SECTION 1: APPLICANT INFORMATION
Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name: Squirrel
Project Name: Arrakis Finance
Project Description: Arrakis Finance is the largest LP manager on top of Uniswap V3. We build market making infrastructure and strategies.
Team Members and Qualifications:
Kassandra - Cofounder and CTO of Arrakis, previously a senior smart contract engineer at Gelato Network. Before joining Gelato, Ari was a cryptography researcher focussing on privacy and state channels.
Hilmar Orth - Cofounder of Arrakis and Gelato Network. Before Gelato, Hilmar co-founded a private blockchain focussed startup in Berlin which helped companies like Novartis and Bayer build consortium EVM networks.
Squirrel - Head of BD & Growth; prior to Arrakis, lead growth at Abracadabra - the stablecoin protocol; co-founded one of Europe’s largest crypto and accounting tools - Accointing.
Non-Technical Docs: https://resources.arrakis.fi/
Technical Docs: https://docs.arrakis.fi/
Do You Acknowledge That Your Team WIll Be Subject to a KYC Requirement?: Yes
SECTION 2: GRANT INFORMATION
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size: 806k ARB
Grant Matching: Arrakis currently does not have a token but will in the future. Potentially, we could see grant matching from the LST protocols that use the services of Arrakis.
Grant Breakdown: 100% of the tokens will be used for liquidity mining.
Funding Address: 0x77BADa8FC2A478f1bc1E1E4980916666187D0dF7
Funding Address Characteristics: This is a 4/7 gnosis safe on Arbitrum
Contract Address: This will be provided at a later stage once vaults are deployed.
SECTION 3: GRANT OBJECTIVES AND EXECUTION
Clearly outline the primary objectives of the project and the Key Performance Indicators (KPIs) used to measure success. This helps reviewers understand what the project aims to achieve and how progress will be assessed.
Objectives: This grant will be used to incentivize liquidity on the Arrakis LST Vaults to make Arbitrum the most liquid chain for LST assets. The objective here is to have the lowest price impact for buying and selling LSTs (stETH, rETH, cbETH, frxETH).
7 LST Vaults will be deployed:
Key Performance Indicators (KPIs): The KPI here are: Volume facilitated, and overall volume growth verse other chains of these LST assets.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:
Arrakis LST Vaults provide an algorithmic market-making strategy. The algorithm is optimized for the market depth of LSTs and risk management for LPs. The strategy deployed on Uniswap V3 uses limit orders, asymmetric liquidity, and algorithmic rebalancing in order to minimize price impact for larger trades and make liquid staking tokens actually liquid. This means that Arbitrum can reduce their expenditure on liquidity mining rewards because less capital is required to establish a liquid market, while LPs can benefit from a strategy that efficiently manages their inventory and mitigates the risk of impermanent loss.
With this grant, Arbitrum should be able to become the number one place for LSTs, as can be seen with the current Lido LST vaults on mainnet and optimism theyre significant volume drivers. If LSTs are highly liquid, collateral backed stablecoins and LST lending markets on Arbitrum will flourish.
Justification for the size of the grant: The requested grant size will lead to each pool having 38.38k ARB as liquidity mining incentives per month for 3 months. This will allow each LST vault to receive a significant TVL (~ >$1m) and result in a highly liquid market due to a low price impact.
The execution will run as follows:
If the grant gets approved, the ARB tokens would be sent to the funding address.
Then these 7 LST Vaults with gauges would be deployed:
wstETH/WETH - Rewards per month:38.38k ARB
wstETH/USDC - Rewards per month:38.38k ARB
rETH/WETH - Rewards per month:38.38k ARB
rETH/USDC - Rewards per month:38.38k ARB
cbETH/WETH - Rewards per month:38.38k ARB
cbETH/USDC - Rewards per month:38.38k ARB
frxETH/FRAX - Rewards per month:38.38k ARB
The process of deployment would likely take 2-4 days.
Once the pools and gauges are deployed, the gauge would be filled with on a weekly basis. Each week rewards are provided by Arbitrum gauges will be topped up.
Grant Timeline: The funds from the grant would be used over a 3 month period from the time of them being sent.
If this proposal is greater than 1M ARB, please provide details on any funding tranches or milestones your application aims to abide by:
Milestone Descriptions: N/A
SECTION 4: PROTOCOL DETAILS
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the Protocol Native to Arbitrum?: No, Arrakis Finance is deployed on top of UniV3 and thus is available wherever UniV3 exists.
On what other networks is the protocol deployed?: Ethereum Mainnet, Polygon, Optimism, Base
What date did you deploy on Arbitrum?: V1 was deployed on Arbitrum in 2021, V2 was deployed in January 2023.
- Current protocols utilizing Arrakis PALM: Thales, Y2K, Premia, Unstoppable
- TVL: $1m
We believe it is important to mention TVL in other places as we would like to help Arbitrum excel and think we can do this by advertising to our existing users on other chains to move to Arbitrum. This existing userbase could have a significant impact on Arbitrum.
- Arrakis Finance is currently the largest Liquidity Manager and at its peaking has a TVL over $1.7b (currently around $200m)
- More than 25% of the Uniswap V3 total TVL
- 80+ projects have had their liquidity managed by Arrakis vaults, projects include: Lido Finance, Frax Finance, MakerDAO, Stargate Finance, UMA and many more.
The relevant products involved in this protocol are Arrakis V2 and the Arrakis LST Vaults.
Arrakis V2: Arrakis V2 has been live since January 2023 and can be thought of as an abstraction layer on top of concentrated liquidity AMMs like Uniswap V3. It enables central limit order book (CLOB) like interactions. This allows market makers to offer and execute advanced strategies that up to this point have only been feasible on centralized exchanges (CEXs). The protocol itself is open for everyone to use and has no protocol fees. Anyone can become a vault manager that deploys vaults, executes market making strategies, and in return receives fees from the LPs who deposited into their vaults.
Liquidity providers, which can be DAOs, protocols, institutions or individuals, can either use private vaults that are exclusive to them, or opt into existing public ones that everyone can join. A Vault has a privileged manager role that can execute arbitrary market making strategies which can optimize for deep liquidity, trading fee APRs or mimicing traditional AMM invariants, such as constant product, stableswap, or Curve V2.
Arrakis LST Vaults: Arrakis LST Vaults are a new product built on top of the V2 infrastructure and was launched in September with the first user being Lido Finance.
Arrakis LST Vaults provide an algorithmic market-making strategy that LST protocols can utilize and incentivize through liquidity mining rewards. The algorithm is optimized for the market depth of LSTs and risk management for LPs. The strategy deployed on Uniswap V3 uses limit orders, asymmetric liquidity, and algorithmic rebalancing in order to minimize price impact for larger trades and make liquid staking tokens actually liquid. This means that LST protocols can reduce their expenditure on liquidity mining rewards because less capital is required to establish a liquid market, while LPs can benefit from a strategy that efficiently manages their inventory and mitigates the risk of impermanent loss.
Upcoming other products are vaults specific for other usecases such as stablecoins. Furthermore, we are also working on Uniswap V4 hooks.
Audit History: 3 Audits have been done by Watchpug, Statemind, and Sherlock and can be found here:
V2 Core: https://github.com/ArrakisFinance/v2-core/tree/main/audit
V2 Periphery: https://github.com/ArrakisFinance/v2-periphery/tree/main/audit
SECTION 5: DATA AND REPORTING
Provide details on how your team is equipped to provide data and reporting on grant distribution.
Is your team prepared to create Dune Spells and/or Dashboards for your incentive program?: Yes, all the vaults will have dashboards similar to this: https://dashboard.arrakis.finance/
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread? Yes, we certainly can provide bi weekly updates in the form of dashboard snapshots and explanations.
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.
We look forward to hearing your feedback and answering any questions!