contribute, acknowledge that you are aware that Drift can open positions up to 5x, and confirm the transaction.
Sidenote
There is a weekly allocation of 2 million points that are distributed between Makers and Takers. The most recent update from Drift Protocol outlines that 750 thousand points are for Taker activity while 1.25 million points are for Maker activity. As more users compete for these points, distributions will be spread wider and result in fewer points per user.
Conclusion
Drift Protocol is providing a decentralized exchange platform for users to perform various trading options including spot trading, perpetuals trading, borrowing, lending, staking, and providing liquidity on the Solana blockchain. With the introduction of Drift Points earlier this year, the protocol aims to incentivize users to provide liquidity and increase trading activity. Many are looking forward to the platform’s continued growth while also rewarding users.
As mentioned above, an airdrop has not been confirmed by Drift Protocol and following the steps in this guide does not guarantee an airdrop allocation.
Stephanie has a keen interest in breaking down complex topics into beginner-friendly pieces. She has been in the crypto space since 2020 and wants to continue contributing to the demystification of the crypto industry to a broader audience.
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