Camelot STIP Addendum

[Camelot]

Information about STIP/STIP Backfund

1. Can you provide a link to your previous STIP proposal (round 1 or backfund)?

[Camelot] [FINAL] [STIP - Round 1]

UPDATE as of 6 November: New Multi-sig to receive STIP funding: 0xEf9162fE27d319723feF7183348c87304a134c4B SECTION 1: APPLICANT INFORMATION Applicant Name: Ironboots, 0xMyrddin Project Name: Camelot Project Description: As Arbitrum’s largest native DEX, Camelot provides custom liquidity infrastructure tooling and fosters a collaborative environment for innovation that incentivizes teams to build specifically on Arbitrum. Camelot offers one of the broadest range of liquidity pools on Arbitr…

2. How much, in the previous STIP proposal, did you request in ARB?

3.09m ARB tokens.

3. What date did you start the incentive program and what date did it end?

The program started on November 14th 2023, and ended March 29th 2024

4. Could you provide the links to the bi-weekly STIP performance reports and Openblocks Dashboard?

Performance reports:

Camelot STIP Program Updates

[Camelot] Bi-Weekly Update [11/30/2023] - Epoch #1 Recap of the Previous Two Weeks (11/14 to 11/28) Over the first epoch, Camelot has seen strong growth across all the key metrics. Most importantly, in addition to the increase in baseline metrics, Camelot has focused its STIP incentives to support protocols migrating to v3 liquidity, onboarding new pools, and a consistent BD effort to expand the ecosystem. Whilst these objectives are harder to quantify, Camelot emphasises that its strategy comb…

Openblocks dashboard:

OpenBlock Labs

5. Could you provide the KPI(s) that you deem relevant for your protocol, both in absolute terms and percentage change, month over month, for the first of each month starting from October 2023 until April 2024, including the extremes? If you don’t know what KPI might be relevant for you or how to properly define them, please refer to the following document:

Thanks to its ecosystem-focused and long-term driven approach, Camelot was one of the strongest performing protocols during the STIP incentive period.

KEY METRICS

All of those metrics followed a relatively similar curve. While they naturally slightly slowed down during the weeks after the end of the incentives, all remain strong and very significantly higher than pre-stip numbers.

While some LPs probably left at the end of the STIP, a large part of the TVL decrease is related to ETH price action (most of our pairs being ETH-based), and a reaction to the recent market events in general. Camelot’s TVL was 60m pre-STIP, and is now sitting at ~100m after having reached ~140m during the STIP when ETH peaked at $4k.

Volume has been a perfect illustration of the success of that campaign, peaking at 3.4b in March, and maintained at 2.8b in April. In other words, except from March, Camelot generated more volume post-STIP in April than during most of the STIP.

But volume by itself can also be a deceptive metrics. We believe that, in most cases, it’s essential to combine it with fees to correctly assess its true value. Fees followed exactly the same curve, peaking at 4.32m in March, and holding steady at 3.63m in April.

In other words, volume has never been generated by aggressively lowering fees, but rather by an adapted incentives approach and a strategy that prioritizes LP returns. This allowed us to maintain strong natural returns for LPs, rather than betting everything on short-term incentives.

Users and trades followed almost the same curves as other metrics.

FOCUS ON PROTOCOLS AND ECOSYSTEM GROWTH

During the STIP we incentivized more than 75 different pools from various ARB protocols.

Contrary to a strategy focusing exclusively on TVL/volume/fees generation by prioritizing core and bluechip pairs, we chose an ecosystem-focused approach including many of our partners, a mix of Arbitrum OGs, smaller protocols, newcomers, and established projects from other ecosystems.

With those pools, rather than targeting high volume/fees returns, our intent was to highlight those protocols and give them more exposure to Camelot and the wider Arbitrum community. Those additional yields were a perfect opportunity for many users to discover protocols they hadn’t heard of and give them a try.

The STIP also allowed us to help many protocols to migrate their liquidity from v2 to v3, with those additional incentives helping them jumpstart their new CL pools – bringing a lot more capital efficiency and returns to their liquidity.

Finally, more than 15 protocols (Peapods, Yak, Apex, Polytrade, etc…) used the STIP as an opportunity to facilitate their migration/expansion to Arbitrum by seeding their liquidity on Camelot – which naturally means onboarding their users from other chains to Arbitrum too.

INCENTIVES METHODOLOGY

The choice of 15-days epochs gave us the possibility to:

• efficiently readjust our allocations when needed
• experiment more freely, knowing we could easily revert
• quickly onboard new Arbitrum protocols

The key part to understand our approach is that the STIP ARB was actually not a large part of our biggest pairs APRs. For any pool able to generate volume, we’ve always prioritized sustainable liquidity first, i.e. that is naturally incentivized by the fees it generates.

While aggressively cutting fees can sometimes be seen as an easy way to bring more volume, it actually ends up penalizing both LPs by lowering their returns, and ultimately dexes too, as the only remaining compensation for providers become emissions (whether it’s ARB or their own token).
The power of CL is to actually allow to compensate IL through the pools’ natural fees, which is the only way to properly maintain and scale liquidity in the long run.

We hence chose to apply to our ARB distribution the same logic we used for our own GRAIL emissions, which allowed us to save millions of dollars in 18 months, compared to what was initially planned (cf. https://twitter.com/CamelotDEX/status/1779117212441223536).

This can be easily illustrated by comparing some of the generated fees vs spent incentives:

• February 24, our weakest STIP month: 2.58m of fees for 1.2m of incentives spent (ARB + GRAIL)
• March 24, our strongest STIP month: 4.32m of fees for 1m of incentives spent (ARB + GRAIL)
• April 24, post-STIP: 3.63m of fees for 500k of incentives spent (GRAIL only)

To summarize, our approach has been to focus on the fees generation while keeping incentives as low and sustainable as possible, always with a long term approach in mind, which we think is relatively unique in the dex space.
We strongly believe that this strategy enables us to exploit these additional ARB incentives in the most efficient way, while ensuring that the newly-attracted liquidity is retained even once those incentives are exhausted.

New Plans for STIP Bridge

6. How much are you requesting for this STIP Bridge proposal?

Camelot is requesting 50% of its original grant, 1.545m ARB tokens.

7. Do you plan to use the incentives in the same ways* as highlighted in Section 3 of the STIP proposal?

YES. Camelot will maintain the same methodology and transparency commitments as detailed and executed in the first STIP grant.

8. [Only if answered “no” to the previous question] How will the incentive distribution change in terms of mechanisms and products?

-

9. Could you provide the addresses involved in the STIP Bridge initiative (multisig to receive funds, contracts for distribution, and any other relevant contract involved), and highlight if they changed compared to the previous STIP proposal?

Multisig (same as STIP): 0xEf9162fE27d319723feF7183348c87304a134c4B
Merkl distributor (same as STIP): 0x8BB4C975Ff3c250e0ceEA271728547f3802B36Fd
Fresh Nitro pools contracts (one per concerned pool) will be created when distribution starts.

10. Could you share any feedback or suggestions on what could be improved in future incentive programs, what were the pain points and what was your general evaluation of the experience?

Camelot was the first protocol to go directly to the DAO and propose ecosystem incentives. Following this, the STIP programme provided the necessary structure for Arbitrum protocols to receive incentives. Overall, Camelot believes that the STIP served its purpose of unlocking DAO funds and ensuring that builders who were committed and aligned with the ecosystem would receive support, and that the STIP bridge proposal continues to provide the necessary incentives for builders whilst a long-term programme is still being built out.

[Matt_StableLab]

Hello @Camelot ,

Thank you for your application! Your advisor will be SeedLatam Gov @SEEDGov

Please join the LTIPP discord and ping your advisor in the general chat so they can create a new channel and start communicating with you.

[SEEDGov]

gmgm @Camelot we are waiting you here to discuss your application!

[SEEDGov]

Following feedback on the proposal to establish the STIP Bridge, it was agreed to involve the LTIPP Advisors in this process with the mission to “help applicants gain insights into their proposals. This not only guides applicants through the process but also ensures that the DAO will review better proposals.”

Despite the inclusion of Advisors, this process does not involve the Council, leading us to believe that this addendum places a significant burden on the delegates who must review all the proposals. One of the reasons for the LTIPP was precisely to avoid this excessive burden. Moreover, the optimistic model adopted in this phase could raise concerns about the real control the DAO will have over these proposals, as reviewing six months of data for each applicant is time-consuming.

For this reason, we decided to accompany each application we reviewed with a brief report. We ask the delegates not to take this as an in-depth or definitive basis for deciding your vote, but rather as a high level overview that can potentially raise questions for your own analysis.

Regarding Camelot, STIP KPIs were:

• TVL growth
• Fees growth
• Volume growth
• Adoption of ARB as a base asset
• New partners and protocols supported on Arbitrum (both multichain and native protocols)

According to the metrics reported by OBL, the numbers are very encouraging:

They achieved considerable growth in TVL, fees, and volume, all of which have remained above their levels prior to the start of incentive distribution.It is particularly striking how they have managed to maintain very high levels of volume, generated fees, and DAU. Therefore, we congratulate Camelot on their success.

One point we emphasized when analyzing the execution of the plan outlined for the STIP was the discretion with which Camelot allocated incentives to over 75 pools, raising questions about the sustainability of the strategies.

Their explanations for this were included in the addendum and relate to a vision: ecosystem growth. Through incentives, they exposed many protocols to new users and even spurred the onboarding of new protocols. This is combined with an execution model that prioritizes sustainability, where the extra APR from incentives in ARB was a small part, with fees being the incentive that should prevail to prevent liquidity from migrating once those incentives are cut. For more data on their explanations, please check the Discord.

As can be seen in their reports, Camelot has shared very good data on the evolution of TVL, volume, and fees per incentivized pool in their epochs. Something we recommend to the applicant for the execution of this new program is to include more data in their biweekly reports about the amount of incentives allocated to a pool and the extra APR that ARB is boosting. This combined data will allow for gathering more information on efficient incentive allocation to later determine parameters in the Long Term Incentives Program.

Conclusions

The results shown during the incentive distribution are very positive, with the applicant having achieved the objectives set for the STIP. Therefore, it makes sense for them to propose continuing with the execution of their plan without any modifications.

We noticed in all the applications we reviewed that there is a significant drop in TVL during the last month. We believe there are multiple reasons for this, and there isn’t enough time to conduct a thorough and conclusive analysis of the long-term effectiveness of the STIP.