If you've explored Merkl — through our app, docs, or social — you've likely come across the term "forwarders" or "reward forwarders."
Forwarders are a unique and powerful feature of the Merkl platform, ensuring rewards are distributed fairly and efficiently, both for campaign creators and end users.
But what exactly are reward forwarders, and why do they matter?
The challenge: in DeFi, wallets don’t always hold the funds
Incentives are all about impact — you want to distribute the right amount of tokens to the right people to drive behavior and maximize return on investment.
But in DeFi, users rarely keep their funds directly in their wallets. Instead, assets are often deposited into smart contracts — for staking, lending, or delegated liquidity management.
Reward distribution to token owners then becomes a challenge.
If your protocol or chain is distributing incentives based on who appears to hold assets, you risk misallocating rewards.
For example, imagine a newly launched blockchain looking to attract liquidity to a Uniswap pool in order to facilitate swaps from other tokens into its native token. To do this, it distributes rewards to users who provide assets to the pool. But what if the majority of the liquidity is deposited by an Automated Liquidity Manager (a protocol that automatically manages a user's liquidity, aka ALMs)? Onchain, it’s the ALM smart contract that appears as the liquidity provider — so it should receive the rewards.
In reality, though, that capital belongs to dozens or even hundreds of individual users who entrusted their funds to the ALM to automate funds management. Without a way to trace the original source of the liquidity, those users are excluded. The incentives are misallocated, with the ALM capturing all the rewards. And while the ALM could try to redistribute them to its users, doing so adds significant complexity and overhead.
This problem isn’t rare — it’s the norm in modern DeFi. From staking vaults to ALMs, funds flow through layers of contracts.
The challenge is recognizing who should be rewarded, not just where the funds currently are.
Rewarding the real owners, not the intermediaries
Reward forwarders solve this. When a campaign is created on Merkl, our engine can look beyond the surface and trace back the original owner of the funds — so that incentives are distributed to the real users, not just the smart contracts holding the tokens.
For example, imagine a campaign that incentivizes holders of USDA. Users who stake their USDA receive stUSD in return. Under normal conditions, these users would no longer be eligible for rewards—after all, they no longer hold USDA directly in their wallet. But with forwarding enabled, Merkl recognizes stUSD holders as USDA holders and distributes rewards accordingly.
And it doesn’t stop there!
In many real-world scenarios, users don’t just stop at one layer of abstraction. That stUSD might be deposited into yet another contract, which issues a new token in return — only for that token to be staked again in a third protocol, and so on.
Merkl is designed to handle these complex paths. Our engine can trace ownership through multiple layers — no matter how deep the structure goes.
We’ve already tracked ownership across more than seven layers of contracts to identify the true origin of funds and ensure the rightful user receives their rewards!
This is what makes Merkl campaigns uniquely powerful: the ability to ensure fairness and precise reward distribution, even when assets are deeply nested in complex DeFi structures.
By ensuring rewards go to real users, Merkl enables higher campaign ROI for protocols launching incentive programs, while also simplifying campaign setup and creation. This allows protocols to focus on strategy rather than the complexities of correct reward distribution.
Conclusion
Reward forwarders are one of Merkl’s core innovations. They ensure that incentives are aligned with reality—not just what’s visible on-chain. For campaign creators, this means better targeting and ROI. For users, it means trust: knowing that no matter where your assets are deployed, your participation will be recognized and rewarded.
Incentivizing behavior in crypto isn’t just about distributing tokens—it’s about distributing them to the right people.
That’s what reward forwarders make possible — and that’s why protocols and chains trust Merkl to power their most complex campaigns.
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