gm,
following the rejection of the initial proposal from the LTIPP Council, this week we’ll be re-submitting it on Snapshot with a few modifications. The council feedback could be summarized as:
- Incentives should go more towards users
- Lack of benchmarking with other bridging projects to justify LP requests
I believe in general there is a misunderstanding of Connext: we don’t aim to be a user-facing bridge;
our main users are apps, and we serve them and their users.
As a result, we brought more than $285m of LRTs to Arbitrum in the last 3 months, and more than $280m went through Arbitrum in the last 30 days alone.
We want Arbitrum to succeed, and our priority remains to attract more users to bridge into Arbitrum and Restake ETH on the L2.
The most straightforward way for us to do that would be to incentivize the liquidity in our pools (more liquidity = better pricing for apps we offer our Restaking service to), but, as the Council required to move the incentives toward users, we can switch the point of view:
In order to provide the best experience, we can incentivize users by subsidizing part of the bridging fees, and this will further boost the utilization of our pools which will increase our ETH TVL. Higher TVL enables us to provide the best pricing when the Restaking module is used.
Incentivizing users to bridge into Arbitrum has 2 benefits:
- We can help more users bridge away from mainnet fees, onboarding them permanently onto Arbitrum
- It helps to rebalance the AMM pool, as the restaking activity tends to unbalance the pool in the opposite direction. Having a balanced pool means that users restaking ETH don’t incur a negative price impact.
Therefore, we decided to:
- Remove the request of liquidity incentivization for our routers and LPs, and shift focus towards our users
- Refund 95% of the fees to the users bridging into Arbitrum, up to 13bps. Fees vary depending on the origin chain (from mainnet it’s 9bps, from other L2s, 13bps) so only the actual fees incurred will be refunded.
Gas fees will only be subsidized to users who are onboarding to Arbitrum (from any other network), and users exiting Arbitrum will not get subsidized.
Our estimate (according to the average of the last 7 days at the time of writing the original proposal) is for users to bridge 137k ETH during the pilot program.
Bridging fee rebate: 137,000 * 0.0013 (max fee) * 0.95 = 169 ETH
Tot ask: 446,472 ARB (1 ETH = 2,646.75 ARB at the time of writing)
Note: pricing the ask in ARB vs ETH as the pair is less volatile, thanks @pedrob for the suggestion.
Expected milestones
Month 1: 45k ETH bridged into Arbitrum (30% of ARB distributed)
Month 2: 90k ETH bridged (60% of ARB)
Month 3: 137k ETH bridged ($100% of ARB)
The Connext team agrees to return to the Arbitrum DAO any unused ARB funds once the 12 week LTIPP program is concluded