  Liquidity providers are currently incentivised to provide liquidity through
the LP Incentives Programme on dYdX. Based on the various parameters -
makerVolume, depths and spreads, they are rewarded accordingly based on their
activities. Given the maturity of the BTC and ETH markets, alongside other
altcoins which enjoy a consistent amount of liquidity, this paper aims to
update the formula to encourage more active and efficient liquidity, improving
the overall trading experience. In this research, I begin by providing a basic
understanding of spread management, before introducing the methodology with the
various metrics and conditions. This includes gathering orderbooks on a minute
interval and reconstructing the depths based on historical trades to establish
an upper bound. I end off by providing recommendations to update the maxSpread
parameter and alternative mechanisms/solutions to improve the existing market
structures.
