Gm Arb community, this is Roger with Radiant (also known as Mero on Telegram).
Great job by @tnorm and the working group on creating a proposal that provides a framework for protocols to move forward with grant requests.
Arbitrum TVL is down 500 Million since mid-July, as other chains have attracted demand. It’s critical to find efficient and creative ways to responsibly distribute incentives to protocols that can positively impact Arbitrum.
Even though 75M ARB is proposed, not all of it needs to be distributed.
It is up to the DAO to be critical of applications and ensure a proper balance between grant requests, impact, KPIs, and protocol strategies for redistributing granted ARB to ecosystem users.
First of all, fully support launching a grant program as it can potentially help the Arb eco gain users, liquidity, and exposure; the proposal is also thoughtfully drafted with collected insights from builders, community members, OP grant takeaways and more, thanks to @tnorm and everyone who joined the previous community calls.
However, despite the good intentions and collected effort behind the proposed framework, I am writing to express several concerns and submit suggestions surrounding the grant cap, grant campaign duration, application discussion & voting period length, grant distribution, and the milestones setup.
The milestone-based funding tranches can be beneficial for guiding builders to build more long-term incentive plans and more opportunities to optimize the programs. I want to suggest the following updates:
Apply the milestone-based funding tranches requirement for all grant applications, not limited to $1M+ ARB grants.
Add a grant distribution percentage cap for the milestone tranche, like 30%, and only distribute the incentives in the following tranches if the previous tranche hits the preset milestone.
If the mechanism above is hard to set up, we could try adding mechanisms to shut off bad actors’ incentive distribution.
The goal is to balance the incentive distribution pacing while guiding protocols to plan the incentive model and milestones more thoughtfully.
Considering many builders in the ecosystem might not be aware of this program yet, and they will only have less than one week to draft applications after the current proposal passes, the time looks pretty tight for teams to be aware of this program and its context, insightfully draft plans for gaining more organic & healthy growth, clear milestones & API, a clear goal to empower the ecosystem, as well as a thoughtful reward distribution model.
Also, the 1-week review process could be rushed considering the total cap is 75M ARB (more than what other L2s have offered in multiple seasons combined), and it’s reasonable to assume larger numbers of projects will apply because of the capacity.
I suggest extending the Application and Review periods to at least two weeks each.
Pushing this program into action faster is necessary, but we shouldn’t sacrifice crucial periods like proposal drafting & review time. Ultimately, the higher the program quality, the better results Arb ecosystem will receive.
If the 75M $ARB grant is a hard cap and not intended to be spent all at once (ideally, it shouldn’t, considering the large-cap & short-term combination), we might need to weaken general audiences’ focus on this 75M number when preparing the following proposals and marketing materials. The concept of releasing 75M ARB tokens in the short term can shake community holders’ confidence, considering the potential selling pressure caused by this campaign, which can lead to unforeseeable side effects that can negatively impact the Arbitrum ecosystem.
I also suggest adding more detailed requirements for preventing protocols from promoting campaigns that can initiate sybil attacks or wash-trading-type activities; campaigns should exclusively encourage more organic usage. Based on certain OP grant recipients’ activities, we are witnessing protocols hitting abnormally high daily volume & tx while having less than 100 DAU (not everyone, but I just wanted to use this as an example). Such activities likely only benefit mercenaries who won’t contribute long-term value to the ecosystem.
Another consideration is how we send grants and what recourse the DAO has.
For example, we could say that all grants use Hedgey Token Grant streaming which is revokable by the multisig. We could even say that the multisig can be overridden by the DAO with only a snapshot vote.
This type of revokable stream would not be used for performance per se, but more importantly to stop bad actors like this:
Incentives are great. This will really help. Good Entry has fully committed to Arbitrum since our inception with no immediate plans for a multi chain strategy. A meaningful boost is necessary. Considering the large size of incentives its good to clarify what’s the important objectives here.
What is the team looking for? Activity? Awareness? Good Entry would suggest, the purpose of this incentive programme should be to search for the next GMX. A project that really defines the ecosystem.
Good Entry would propose that the foundation only provide grants to projects exclusive only to Arbitrum.
Another real north star for us builders is creating sticky activity. As we know incentives can bring mercenary capital that leaves once incentives end. One thing that can inform if a project deserves extension is if increased activity remains and grows for at least 3 months from the end date of the incentive programme.
Investing short term is necessary for long term. We want Arbitrum to win and these clearer goals can help us create sustainable programmes moving forward.
I love the idea of half the grant being offered on a stream, then the other half being awarded 3 months later for having sticky commitments. This would have to be baselined though…
Disclosure - I was part of the working group that helped draft this with @tnorm. TLDR - there was a lot of compromise made here, and I don’t know that I Iove everything about it, but I think it works and captures the essence of what is needed. (This is how compromise works)
I think the main thing here is to enable Protocols to access DAO funds as quickly as possible and for the DAO to be able to judge how those funds were used. IMO it is unlikely $75m ARB is used in 2 months given the requirement for public voting.
Favouritism for particular protocols to exclusion of others (ie kingmaking)
Given the bear market, and the peculiarities of network effect, the DAO will likely need to be bold to retain market position or risk losing out to others (optimism, Mantle etc.) Hopefully, this programme will be an opportunity for protocols to innovate and make requests for funding that demonstrate more thought than pure ‘incentives’ (i.e. outright unfettered giveaways). Vertex Protocol will be making an effort to do this - we would urge other protocols to do the same to avoid some of the mistakes people on the forum seem so concerned about.
75m ARB ‘given away’ seems foolish.
75m ARB as capital to fuel the ecosystem could be genius.
That’s a super interesting idea. Streams could be an interesting way to encourage stickiness of TVL or whatever metric you’re using for a longer duration.
We fully appreciate the transparency of the application and review process and think such incentive program is very much needed at this stage as more newer L2s are attracting users and capital with airdrop speculation.
75M ARB does sound quite significant for a short term incentive program, but more importantly each application should be carefully evaluated on multiple fronts - incentives should not be casually designed to increase TVL and only benefit mercenary farmers, rather they should be efficiently used in more creative ways to foster user activities on Arbitrum, collaboration between existing protocols and new protocol integration.
First of all, appreciate the work and it’s generally a great initiative.
As the first season, this is an experiment. And if we take a look at what happened to OP season 1, we should start small, instead of such a huge number. We can expand based on the data and result of season and then expand in season 2.
already saw some concerns raised around the large cap and tight schedule. Suggest to tweak the number and time frame.
Fully in support of this proposal, 75M ARB could sound significant but it remains low for an ecosystem of our size in need for new traction and liquidity.
In the current bear market landscape, blue chip token volatility and assets inflow are at a historical low. User activities are naturally low in this stage, as few new players enter the space, yet the remaining users primarily seek farming opportunities for quick yield. Based on this context, it still needs to be determined whether the grant can sustainably attract and maintain real users instead of mercenaries. The 75M ARB is SMALL to boost the entire crypto industry and attract inflow, yet too LARGE for one L2 to release in a 2-3 months campaign.
I totally understand the mindset of getting the ball rolling quickly. Still, the query for the risks surrounding the too-large 75M cap can’t be simply addressed by using perspectives like “it’s an experiment,” “as long as things move forward, it’s good enough,” or “the cap is high, but what if we don’t spend of it all.” If the cap is set as 75M, people will aim to apply for all of them and spend them all; if each proposal drafting, reviewing and voting round is less than three weeks combined, the process will likely be rushed considering the number of applicants attracted by the 75M number. And if up to 75M ARB tokens are released to the secondary market in 2-3 months rapidly, considering the current market conditions, before we onboard more long-term LPs and users, we might witness holder confidence collapse first. If things turn south, this “experiment” will be very expensive in terms of cost and reputation.
After releasing this proposal, we have seen Twitter KOLs referencing it and using 75M ARB in the headlines; general audiences will ignore the fact that this is a cap, and they will assume a lot of ARB tokens will be dumped on the market in the short term. The attention that the eco gained from artificially boosted volume & APR might be countered by potentially scary price actions.
Representing one of the larger delegate in the ecosystem, I sincerely suggest making the following changes:
Lower the cap of 75M ARB to 15M ARB
15M ARB is aligned with OP season 2 number, and it’s proven to be sufficient for dozens of protocols running 2-3 months of campaigns
Again, if it keeps being admitted the 75M cap is high, but we hope to spend only some of them, then let’s lower the cap directly to reduce the hassles.
If we really want to "experiment, " the cap must be conservative.
Extend the Application and Review periods to at least two weeks each
The goal is to allow more protocols to have enough time to draft proposals & incentive structures thoughtfully.
Allow the community to have more time to review and discuss each proposal
Pushing this program into action faster is necessary, but we shouldn’t sacrifice crucial periods like proposal drafting & review time. Ultimately, the higher the program quality, the better results Arb ecosystem will receive.
Hello there, we are a trustless non-custodial digital asset payment protocol with innovative tech breakthroughs that have already been deployed on Ethereum and Tron, and we are currently working on deploying it on Arbitrum right now. We would make a great contribution to Artibtrum by attracting more merchants to deploy their payment systems on Arbitrum and bring in more liquidity & active users to the Arbitrum ecosystem.
Even though we haven’t deployed on Arbitrum right now, I am still wondering if there is any chance that we can participate in this short-term incentive program. It would be so helpful in accelerating our progress of bringing more value and vitality to the Arbitrum Ecosystem. If we could get in touch with the right person, we would love to discuss this further in detail!
Wait for the bull market. In this current bear market, these tokens will ultimately be dumped by mercenaries reducing the current value of ARB. It’s unfortunate, but at the moment this is the reality.
Atomica.org has spent two years developing the NextGen Risk and Insurance Marketplace in stealth mode.
However, it seems that we do not even meet the initial requirements for Beacon Grants…
Finally, we are planning to launch this month (September) to support our partner - DeltaPrime.
Unlike others, we plan to use the Grant to create the Arbitrum Ecosystem Reinsurance Fund to provide Ecosystem Safety to protocols deployed on Arbitrum.
The more insurance liquidity there will be in the Arbitrum reinsurance pools, the cheaper insurance can be.
It simply means that if I can get 20% unprotected yield somewhere, my protected yield on the Arbitrum ecosystem will be 16-18%. I’ll definitely choose the protected yield and increase my allocation on Arbitrum.
The results may be as follows:
Outcome 1: Arbitrum Ecosystem Reinsurance Fund
Seeing the Arbitrum Ecosystem Reinsurance Fund, the 3rd party underwriters will be willing to provide more reinsurance capacity at a lower price.
The outcome leads to more reinsurance liquidity, lower risk market rates and lower insurance premiums.
More reinsurance liquidity and lower insurance premiums can attract the institutional users and unlock organic TVL growth.
Outcome 2: Safety Module as a Service for DAOs
Inspired by the AAVE Safety Module, Atomica.org team developed Safety Module as a service. DAOs and Protocols can use the Safety Module as a Service to protect the community from unexpected events.
Grants received from Arbitrum can be stacked by DAOs in the Security Modules to help protect the protocol.
Arbitrum Grant can also be used to incentivize the community to contribute to protocol safety.
DAOs that implement the security module can provide more security to the community, which means more trust and peace of mind for users.
Outcome 3: Insured Bridge transactions to the Arbitrum ecosystem.
The Arbitrum Ecosystem Reinsurance Fund can be used to secure the bridge transaction to the Arbitrum ecosystem.
80% of bridge transactions are below $10K and have a very short time risk, usually up to a few minutes.
80% of bridge transactions can be insured with a small reinsurance capital.
When users bridge funds to the Arbitrum ecosystem, bridge aggregators like magpiefi.xyz can show these transactions as Insured or Protected.
Outcome 4: Embedded insurance in the Arbitrum ecosystem
Thanks to the Atomica SDK, API and Widgets users can buy insurance directly from the partner’s UI after insurance products are embedded.
Insurance can be embedded into the transaction lifecycle. When users deposit liquidity into the pool, insurance can be purchased directly from the partner’s dApp UI.
Embedded insurance can reduce the friction as LPs deposit on one network and buy the insurance on another network.
The Arbitrum ecosystem may have its own insurance provider and its own insurance liquidity.
Final thoughts:
Buying TVL, users and transactions through incentives is not sustainable in the long run.
Short-term incentives can attract Fluctuating retail liquidity.
Providing Ecosystem Safety can be a better long-term strategy:
The Arbitrum Ecosystem Safety Fund can be reused to bootstrap other projects.
After creating the Arbitrum Ecosystem Safety Fund, Arbitrum can differentiate the ecosystem as a Safetynet.
We have more ideas on how to bootstrap the Ecosystem. Reach us if you are interested.
We’re truly grateful for the fantastic work put in by the Arbitrum Incentive Group and the unwavering commitment of the Arbitrum community to drive further growth in the ecosystem. We fully support the launch of a grant program to help the ecosystem to help attract more users, given the intense competition in the L2 war.
Vaultka has been an Arbitrum maxi since day one and will continue to be the no.1 Arbitrum Perp Dex supporter. Incentives are a fantastic way to lure new users into embracing fresh protocols. However, a one-time incentive might have a downside, potentially creating a temporary surge in selling pressure on the $ARB token, which isn’t exactly the healthiest scenario for the ecosystem as a whole. Therefore, we suggest a more rigorous review framework to ensure that grant funds contribute to long-term development.
This proposal is a step in the right direction, and demonstrates the community’s dedication to elevating Arbitrum. We’re eagerly looking forward to seeing how this proposal propels Arbitrum to new heights!
I’m glad to see some intelligent and helpful suggestions in posts. My impression is that the main concern is about the proposed size of the incentive program. From my understanding, 75 million is the maximum possible allocation; in practice, only part of that will be distributed during the first 2 months. This proposed program surely isn’t perfect - but it is needed, asap.
It saddens me that I see criticism (and some valid, well-thought-out concerns) from the people with large voting power who didn’t feel the need to take part in the calls and help in carving out this proposal. You are not sending the right message this way. Calls and consultations were open to everyone, and you should have attended and tried to help. After all, that is also the duty of a delegate, not only voting.
