[ApeSwap] [DRAFT] [STIP - Round 1]

Archive Incentive Framework (Round 1)
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SECTION 1: APPLICANT INFORMATION

Applicant Name:

Julian, Boba, Adam

Project Name:

ApeSwap

Project Description:

ApeSwap is a DEX aggregator and bond provider. In an industry plagued by unsustainable and inflationary tokenomics, ApeSwap’s novel approach to DeFi solves two problems that all protocols currently face: how to source sustainable decentralized liquidity, and how to sustainably diversify treasury assets.

Leveraging our comprehensive suite of products and unique DeFi expertise, ApeSwap works closely with partner protocols to ensure their treasury and liquidity are set up for long-term success.

Team Members and Qualifications:

  • Scott: CEO / Head of Technology
  • Ignacio: Head of Product
  • Julian: Head of BD
  • Santiago: Head of Communications

Project Links:

Contact Information:

Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?:

Yes

SECTION 2: GRANT INFORMATION

Requested Grant Size:

1,250,000 ARB

Grant Breakdown:

The proposal suggests allocating 1,250,000 ARB tokens in two monthly installments of 625,000 ARB each. These tokens will be used to fund the sale of ARB bonds in order to further grow Arbitrum’s POL.

The incentive distribution is spread over a 60-day period (8 weeks), bifurcated into two “phases” of 30 days (4 weeks) each:

  • Phase 1

    • Bond Token: 625,000 ARB
    • Bond Vesting: 60 day linear

  • Phase 2

    • Bond Token: 625,000 ARB
    • Bond Vesting: 60 day linear

Assets raised through the bond sales will be automatically distributed back to Arbitrum DAO’s preferred wallet directly from the smart contract.

Funding Address:

0xd9d5930297F08181da4E2883863C463bF1cdC3Cb

Funding Address Characteristics:

A 3/6 multisig SAFE created to hold the 1.25M ARB.

Contract Address:

The full ARB allocation will be distributed through ApeSwap’s Bond contracts, which can be viewed here.

The specific contract address can’t be shared until the ARB bond contracts have been deployed.

SECTION 3: GRANT OBJECTIVES AND EXECUTION

ApeSwap intends to revolutionize liquidity provisioning, offering a superior alternative to short-term yield farming. We are committed to supporting protocols within the Arbitrum ecosystem, striving to create sustainable liquidity through our bonding solutions. Although our engagement on Arbitrum has been limited in the past, we aim to leverage this grant to enhance our involvement, facilitating Protocol-Owned Liquidity (POL) for projects on the Arbitrum Network. Through this initiative, we aspire to establish a robust footing for our bonding solutions, proving its efficacy and attracting more partners within the Arbitrum ecosystem.

Objectives:

Bonding Permanent Liquidity

We aim to create a pilot program that will utilize the ARB allocation to bolster Bonding Liquidity, demonstrating how to transition liquidity mining from an expenditure to an investment. This initiative will foster permanent liquidity on the Arbitrum Network, ensuring stability even during bear market conditions.

Closing the Liquidity Debt

We’ve coined the term ‘Liquidity Debt’ to depict the deficit in liquidity needed for a project to sustain larger trades, ensuring a reliable trading ecosystem. Through our Liquidity Health Dashboard, we shed light on decentralized liquidity health, a crucial yet often overlooked metric. Our analysis reveals a Liquidity Debt of $10.08M for ARB, which we aim to address to foster a secure trading environment.

Community Building and New Ecosystem Engagement

Our objective is to enhance the protocol community through responsible liquidity management, offering higher returns than traditional liquidity mining. Unlike short-term liquidity from profit-oriented miners, our model procures liquidity from dedicated supporters, cultivating a loyal and engaged backer base.

Objectives Bulleted out:

  • Utilize the grant of 1.25M ARB tokens to establish a pilot program to bond around $950k - $1M POL through a bond sale on ApeSwap.
  • Build LPs in the form of ARB-ETH on Camelot.
  • Establish a Dune dashboard for real-time tracking and share regular status updates with the DAO and community.
  • Target a 93% - 99% return on ARB through our proven approach, based on our historical data.
  • Ensure real-time transfer of raised POL to the specified Arbitrum DAO wallet via the Bond smart contract for enhanced transparency and security.
  • Post-pilot, present a detailed analysis to the DAO on liquidity depth enhancement and propose strategies for further reducing the Liquidity Debt.

Key Performance Indicators (KPIs):

The following KPIs are aimed at evaluating the progress and success of our initiative in enhancing the liquidity health of the ARB token, making strides towards achieving liquidity comparable to well-established assets on Arbitrum like ETH, USDC, and wBTC.

KPI GOAL KPI METRIC PROOF
ARB Bond ROE* 93-99% Dashboard + status updates
Liquidity Debt Reduction 8-10%+ Dashboard + status updates
Unique Bonding Wallets 500 Dashboard + status updates

*Return on Emissions (what return are we receiving for the token spent)

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:

Our initiative seeks to significantly bolster the Arbitrum ecosystem through the integration of ApeSwap’s Bond technology, aiming for a permanent DAO-controlled liquidity base.

Enhancing Liquidity:

  • Our goal is to elevate the liquidity depth of ARB, aspiring to reach parity with blue-chip tokens like ETH, USDC, and WBTC on the Arbitrum Network.
  • Higher liquidity is pivotal for attracting new users and bolstering blockchain usage, with Total Value Locked (TVL) being a crucial metric in this aspect. For instance, the momentum seen in Arbitrum and Optimism, with TVLs of $1.5 billion and $800 million respectively, underscores the importance of liquidity in gaining traction and notoriety.

Benefits Across the Ecosystem:

  • For the Arbitrum DAO:
    • Diversify ARB holdings
    • Strengthen ARB liquidity
  • For Token Holders:
    • Acquire ARB at a discount
    • Enhance ARB liquidity
  • For Protocols on Arbitrum:
    • Increase awareness and access to bond programs
    • Enhance liquidity in ARB pools, fostering creativity and ease in protocol development for ARB-funded protocols

Through these mechanisms, we aim to create a win-win scenario for all stakeholders within the Arbitrum ecosystem, stimulating growth, and innovation, while establishing a robust liquidity foundation.

Justification for the size of the grant:

This proposal is primarily geared towards building sustainable liquidity for the Arbitrum DAO, addressing the current liquidity debt of ARB. Targeting a 10% reduction in this debt through an initial pilot study presents a logical and attainable objective. This grant also seeks to showcase the advantages of POL to users and other tokens within the Arbitrum network, promoting a robust and sustainable liquidity framework.

With a planned bonding program duration of approximately 2 months, the allocation of 1.25 million ARB tokens is a conservative and calculated approach. Our analysis indicates that this amount, while effective for the project objectives, is prudent to avoid undue sell pressure on the ARB token. Our models, which historically engage long-term holders and mitigate direct token dumping, validate that the current ARB token emissions and sell pressure can comfortably sustain this grant size without negative price impact.

This initiative not only introduces this sustainable liquidity methodology to other protocols on Arbitrum but also provides a tangible demonstration of POL’s benefits, especially during market volatilities. Engagement with other protocols and the broader Arbitrum community is integral to our strategy, facilitating the dissemination of the demonstrated benefits and encouraging a collaborative approach towards liquidity sustainability within the ecosystem.

Execution Strategy:

ApeSwap’s execution strategy revolves around allocating the entire grant as Bonding incentives, which will allow users to bond ARB tokens at variable discounts.

We leverage the ERC-5725 token standard, which was developed by the ApeSwap team and has received official endorsement from the Ethereum Foundation. This NFT-based standard is integral to our Bonds, granting users a Bond NFT containing their tokens, which vest over a defined period as specified at the time of purchase. In this case, the ARB bonds will vest linearly over 60 days.

ApeSwap’s approach aims to efficiently bond POL for the DAO, a feat unattainable through traditional farming incentives. The result is a lasting deepening of the liquidity pool for the native token, as elucidated earlier.

The incentive distribution is spread over a 60-day period (8 weeks), bifurcated into two “phases” of 30 days (4 weeks) each:

  • Phase 1

    • Bond Token: 625,000 ARB
    • Bond Vesting: 60 day linear
    • Raise Asset: ETH-ARB Camelot LP
    • Fee: 5% Initiation

  • Phase 2

    • Bond Token: 625,000 ARB
    • Bond Vesting: 60 day linear
    • Raise Asset: ETH-ARB Camelot LP
    • Fee: 5% Initiation

For the adept management of this initiative, ApeSwap will impose a 5% initiation fee on the net bonded value. This fee is a requisite to cover ongoing marketing, development resources, and operational costs, ensuring the smooth execution and success of the Bond. It’s an investment towards not only covering the costs but propelling the initiative to a wider audience.

Our marketing strategy is robust, encompassing outreach through our community forums, social channels, PR outlets, and media partners. Additionally, we’ll collaborate with other entities on Arbitrum to extend our marketing reach. Consistent marketing campaigns are planned to continually attract participants and keep the momentum going.

This is a pilot study, and our ultimate objective is to present compelling evidence to permanently alleviate the Liquidity debt on the ARB token, which presently stands at $10M.

Grant Timeline (Milestones):

  • Grant funds distributed
  • Week 1: Pre-launch marketing campaign
  • Week 2: Launch of Bond Sale Phase 1 (625,000 ARB)
  • Week 3: Bond metrics dashboard is operational tracking KPIs. First status report shared on Arbitrum DAO forums.
  • Week 3 - 5: Ongoing marketing campaign
  • Week 5: End of Bond Sale Phase 1. Status update on Phase 1 of bonding shared on Arbitrum DAO forums. Host community call (Twitter Spaces).
  • Week 6: Launch of Bond Sale Phase 2 (625,000 ARB)
  • Week 7: Third status report shared on Arbitrum DAO forums.
  • Week 7 - 9: Ongoing marketing campaign
  • Week 9 - 10: End of Bond Sale Phase 2. Final status update (Phase 1 & 2) shared on Arbitrum DAO forums. Allow 1 week for feedback, questions and queries.
  • Week 11: Submission of a proposal to continue Bonding and Building Permanent Liquidity for the Arbitrum DAO closing out ARB liquidity debt for good.

Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multi sig holds the power to halt your stream?

Yes

SECTION 4: PROTOCOL DETAILS

Is the Protocol Native to Arbitrum?:

No

On what other networks is the protocol deployed?:

BNB Chain, Polygon, Ethereum

What date did you deploy on Arbitrum?:

Friday, March 10, 2023

Protocol Roadmap:

We keep most of our developments and updates internal until they are closer to launch. Here are some upcoming updates and developments we’re excited to share:

  • Extended zap integrations for bonds before end of month
  • Quickswap Bonds powered by ApeSwap launching mid-October
  • Major news coming soon which we’ve started teasing on socials, but we can’t announce here yet

Audit History:

SECTION 5: DATA AND REPORTING

Is your team prepared to create Dune Spells and/or Dashboards for your incentive program?:

Yes we can create a custom Dune dashboard specifically for the purposes of tracking the bond sales performance outlined in this proposal. We also have a bonds dashboard available here.

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?:

Our team will gladly plan bi-weekly status updates and calls to report on relevant data points and KPIs.

Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?:

Yes

15 Likes
2

Hi @ApeSwap
So , you sorted out your convo with sushi and @SeriousTaylor
on the closed previous topic by @stonecoldpat

No drama, or legal stuff on the horizon ?
Are we good with everyone or still in progress ?

1 Like
3

Hello, assume I am incorrect so do correct me, but is this your following ask?

“Give the DAO 1.25m ARB that we will sell to Bonders at a small discount and pocket 1m~ usd”

And take a 5% directly to your pockets despite the grant outline explicitly telling you to not do so?

2 Likes
4

You have applied for a Lighthouse Grant but fail to meet either TVL or Volume. Can you clarify why you think ApeSwap justifies applying outside of the suggest guidelines for a protocol of your size and contribution to the Arbitrum Ecosystem?

This is not aligned to the program. For any level of approval you would be expected to remove this fee entirely and/or pass it directly onto the end user/beneficiary.

Please treat this process seriously, if you have no news please just remove this line entirely.

2 Likes
5

My understanding is that the discussion is ongoing but I cannot comment on it further than that at this time.

3 Likes
6

I believe Apeswap is a loyal project, The program has a lot of attraction especially Arbitrum DAO will be better in the future and ApeSwap will be the best, High reputation and strong real name With such an enthusiastic and excellent team. I’m sure it works.

5 Likes
7

I trust in ApeSwap’s expertise on this subject because it has a vast experience on bonds which are working great in Bsc for quite a long time now!! i think it’s a no brainer, a win-win and Im sure ApeSwap devs can implement this perfectly

4 Likes
8

It should be understood that it was the ApeSwap team that came up with the bond system. And he has been offering it for more than one year. It used to be called Treasury Bills. They have extensive experience in creating, promoting and selling this product. So I am sure that they will easily cope with this task. ApeSwap are the creators of the bond system and the main experts in this matter in the entire DeFi system.

4 Likes
9

Apeswap is my favorite project, the bond system is very revolutionary

4 Likes
10

Apeswap is the rocket
Arbitrum is the fuel

And you guys can you guess what will happen if we put the rocket and the fuel together?

4 Likes
11

I strongly agree with Apeswap’s proposal considering it’s expertise with the Bonds together with their Liquidity health dashboard features.

Judging by the offerings of Apeswap and having learned a lot during the downturn of Crypto Markets, they successfully implemented new offerings that is all about sustainability and project health.

I believe their plans are well executed and always into community benefit as a whole, I’m sure the team of Apeswap can fully capitalize their skillset into delivering a smooth and successful proposal.

3 Likes
12

Will refrain from commenting on specifics for the time being, but there is nothing imminent that would prevent us from executing on this proposal

5 Likes
13

Appreciate you reading through our proposal, definitely looks like we should have been a lot more clear with the wording here: The raised LPs would all go back to the DAO, we would only keep the 5% fee for running the bond sale.

And in terms of the use of the fee, definitely wouldn’t be to fill our pockets. At this point, ApeSwap has about 20 full-time contributors and is fully reliant on bond volume to support our efforts and operations. While this fee helps, it won’t cover most of our costs but that’s not what this is about for us. The main purpose of this proposal is to provide a service to the Arbitrum DAO by helping build a stronger liquidity base, while giving us a chance to work with a large, credible partner in order to more thoroughly engrain ourselves in the Arbitrum ecosystem.

6 Likes
14

First off, thank you taking the time to read through the proposal, your thoughts and comments are much appreciated in the spirit of sparking conversation and getting feedback that can be incorporated into the final proposal.

This is a great call out, though the reason for this is simple: TVL and volume are irrelevant in regards to bonds. Let me explain. While we originally launched as a DEX over 2.5 years ago, ApeSwap has not been focused on building a DEX for over a year. This is largely due to our bonds quickly becoming our bread and butter, and us slowly shifting our focus and resources away from the DEX as a whole. This has been made especially over the past couple of months. While our DEX page is still live, you’ll notice that we are now leveraging LiFi’s tech to route swaps across multiple chains, effectively moving us completely away from our own liquidity and running our own DEX. While we still support swaps, we are fully focused on providing bonds.

Now why are TVL and Volume irrelevant? These are not great metrics to track bonds with as:

  • There is no TVL with our bonds offering
  • Volume works differently than trading volume, and therefore wouldn’t make sense to compare

Will reference my previous comment here for a better explanation and justification of the fee. In regards to passing the fee off to the end user/beneficiary, in this case that’s exactly what we’re doing as Arbitrum is the main beneficiary of this program.

We are very much treating this process seriously. This is one of the biggest changes we’ve ever undergone and will be public by the time this proposal goes live. We have shared other more tangible news and will update this line as soon as we have made this news public!

4 Likes
15

Hello @ApeSwap thank you for your application!

Unfortunately your proposal is not eligible for this incentives program for the following reasons.

  1. You are not distributing the ARB to incentivize contracts and are instead selling it and keeping 5%. This 5% profit is not permitted as it can be seen as using the ARB for operational costs.
  1. The ARB is not permitted to be sold into another Asset. The intention of the program is to distribute ARB not to sell it for ETH.
2 Likes
16

Firstly, thank you for your proposal and for showing interest in the Arbitrum ecosystem.

Introduction and Rationale

ApeSwap aims to address liquidity concerns on Arbitrum by offering a bonding solution as an alternative to short-term yield farming. They’re requesting a grant of 1.25M ARB, to be dispensed in two instalments. This grant would fund the sale of ARB bonds, aiming to grow the Arbitrum POL. Despite ApeSwap’s low current volume on Arbitrum, we appreciate their interest in introducing alternative liquidity mechanisms like bonding. However, we question the overall effectiveness of this proposal in contributing to the Arbitrum ecosystem at large.

Major Concerns

Effectiveness and Appropriateness of Grant Size

  • Current TVL is only $70k on Arbitrum
  • Registers very low volumes compared to its BSC activity
  • The requested grant size seems disproportionate to the project’s current scale
  • Our recommendation for change: We suggest lowering the grant size and possibly starting with only one phase of bonding.

Alignment with Arbitrum’s Ecosystem Needs

  • Not clear how the bonding process will benefit the Arbitrum ecosystem
  • Concerns over the 5% initiation fee on bonded value
  • Our recommendation for change: We recommend ApeSwap to start developing an Arb-focused product suite and form partnerships with other Arbitrum-native protocols.

Minor Concerns

  • Limited scope of the proposal beyond bonding
  • Lack of clarity in how the assets raised with bonds will be utilized for the benefit of Arbitrum
  • Our recommendation for change: Please provide more details on how the raised assets will benefit the overall ecosystem and consider broadening the scope of your proposal.

Summary

Castle Capital appreciates the efforts put forth by ApeSwap to introduce an alternative liquidity mechanism in the form of bonding. However, in its current form, we do not support the proposal moving forward. Namely, we believe that the issues regarding the grant size and its limited scope in terms of overall ecosystem benefit need to be addressed. Our recommendations can be summarized as follows:

  • Consider reducing the grant size and focusing on a single phase of bonding initially
  • Expand the scope of the proposal to include Arb-focused products and partnerships with other Arbitrum-native protocols

We hope that our comments are constructive and help guide improvements for the betterment of the broader ecosystem.

17

Big thanks to everyone afor sharing your thoughts on our proposal— it’s given us a lot to think about!

In digesting your feedback, it’s clear our proposal has merit but isn’t fully aligned with the STIP program’s current goals. We missed some marks and you helped us see that— thank you.

With this in mind we are working on putting together a new proposal for the DAOs consideration, outside of the STIP structure, with your valuable feedback front and center.

We’re eager to bring you something revised and improved soon!

1 Like
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great thinks … I think Arb will break all record in Bull Run :+1: :+1: :+1: :+1: