For those that didn’t have a chance to attend these are the slides I presented on yesterday’s Incentive program call: IOSG <> Arb - Google Slides
The following reflects the views of the Lampros DAO (formerly ‘Lampros Labs DAO’) governance team, composed of Chain_L (@Blueweb), @Euphoria, and Hirangi Pandya (@Nyx), based on our combined research, analysis, and ideation.
Thank you @momir_iosg & team for sharing your research. We resonate with most of the findings especially when we refer to our latest research for LTIPP some problems overlap with what we observed.
We would like to point that increase in TVL of Pendle also came from LTIPP grant recipient like Factor Fi which incentivized LPs in Pendle with the ARB, so collaborations by different protocol team can be the driving factor of it’s success.
We agree with the above statement & have encountered similar views from different builders.
The mantra here is really simple & much needed. But for Arbitrum does it make sense to extract MEV & not share with it’s best protocol? As the largest DeFi protocol will always have incentive to deploy their own chain to get the MEV. We are not sure what should be Arbitrum’s guiding principles but it should not be MEV.
These are much important questions before starting an initiative, previous with lack of time it was not possible but we shall be answering these before starting an initiative.
We like Arbitrum Summer as the campaign name, and the table comparing with Previous Incentive Schemes is apt for implementation. The opening of doors for any project to participate and allowing users to explore wider ecosystem will nurture the ecosystem rather than going with allowing few projects. Also, the top down approach of identifying the activity we think should be rewarded shall be the better approach.
For protocols that are starting with Arbitrum may not have high TVL, so not including them will not allow fostering of ecosystem.
How do we have high-mindshare asset in spot market if they are not deployed on Arbitrum?
Is there a plan to put a number in place and a structure for a new incentive program with this proposal or is it for discussion on which DAO can learn from for future incentive?
Thank you for the thoughtful analysis and insights. We strongly agree on the critical need to improve user and protocol retention within the Arbitrum ecosystem. Retention is key for long-term growth, and addressing this challenge requires a strategic, data-driven approach.
This aligns closely with our previous position at Karpatkey, where we supported the “incentives detox” initiative to reassess and optimize resource allocation. As highlighted in your response, running incentives in perpetuity can unintentionally create barriers to onboarding new protocols by fostering dependency and reducing the competitive appeal for emerging projects. We’re supportive of exploring a transition to more performance-based, outcome-driven incentive structures that can mitigate this issue while promoting healthy ecosystem growth.
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thanks for your input! @Euphoria
this is the presentation from yesterday, I believe it contains answers to your questions
Thank you for this proposal - I’m very happy to see more discussion over ecosystem incentives. A few things I have in mind seeing this and observing how this is playing out in other ecosystems:
- Optimism is spending their money on bringing new chains to the Superchain, and seeing that they have the ability to conduct these deals in private which is a massive advantage there, I think the focus on Defi on Arbitrum is where we’ll get the more bang for our buck.
- Is the North Star of Defi on Arbitrum TVL, volume, ETH bridged, sequencer revenue? That’s an important distinction and we have to figure out ASAP.
- Programmatic distribution feels like a natural evolution to the grant-focused approach we’ve been taking so far. Something dynamic, that evolves, that changes based on observable onchain results. I’m a fan of gauges in that sense.
- Adding a certain layer of gamification might be what we need to get whales coming back to Arbitrum - there needs to be an element of “right now is the right time to go to Arbitrum” as the fight for user mindshare is as heated as its ever been.
Thanks for a well crafted and researched proposal.
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Hey @momir_iosg, thank you for coming up with this proposal!
It’s clear how the current incentive programs have indeed fallen short in delivering sustainable growth, and this highlights the need for a significant shift in the incentive strategy. This is why I appreciate the proposal and agree that restarting an incentive program is a good idea, but I believe we should take a more nuanced approach to liquidity incentives.
While liquidity provision is heavily farmed and often attracts capital with low retention, we can design more effective strategies to encourage long-term commitment. Instead of simply giving funds to DEXs/ALMs and similar for them to give out, we could implement structured programs that require users to lock liquidity for extended periods (beyond the incentivisation period) to access rewards or, alternatively, we could experiment with retroactive airdrops / points-based systems for rewards. Retroactive rewards, such as seasonal airdrops based on historical participation, could potentially attract even more liquidity in my opinion as users don’t see a net token increase daily but instead are speculating on what they’ll receive. This approach might drive increased participation and create a stronger incentive for long-term engagement.
I also agree with focusing on long-term retention but disagree with the proposed TVL limit of 10M. This cap might inadvertently exclude smaller projects from participating in the incentive program. By setting such a threshold, we risk limiting the diversity of participants and potentially missing out on valuable contributions from emerging or niche platforms. We should be open to more substantial funding if needed and experiment with more complex systems that either require users to lock liquidity or utilize retroactive airdrops. This strategy could help balance immediate liquidity needs with long-term ecosystem growth and sustainability.
Thank you! @NathanVDH
IMO, it should be MEV/sequencer revenue. MEV scales more significantly with on-chain volume than other metrics.
Thanks you @0x_ultra
this could be an interesting idea to explore, the longer you commit your liquidity for the higher boost in “points” collected, but I’m afraid this would be operational nightmare
can you elaborate why you believe that less straightforward incentives are going to be more appealing to the users? any good examples to refer to?
I made a comment on this above, as shared in this presentation IOSG <> Arb - Google Slides I believe there is a way to structure it in a way where its fully protocol agnostic
We agree on private negotiation and focus on onboarding major players into the Superchain, representing a key success element in Optimism’s growth strategy. On our part, Arbitrum DAO recently approved funding (250 Million ARB) for the Arbitrum Foundation to foster key strategic partnerships. While the DAO doesn’t currently have a body specifically focused on or able to conduct private negotiations, we believe the Arbitrum Foundation has the necessary funding to pursue that strategy if they see fit.
Considering the above, ecosystem building is more in line with the scope and ability of the Arbitrum DAO. We agree that DeFi could benefit from additional attention, especially in light of other areas, such as Gamining, obtaining significant funding from the DAO.
We also support having an ecosystem-wide discussion (including various stakeholders) to set our north star. We believe that’s an essential conversation to maximise value capture and impact of the initiatives the DAO supports.
The previous incentive structure wasn’t delivering the desired outcomes, and I agree that we need a more effective system for driving growth and retention. I appreciate you taking the time to propose actionable steps for improvement.
I especially agree with the idea of incentivizing specific assets and users directly, rather than relying on protocols. This approach not only ensures that incentives are better aligned with ecosystem-wide goals but also reduces the risk of inefficiency or misuse.
It’s expected to see a drop in activity once incentives end, but the real issue lies in how ARB incentive distribution was structured. Arbitrum used to run very long, almost perpetual incentives for a select group of protocols. This caused these protocols to rely heavily on the incentives to maintain their metrics, creating dependency. At the same time, it discouraged new protocols from launching on Arbitrum due to the unfair competition created by these sustained ARB incentives.
In contrast, ecosystems like Uniswap have taken a more strategic approach by distributing time-bounded, one-off UNI incentives focused on specific assets and pools. This model has shown better results, helping with the initial bootstrap while encouraging organic growth in the long term. Adopting a similar system could make Arbitrum a more inclusive and competitive environment, benefiting both established protocols and newcomers.
Ultimately, I agree we should prioritise creating a sustainable incentives framework.
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Could be an operational nightmare but not necessarily, can set up some funds aside to build an indexer for all of these which tracks all participating protocols and distributes the rewards in a more centralized manner. Yes it would take more time to implement but would also lay some groundwork for an arbitrum-wide incentivisation system which will most likely be reused in the future.
For the speculation point I don’t have research I can link to, but from personal experience situations in which users fight for a future share of rewards tend to attract larger capital that will try to skew the rewards % in their favor and it being retroactive (not a given rate of arb/day) means they can enter even later in the game and still skew rewards in their favor. It hurts smaller players but ultimately if the goal is to simply attract large liquidity for sustained periods of time perhaps this is a direction worth looking into mainly targeting larger portfolio size players.
To the 10M limit point I understand what you’re trying to propose, but perhaps there could be two tiers to the incentives program where one is for platforms which already do have a lot of liquidity TVL and one for more experimental projects? I guess innovative ALMs could still tap into say Camelot, Uniswap and so on campaigns and re distribute those rewards themselves, but there’s also innovative approaches to liquidity provision that should not be hurt from such incentives. Say Stryke and their more efficient approach to V3 provision, their TVL on arbitrum is lower than 10M and would not be able to partake in the initiative. When the campaign begins their tvl would likely go even lower considering much more attractive liquidity provision strategies with incentive-inflated APRs. What I’m trying to say is I agree thick liquidity is important, and should be pushed for, but I would like to see some system that can avoid secondary effects that would “suffocate” projects unable to tap into incentives from campaign participant projects. An increase in tvl on big projects should not mean a transfer of tvl from smaller projects to bigger ones (which would cause centralisation of TVL and suppression of innovation) but rather an onboarding of new capital.
iosg is a very good investment fund. Thanks for providing this detailed program，I fully agree with the proposal’s direction, especially focusing on the spot market and liquidity depth, which are indeed key to retaining users. However, the execution needs to be simplified. Rewarding liquidity providers directly instead of projects is an excellent improvement, but fairness for smaller users must be addressed, such as setting caps on rewards for large players or providing extra incentives for smaller LPs.
That said, there are some questions:
1. How will specific KPI targets, such as liquidity depth, trading volume, or user growth, be determined? Could overly high targets make them hard to achieve, or overly low targets waste resources?
2. While rewarding LPs is great, large players may dominate. Will smaller LPs get enough rewards, and is there a subsidy mechanism for them?
3. Should adjustments happen monthly or quarterly? If too frequent, users and projects may struggle to keep up; if too slow, opportunities could be missed.
4. While adding non-EVM assets has potential, will it dilute resources? Should efforts prioritize strengthening existing assets instead?
Additionally, some personal suggestions:
1. Start with stablecoins and blue-chip assets as a pilot to address liquidity shortages, ensuring these core assets are deep and stable.
2. Simplify the reward mechanism to make it easy for users and the community to understand, using trading volume and liquidity depth as primary indicators.
3. Regularly assess incentive effectiveness. Reduce rewards if targets are met, and optimize strategies if not, to avoid resource waste.
Really recognizing the core points of the proposal and the fact that this proposal is focused on the users themselves, with a very clear main objective: to increase the liquidity of stablecoins and short-tailed assets, as well as assets that are trending according to mindshare metrics, and providing practical implementation solutions with clear metrics and strategies.
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Read it again carefully, very exciting proposal, too professional to learn from, thanks again to IOSG for the detailed implementation plan and clear incentive logic. The current liquidity strategy and asset consolidation plan for Arbitrum is very forward looking, especially the dynamic incentive and high mindshare asset monitoring components. However, in order to better drive Arbitrum’s ecological sustainability in 2025, it is recommended that the IOSG team provide the following:
1. Incentive funding framework and budget program
- Can you provide a complete funding scenario for the allocation of liquidity incentive funding in 2025?
- Can you provide a complete funding plan for liquidity incentive funding allocation in 2025? Refine the percentage of funding for different asset classes (stable coins, blue chip assets, and high mindfulness assets) to ensure accurate allocation of resources.
2. Implementation details and KPI measurement standards
- Establish detailed KPI execution details, including:
- Target liquidity depth indicators (e.g. TVL targets).
- Exit or adjustment conditions for asset incentives.
- Clarify how the dynamic points allocation mechanism will be implemented, such as initial incentive curve design and incentive decay mechanism.
3. Cost and resource allocation
- For the cooperation of cross-chain bridges, data providers (e.g., Kaito) and fair distribution tools, can you provide specific cost estimates and resource allocation details?
- Considering the long-term nature of these collaborations, it is recommended that the IOSG provide an annual cost plan and a phased report on the use of funds.
4. Long-term sustainability planning
- It is recommended that the framework incorporate a design for financial sustainability, for example:
- Should the parties share some of the costs of incentives?
- How to balance short-term incentives with long-term ecological self-growth?
It is hoped that the IOSG will provide a complete core framework for incentive funding in 2025, including budget scenarios, implementation details, and annual cost planning, so that DAOs and the community can better assess and support the long-term value of this proposal.
Thank you for your professional analysis and efforts, and I look forward to seeing further refinements to the proposal!
as shared in this presentation I think its possible to structure the incentive to be fully protocol agnostic IOSG <> Arb - Google Slides
Thank you for your input!
Some of these are still open-questions that we will work on, some are answered in the presentation we shared last week IOSG <> Arb - Google Slides
The aim of this proposal is not to be egalitarian, the aim is to let Arbitrum win and this is possible only if we listen to the needs of our most valuable users
this is to a large extent aligned with our thinking
Yesterday, I briefly heard about the proposal during the meeting, but the fast pace made it hard to fully understand. As a loyal Arbitrum user, I’m thrilled to see proposals like this that identify key issues and genuinely advocate for Arbitrum. Especially given the significant competitive pressure mentioned in the theme, it’s clear that a critical transformation is needed.
The proposal outlines clear objectives and execution paths, such as enhancing spot market liquidity, attracting high-quality users, and establishing a KPI-driven incentive framework. These directions align with Arbitrum’s long-term ecosystem goals. The proposal accurately identifies the shortcomings and current issues of the existing incentive programs. However, I didn’t see a detailed long-term incentive funding plan, including total budget, allocation strategy, and measures to prevent fund exhaustion. It would be helpful to provide explicit evaluation criteria and dynamic adjustment standards.
I also hope to see incentive mechanisms tailored to regular users. It’s important not just to serve whales but also to attract more everyday users, injecting vitality into the ecosystem. While the proposal includes multiple dynamic adjustment mechanisms, practical implementation could face execution bias or market volatility. The proposal team needs to provide a risk response strategy to clarify how they would address potential incentive failures or misuse.
The core focus should revolve around retention and growth.
Could you take some time to provide a more detailed implementation report and framework? Additionally, it would be reasonable to apply for funding to cover IOSG’s participation and coordination efforts. The proposal’s focus on attracting the “right” liquidity and establishing an economic flywheel indeed addresses core issues. However, I have the following questions:
- The proposal emphasizes attracting liquidity and establishing an incentive framework, but it does not mention the total incentive budget, the distribution plan, or how to ensure the sustainability of incentive funds. Could you provide a clearer funding usage plan?
- If the incentive program encounters deviations or market fluctuations during implementation, how would such situations be addressed?
- Since the proposal highlights attracting high-value assets, what are the specific plans for cross-chain bridge integrations and multi-ecosystem collaborations? Have you considered partnerships with other L2s or DeFi projects to expand Arbitrum’s ecosystem influence?
Given the critical role of the IOSG team in analysis, coordination, and execution, it would be reasonable to apply for dedicated funding to support:execution support，For activities like research, analysis, and the implementation of the incentive program.Cross-chain and ecosystem collaboration， Including technical integration, protocol design, and market promotion efforts.Long-term participation funding， To ensure the IOSG team’s continued involvement and optimization of the incentive program.
I’ve been away from Forum planning my coin Launch and EXchange launch. With that said I hope Base was a clear wake up call unless Arbitrum wants to be a dying chain like Polygon. Not going to lie a Arbitrum grant or gift would increase my motivation to help save the chain. I was left out of the initial airdrop as I didn’t have a governance vote and admit it didn’t leave a great feeling. I think there is real potential here but not going to lie an pretend I have a desire to save it just out of the kindness of my heart.
Can you expand on this, as I saw another poster (@Euphoria - if you want to answer too) also agreed on this issue. I’m mainly interested in the following:
If the concern is established protocols having disproportionate influence, have they indicated what would change their mind? I guess my question is if that is the stigma based on past actions, are these relationships salvageable? We have done a detox period, effectively stopping grant programs for the moment, and I think as a general vibe of the forums people agree that the grant programs are not working as effectively as we hoped.
I’m wondering if we’re trying to chase down projects with ideologies we simply can’t change their minds on regardless of method. Or possibly even worse only will have their minds changed if we make it fair by throwing money at them.
I’m also curious if this is a large group of projects? And if this is a primary feedback or simply one of many feedbacks that just happens to be relevant to this specific proposal. As a layman, I guess this sounds like odd decision making. Where your forgoing launching on the relevant platform (ie, has the most liquidity) over concerns about not being able to have as much influence. And why they wouldn’t just launch on both platforms or something.