SECTION 1: APPLICANT INFORMATION
Applicant Name: Telaga
Project Name: Chronos Finance
Project Description: Chronos Finance is an Arbitrum native decentralised exchange (DEX) that is designed to maximise sustainable value creation for all participants; users, protocols, and the Arbitrum network. This is possible through a ve(3,3) model that allows us to build products that are guided by the following principles:
- Maximising value creation
- Rewarding long-term users
- Benefits for the whole community
Team Members and Qualifications:
0xCronos (Co-founder; CEO)
Satsy (Co-founder; CMO)
Atila: (Co-founder; CTO)
Dani.eth: (Smart contract developer)
Pabhetito: (Full-stack Developer)
Telaga (Business Development Lead)
Pandu (Project Manager)
Telegram: @o_Telaga (BD Lead) + @satsyxbt (CMO; Co-founder)
Do You Acknowledge That Your Team WIll Be Subject to a KYC Requirement?: Yes
SECTION 2: GRANT INFORMATION
Requested Grant Size: 525,000 ARB
Grant Matching: 2,500,000 veCHR
Chronos: The ARB Gateway (Chronos TAG)
Chronos TAG is a public infrastructure layer that will drive deeper liquidity for Arbitrum projects at the lowest possible cost. We have designed a bribe matching framework that uses ARB to match partner protocol bribes based on value provided to the liquidity hub (bribe value, liquidity deposited and veCHR locking). When compared to direct LP incentives, this is significantly more capital efficient as much more value is generated for each $ of incentive. Through multiplied voting incentives and increasing CHR scarcity, higher emissions will support higher TVL and deeper liquidity. Over the grant period Chronos TAG will be leveraged to achieve two objectives:
- Direct support for Arbitrum native projects to achieve long-lasting network growth
- Drive volume and liquidity for ecosystem ETH/ARB pairs through our hyper-efficient CLM
1. Deeper and cheaper liquidity through bribe matching – 250,000 ARB
Velodrome and pioneers like Curve and Convex have shown that bribe-for-emission models are a far more capital efficient way to drive liquidity. Although initially attractive, direct LP incentives are one of the least effective ways to drive network growth. The most recent estimate is that the bribe matching programme on Velodrome is attracting $10 in bribes for every $1 in OP spent; an unequivocal success (Velodrome Grant Performance Update - Monitoring - Optimism Collective). This shows the value creation that ve(3,3) models can generate for users, partners and the entire network with such mechanisms. Through effective growth, we want to establish Arbitrum as the most attractive place for builders.
In this light, we will continue building products that can drive sustainable revenue for our partners and users. Chronos has a live low-cost, high volume CLM solution, a financial NFT (fNFT) marketplace and our upcoming derivatives exchange (ChronoX) will generate further revenue that will be distributed to attract new users to Arbitrum, strengthen LP returns and deepen ecosystem liquidity.
Under the conditions imposed here, protocols will be encouraged to remain on Chronos to maximise the value available to them. This is important as reducing the cost for protocols to attract liquidity enables partners to direct development resources elsewhere. As this is universal for all our partners, this increases the overall sustainability for new and the 35+ protocols that currently partner with Chronos. To this end we request the following:
- Amount: 250,000 ARB
- Delivery: 15,625 ARB per week for 16 weeks
All partners will have their bribes matched to certain percentages based on pool type and bribing performance:
Core CLM pools (30%): ETH and ARB CL pairs that drive benefit the most revenue and volume for the ecosystem.
Core partners: (20%): A partner pool that sustains an average bribe value of at least $2000 over 2 epochs
New Arbitrum native partners: (20%): New projects native to Arbitrum with less than 500k marketcap onboarded onto Chronos for less than 4 epochs
Foundation partners (10%): A partner pool that sustains an average bribe value of less than $2000 over 2 epochs
To help partners build protocol owned liquidity (POL), we will issue a bribe boost to partners who deposit POL on Chronos. Furthermore, to be a growth catalyst for new Arbitrum native projects (<500k marketcap) we will issue a bribe boost based on low POL to give native projects the best chance of succeeding.
- 10% Arbitrum Native Boost: Min $50,000 (volatile / stable)
- 10% Bribe Boost: Min $250,000 (volatile) or $500,000 (stable)
- 20% Bribe Boost: Min $500,000 (volatile) or $1,000,000 (stable)
Bringing in the next generation of Arbitrum protocols - 1,500,000 veCHR
Depending on the adoption of Chronos TAG we would deploy any outstanding ARB from the bi-weekly stream to bribe match newly onboarded low marketcap Arbitrum native partner pools up to a value of 40%. If there is no outstanding ARB, we have allocated 1,500,000 veCHR over the course of the grant period to achieve the target rate. By directing resources to the projects that need it most, this will give new Arbitrum native projects the best chance at succeeding at growing their liquidity and supports the next generation of applications.
2. Locking in growth potential for Arbitrum users and protocols – 75,000 ARB
Whilst the maximisation of bribe value brings protocols enhanced cost efficiency to grow liquidity by attracting emissions and increasing user revenue; the other side of the coin (namely accumulating veCHR) is needed to unlock the full capacity of the Chronos system. We want to provide a low-cost platform that allows protocols and users to gain governance power over platform emissions. As a DEX for the entire community we have set highly accessible barriers for entry.
A growing number of protocols and users making a long-term investment provides better alignment for the entire ecosystem. Furthermore, increased CHR scarcity has an important indirect effect of bolstering sustainable revenue for Arbitrum LPs.
- Amount: 75,000 ARB + 1,000,000 veCHR
- Delivery: 4,687 ARB per week for 16 weeks
- Chronos will match any 2-year lock of liquid CHR worth $50-$99.99 to a value of 10% with veCHR
- Wallets max locking $100+ of veCHR will proportionally share a pool of 4,687 ARB per epoch. Only 2-year locks of liquid CHR locks are eligible.
- A bribe boost will be applied if protocols hit the listed lock milestones each week
3. Deeper liquidity for ecosystem pools on a high volume CLM – 100,000 ARB
To drive deeper ecosystem liquidity, we will use ARB to bribe core ETH/ARB pools on our CLM. This will bring more volume and drive better price execution for Arbitrum.
- Amount: 100,000 ARB
- Delivery: 6250 ARB per week for 16 weeks split as follows:
- 25% to WETH/USDC.e
- 25% to WETH/USDT
- 25% to ARB/USDC.e
- 25% to ARB/USDT
We sampled different CL solutions on the network on three separate days during the grant period to see which pools were most able to capture useful volume on Arbitrum. This shows that the Chronos CLM is hyper-efficient and is a robust choice to use ARB to drive adoption, users and volume growth for the network.
Any ARB that is redirected back to Chronos through treasury voting power will be automatically recycled into CLM pools. This will have a cumulative effect on bribes and therefore emissions and liquidity depth. Additionally, we will confirm this recycling in our bi-weekly report.
Chronos TAG Summary:
Partners could get up to 70% of their bribes matched in addition to the lock bonus. This will allow protocols to build liquidity in a sustainable way and has several benefits:
- Provides a clear path for projects to increase ARB governance power
- Supports bribing capacity that lowers liquidity costs
- Protects ARB price and drives value derived from ARB
- Protocols must bribe to benefit; defacto buy-in and real revenue is generated for users.
- Targets benefits for new Arbitrum native protocols to gain TAG benefits to grow liquidity
- Our proposal is fully costed and has used real data to achieve maximum impact at low cost
- Bribe matching is performed on a first-come-first-serve basis
- Partners must bribe, lock and deposit liquidity with the same address
- Any whitelisted protocol will be eligible for TAG incentives
- ARB is not eligible for matching
- No single partner / user will receive >10% of total incentives over the grant period
- To support the best of the newest builders, Arbitrum native projects will be pre-vetted to ensure that the team has shown a commitment to auditing and providing immutable, permissionless and decentralised contracts.
New Arbitrum native projects with <$200,000 of liquidity on Arbitrum cannot bribe with their native token at more than 1% of their total POL each week.
Partners must recycle at least 50% of ARB they receive from voting
Should any protocol engage in negative sum behaviour, say consistently dumping ARB and farming emissions without locking and not recycling, we reserve the right to terminate any incentives.
ChronoX - Brining in a new era for on-chain derivatives trading
Grant Breakdown: ChronoX is an on-chain intent based derivatives trading platform that achieves remarkable increases in capital efficiency over existing vAMM based products. The technology solves key liquidity issues and will bring in the next generation of scalable and high throughput on chain derivatives.
ARB is only deliverable after launch of this milestone
To drive an accelerated and organic adoption of the platform we are requesting ARB to incentivise traders based on profit and loss (PnL) on a weekly basis. To ensure transparency for ARB distributions and accurate tracking of trader performance, we are constructing a trader leaderboard that will be ready before the launch of ChronoX.
Total Amount: 100,000 ARB
Delivery: Only after the launch of ChronoX v0.81 on the 1st of November 2023.
- Weeks 1-13: 7,692 ARB will be distributed weekly and shared proportionally between all traders in profit above $500.
Please see a distribution schedule that also shows predicted revenue and daily volume for ChronoX Calculations / Partner List
We have a data driven, low cost and transparent proposal
We are the only proposal using a highly efficient bribes-for-emissions model
Both parts of the proposal work together to drive innovation, revenue and liquidity
Funding Address: 0x27db5c0a09e1eeb2bf34ad3ffd920fb44a6880d3
Funding Address Characteristics: 3/4 operational multisig
Contract Address: 0x9e31E5b461686628B5434eCa46d62627186498AC - Used to distribute incentives each week from the operational multisig
SECTION 3: GRANT OBJECTIVES AND EXECUTION
PART ONE: ChronoX - Brining in a new era for on-chain derivatives trading
We are requesting ARB to help us realise an ambitious and novel DeFi application. Due to the novel mechanism we provide a background for readers:
Description: ChronoX is a novel approach that takes the efficiency of an on-chain derivatives exchange to a new level. Currently, centralised exchanges (CEX) have a lot of liquidity but little security (see FTX), whilst on-chain decentralised exchanges have low liquidity but are secure and transparent. Through the automated markets for quotes (AMRFQ) framework, ChronoX will bring CEX liquidity on-chain in a trustless and completely secure way.
Current limitations: On-chain derivatives exchanges based on vAMM technology are significantly constrained in their capacity to be capital efficient by the need to reserve large amounts of liquidity for overcollateralisation. The cost of idle liquidity is further increased as when traders win the entire LP pool loses; thus extra risk must be priced in. The consequence of this is that liquidity becomes expensive as it is risky and inefficient. This makes it impractical to trade derivatives on-chain with meaningful volume. Order Books, although different also suffer through liquidity issues on-chain. Deep liquid books are not currently available on-chain and are the reason that 99% of derivatives volume is traded on centralised exchanges, as opposed to just ~80% of spot trading. By solving the liquidity conundrum, ChronoX aims to increase adoption of derivatives trading on-chain on Arbitrum.
Objectives: We want to establish Arbitrum as the home for a new primitive of highly liquid and high throughput on-chain derivatives trading. At the end of our development roadmap we envision a CEX like experience for users on a secure, decentralised on-chain platform. Coingecko reported ~2,460 billion in derivatives trading volume during March 2023 alone. This puts into perspective the potential gain for Arbitrum that would come from taking market share.
Key Performance Indicators (KPIs):
Time spent at maximum overall interest (OI): This will demonstrate that ChronoX is operating at maximum capacity and serves a direct measure for adoption of the platform.
Increasing number of profitable traders: We want to see an increasing number of profitable traders on ChronoX as these users are most likely to provide sustainable growth to the platform.
Increasing volume and fees: With the above KPIs positively met, increased platform revenue will provide more opportunity for us to incentivise traders and bolster revenue for the Chronos ecosystem.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?: By solving on-chain perpetuals limitations through a new level of capital efficiency: Through the ARMFQ model and integrating with trading engine built by SYMMIO, analyses show that ChronoX will achieve spectacular increases in capital efficiency
- 728x more capital efficient than GMX
- 90-100x more capital efficient than Gains Network / Level Finance
ChronoX will eliminate the need for significant amounts of idle liquidity. After a trader opens a request, the engine will source liquidity from a network of institutionally backed market makers. This is what allows for orders of magnitude higher efficiency, as the trading engine operates through liquidity aggregation to complete a trade instead of liquidity fragmentation. Through ChronoX significantly less capital will be required to scale the platform. Furthermore, by significantly reducing the cost of liquidity this will allow new builders to leverage plentiful liquidity to build new products on top of ChronoX. For example, a completely trustless and hedged stablecoin (see Ethena) that removes the need for centralised intermediaries becomes possible.
Justification for the size of the grant: Arbitrum has an excellent opportunity to deploy ARB and establish the network as the home of intent-based derivatives trading. Given the availability of the trading engine on competing chains, we believe that our strategy is necessary to attract the best traders onto Arbitrum and to capture significant market share. By using ARB to incentivise traders based on PnL this will bring organic growth and is a genuine benchmark for assessment.
To this end, we have requested a total of 100,000 ARB which over the course of 13 weeks is projected to generate $204,955 in revenue. Our estimate here is based on the user adoption for the recently launched Thena implementation of the SYMMIO engine. Given that ChronoX will have trading incentives and Thena did not over the period we analysed, we believe that our growth estimate is likely to be conservative.
Please see Projections here:
Execution Strategy: ChronoX v0.81: (launching on the 1st of November 2023) will launch with over 100 assets and up to 40x leverage. The trading engine audit has been completed and in partnership with SYMMIO we are in the process of enabling the infrastructure stack to be accessible on Arbitrum. In support of our commitment we are already developing a functional UI:
Revenue Structure: ChronoX exemplifies our commitment to maximise value creation that is shared by the entire community. In line with this, 100% of revenue and ARB will be used to drive liquidity for Arbitrum ecosystem pairs.
- 100% of fee revenue will buy back CHR that will be max locked into veCHR. We will use this veCHR to bribe core ETH/ARB CL pools to fulfil our goal of being an infrastructure for liquidity growth that benefits the Arbitrum ecosystem. More broadly, this will support Arbitrum LP returns denominated in CHR across all pools.
Grant Timeline: ARB is only deliverable after the ChronoX launch.
We will allocate a proportional share of 7,692 ARB to traders each week based on PnL and will deliver this retroactively starting from the day of launch on November 1st and then normally as based on the bi-weekly stream. We will have an open volume and PnL dashboard for the platform that will allow for monitoring of distributions.
PART TWO: Chronos TAG
Objectives: Arbitrum currently sits in a strong position as the leading ETH layer 2 as measured by TVL. The economic strength and sustainability of the ecosystem will be increasingly threatened if protocols find it cheaper to build liquidity on new and competing chains. Through Chronos TAG, we want to drive the future strength of Arbitrum through a capacity to support protocols through a highly efficient and sustainable public value creation layer that can bootstrap and sustain liquidity at low cost.
- Cementing Arbitrum as the ETH layer 2 for protocols
Key Performance Indicators (KPIs): The basis for the sustainability and value creation potential for the Chronos TAG economy relies on participants needing to provide value (lock CHR and bribe) to compete for ARB incentives. This creates a competition that self optimises for mutual value creation with participants that are aligned with long-term goals. A growing number of participants aligned in this way will deepen liquidity through increasingly robust LP returns denominated in CHR and will provide a wider range of deeper pools available for Arbitrum traders. To this end, we will track the following KPIs that can measure the effectiveness of Chronos TAG to achieve its’ goals over each epoch (7 days):
- Increasing numbers of new Arbitrum native and current partner protocols bribing
- Increasing number of total pools bribed
- Increasing average and total value of bribes on Chronos
- Increasing number of new Arbitrum native and existing partners max locking CHR
- Increasing number of total pools on Chronos
- Increasing liquidity for Chronos UNIV2 style and CL pools
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?: To analyse the effectiveness of the Chronos model to create value, we previously performed a study (May-July 2023) to understand which Arbitrum DEXs are most able to generate revenue from volume. The data showed that Chronos was the premier revenue generating DEX on Arbitrum. This makes Chronos a good choice to provide a multiplicative effect on incentives and will serve as a growth catalyst for the Arbitrum ecosystem. Chronos TAG is significantly more sustainable than liquidity mining and maximises value creation for Arbitrum whilst ensuring governance decentralisation.
- Chronos has significant potential for revenue maximisation for Arbitrum users from incentives
Tied to Chronos TAG will be a Chronos TAG dashboard. This will allow tracking of protocols / wallets that have derived benefits from the programme and will show how Chronos TAG is performing. Additionally, through an “ARB Impact” data graph. The graph will show how each ARB spent has translated into value generated on Chronos.
- A robust, transparent framework that shows demonstrable impact and encourages positive sum behaviour
We have established partnerships with 35+ protocols on Arbitrum including key ecosystem players such as Radiant, Frax, Tangible and PlutusDAO that operate across different DeFi applications. We will continue to seek new partnerships to grow the liquidity hub and will always provide treasury veCHR to give protocols a head-start at building liquidity at low cost. We have already given over 6,000,000 veCHR to bootstrap protocols. Additionally, Chronos TAG will support smaller Arbitrum native projects. This will help foster the next generation of applications on Arbitrum.
- Chronos is already a liquidity hub for several key ecosystem players
- Chronos has a low-cost method for new protocols to bootstrap liquidity
- We will focus on supporting new and innovative Arbitrum native protocols
We launched with no outside or VC investment and instead chose to bootstrap the project through an open-to-all NFT collection and airdropped 55% of our initial supply to protocols and users from other ve(3,3) projects.
- We are 100% Arbitrum community owned
In just 5 months, Chronos has amassed over $265M in trading volume, has created $4.7M in emissions value for Arbitrum LPs and has generated $2.25M+ in real swap fee and bribe revenue that is entirely shared with Arbitrum protocols and users.
- 100% of real revenue that Chronos generates is shared with protocols and users
Justification for the size of the grant: As previously noted, data supports the efficacy and cost-effectiveness that bribe and locking incentives can provide for an ecosystem. This represents an opportunity for Arbitrum to derive significant value for money.
To derive reasonable ARB values for Chronos TAG, we have assumed that the programme will provide a 3-4x effect on TVL and revenue. For reference Velodrome saw a ~400% increase in TVL following the initial OP grant: (https://defillama.com/protocol/velodrome). Our current TVL is at $4.1M and thus we analysed the current distribution of veCHR value and tracked historical user and partner bribing and locking behaviour and have retroactively applied the Chronos TAG criteria to obtain the most accurate possible request that takes into account our value creation multiple.
Please see our projections here:
We hope that this shows that we are making the best possible assessment for the use of ARB and by providing a robust KPI framework for Chronos TAG that will be included into our bi-weekly report, Arbitrum has a clear path for assessment that is cost-protective for funds.
Execution Strategy: Funds will be streamed into our operational multisig:
Our deployer contract:
We will track all wallets that bribe, provide liquidity and lock veCHR under the Chronos TAG criteria. Partners must follow the specified Chronos TAG rules. At the flip of each epoch, rewards will be distributed based.
The effectiveness of the programme will rely on refinement to maximise efficiency. We hope the Arbitrum community will appreciate the data modelling that used real data to derive reasonable values for our proposal and our meritocratic method that provides robust benchmarks for assessment.
Grant Timeline: Following delivery of the first bi-weekly stream that will fund Chronos TAG for 14 days (53,125 ARB), we will distribute incentives through our operational multisig retroactively (if necessary) starting a day after the voting period deadline (12th of October). This coincides with a new epoch on Chronos. Chronos TAG will continue until the end of the grant period. Additionally, should our expected values fall short of our projections, our bi-weekly report will be used alongside our KPIs to augment the request to the most appropriate value.
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?: Yes
SECTION 5: PROTOCOL DETAILS
Is the Protocol Native to Arbitrum?: Yes
What date did you deploy on Arbitrum?: 27th April 2023
Access to extensive DEX performance metrics can be found through our data analytics dashboard: https://dune.com/0xkhmer/chronos.
In 5 months, Chronos has generated $265M+ in volume, created $4.7M in emissions value for Arbitrum LPs and has shared all $2.25M of real bribe and swap fee revenue with our partner protocols and 4000+ veCHR and 150+ chrNFT holders.
We have partnered with 35+ projects across a range of applications on Arbitrum.
Launched a live custom built financial NFT marketplace for veCHR and chrNFTs: https://marketplace.chronos.exchange/
In collaboration with Dyson, we launched a custom and automated low cost, high volume concentrated liquidity management solution that reached $1M in TVL and has brought an increase of 200-500% in fees/volume. We are imminently launching CLM pools for partners such as Radiant, Frax, Plutus DAO, Liquid Driver and are available to any partner.
A full V2 upgrade: 1) Doubled weekly emissions decay and reduced the total theoretical supply by 35% 2) Increased our maNFT emissions boost curve from 2x at 6 weeks to 3x at 12 weeks 3) Enabled cross maturity adding and merging for maNFTs of any boost level 4) UI/UX upgrade 5) In collaboration with Orbs Network, we enabled TWAP and limit orders for traders.
Protocol Roadmap: In line with our design ethos, our future is geared towards creating significant revenue streams that are sustainable and are 100% shared to benefit Arbitrum users.
ChronoX is at the forefront of a highly innovative intent-based derivatives exchange model. Through revenue generated, this has the potential to drive liquidity for Arbitrum ecosystem pairs.
We want to solve the current lack of a low-cost liquidity infrastructure layer on Arbitrum. Through Chronos TAG this will enable new and existing protocols to have the lowest costs for liquidity building and maintenance, whilst simultaneously generating significant increases in real DEX revenue
In Q4 2023, we will be launching a new CL platform on Chronos to provide a wider variety of CLM solutions and manual UNIV3 positions
Audit History: Please see our ImmuneFi bug bounty programme that summarises the scope for bounties and our audited code and contract addresses: Chronos Bug Bounties | Immunefi.
In summary, our smart contracts were forked from Thena V1. The Thena smart contract codebase was inherited from Velodrome that had undergone robust auditing (Code4rena | Keeping high severity bugs out of production) and were subject to a bug bounty contest (Code4rena | Keeping high severity bugs out of production).
The codebase taken from Thena for Chronos V1 was previously subject to a comprehensive audit and was determined to be secure. Downloaded it here: https://github.com/peckshield/publications/blob/master/audit_reports/PeckShield-Audit-Report-Thena-v1.0.pdf. Additionally, the Chronos V1 implementation underwent a Certik audit and was verified to be secure (Chronos Exchange - CertiK Skynet Project Insight).
Furthermore, our V2 gauge upgrade and Chronos Marketplace contracts underwent a Peckshield audit, where no outstanding vulnerabilities remain and can be verified here: (https://github.com/ChronosEx/Chronos-ContractsV2/blob/main/audit/PeckShield-Audit-Report-Chronos-v1.0.pdf)
SECTION 6: Data and Reporting
Is your team prepared to create Dune Dashboards for your incentive program?: We have a dedicated service provider for dashboards. Our current dashboard allows anyone to access all DEX metrics and already meets the necessary criteria for reporting: https://dune.com/0xkhmer/chronos.
We will create new dashboards specific to the Arbitrum grant to enable the most transparent reporting possible:
Chronos TAG Dashboard: This will include a veCHR locking and Chronos bribe leaderboard that will allow us to track new locks that are eligible for TAG incentives. Similarly, the leaderboard will be coupled to partner bribing to track boosts and will all show ARB distributed to all wallets
Tied to this will be an “ARB Impact” data graph. A graph will show how each ARB spent has translated into value generated on Chronos every 4 epochs.
ChronoX Dashboard: A leaderboard that tracks the top traders based on PnL and volume and shows how ARB incentives have been distributed.
Should any of the leaderboards not be functional, we have internal tracking that will allow us to quickly generate a report that tracks all ARB distributions.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?: Yes
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