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: Luca, Head of Trading
Project Name: D2.finance (formerly known as Dsquared.Finance)
Project Description: D2.finance delivers actively traded Options-based DeFi Vaults on Arbitrum, utilizing key Arbitrum protocols as a base layer. Integrations for our V2 vaults audited by Paladin are with GMX (GMX team invested and token swap processes), Camelot (one of the first round-table members), AAVE, 1inch, Lyra, and TraderJoe.
D2.finance offers a range of strategies tailored for different risk appetites and on different platforms with dedicated vaults, operating on an epoch system with a vault specific to the Arbitrum ecosystem ARB++.
Our hybrid trading engine combines quantitative signals and qualitative judgment. Our core vaults capture and capitalize on opportunities across risk profiles.
Team Members and Qualifications: D2.finance has no employees; it relies on stewardship of BWS Labs until relaunching as a DAO under https://www.midao.org/ Dual Structure Governance when protocol will be valuable enough not to be easily attacked by “Risk-Free Value Raiders”. BWS Labs may hire and/or engage key contributors according to their areas of expertise.
BWS Labs Team/ Contractors:
- Head of Trading- Luca ( portfolio manager in volatility strategy for multiple Billions Dollar AUM Hedge Funds. Generated about 21M for investors during 5 years in solely managed strategies in TradFi)
- Growth - Frank (also Rodeo)
- Communications/Community - Vate (also Mithical)
- Solidity Contractors → https://twitter.com/BowTiedPickle / https://twitter.com/BowTiedOriole
- Security Contractor → https://twitter.com/BowTiedIguana (also Jpeg69) / Renzor
- Design Contractor → Edis (also Umami)
- FE Contractor → Greypixel (also Umami) / FarmerCarlon (also Rodeo)
- Socials → Pauline
- Graphics / Meme- > Simone
- Official landing page: https://d2.finance/
- Docs: D2.Finance Overview - D2.Finance
- Medium articles: Dsquared.finance – Medium
- Dune Analytics: https://dune.com/cadmusbenedictus/d-squared-finance
- D-Squared Twitter: https://twitter.com/Dsquaredfinance
Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?: Yes
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: 500,000 ARB (Initial: 125,000; Additional: 375,000 only upon reaching KPI milestones and proving its effectiveness on the Arbitrum ecosystem)
- 80% to the Vaults
- 20% to GMX/DSQ V2 Pool distributed as Camelot Nitro Pool
Grant Matching: We will add the same amount on esDSQ in GMX/DSQ nitro pool (which allows 2 tokens as rewards)
Grant Breakdown: The primary objective of this grant is to create a flywheel for the start of our vaults and increase liquidity to the GMX/DSQ trading pair on Camelot. The D2.finance vaults utilize the assets under management for trading across Arbitrum protocols, which have a direct correlation between AUM and fees generated for Arbitrum ecosystem protocols. Additionally, at the time of writing, we have ~400k USD of Pool liquidity in both Camelot V2 and V3.
Our quant-based trading will drive substantial notional value through GMX and Camelot, and also through other Arbitrum protocols; this is especially true for ARB++ strategy, thus increasing volume and fees for the underlying protocols and ecosystem.
Our Unique Position in the Ecosystem:
For clarity, our proposal stands out in a unique way. To our knowledge, no other Active Vaults protocols boast the number of integrations we offer, all of which have been audited. If we attain a significant Total Value Locked (TVL), the impact of the grant will be magnified due to the increased volumes and fees generated through our partner integrations.
Here’s a snapshot of our integrations:
- GMX: (Swaps, Limit Orders, Leverage Positions, GLP)
- Camelot: (Swap, LP)
- Lyra: (Options, LP)
- Rysk: (Options, LP)
- Aave: Lending and borrowing
- TraderJoe: Swaps, LP
- 1inch: Swaps, Limit Orders
By incentivizing liquidity in the vaults, we can drive more trading volume and, in turn, will increase the fees generated by our vaults, which will help us sustain our operations and continue to innovate.
Given that we particularly value our official partnerships with both GMX and Camelot we are looking to deploy 100% of the grant funds in a way that benefits them either directly into the GMX/DSQ pool or indirectly through trading of our Vaults.
In particular, we are very grateful to GMX for which we completed a token swap on December 10, 2022.
And where GMX team has been invested in our pre-seed rounds, and they are the top shareholder of the protocol (after recent reorganization)
*Arbitrum Transaction Hash (Txhash) Details | Arbiscan
More details on how GMX and Camelot benefit directly can be found in the community call with them below:
Camelot x GMX x DSquared - 9th Feb 2023 (with coinflipcanada and IronBoots)
Or our Masterclass for V3 with (IronBoots).
This grant will help us achieve our goals and significantly contribute to the Arbitrum ecosystem.
Funding Address: 0xe7eb925300075E49fc5CAaD5d408A50Dd22f92D6
Funding Address Characteristics: This is a multisig address requiring 3/5 signatures. The signing wallets are hardware-protected and controlled by BWS team and trusted members of Arbitrum ecosystem bluechip protocols. You can see the esGMX allocation in the safe
DSQ/GMX Pool (Camleot LP V3)
GM vault (formerly known as G-apex)
Vaults Version FAQ
Vaults V0: Vaults have been live since November 2022, funded exclusively with internal capital. They are unsecured and managed by an EOA.
Vaults V1: This is the original design we were developing before the FTX blow-up, which prompted changes in both regulatory compliance and security standards. Vaults V1 are semi-custodial.
Vaults V2: The focus of the current Paladin audit, Vaults V2, operates under a fully modular architecture. It incorporates embedded risk management rules and can only be deployed from a tradeApp. Vaults V2 boast two layers of security: first at the Solidity level and then risk management limits at the OMS level (internal traderApp), akin to hedge fund practices that Luca is used to.
Vaults V3: Code name “Omni Vaults”, aims to meet institutional requirements and is under development utilizing Chainlink CCIP.
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: The primary objective of this grant is to create a flywheel for the start of our vaults and increase liquidity to GMX/DSQ. Our architecture utilizes, but not limited to:
- AAVE, Camelot, GMX, Lyra, Rysk, TraderJoe and 1inch
Our quant-based trading will drive substantial notional value through Arbitrum protocols, thus increasing volume and fees for the underlying protocols and ecosystem. By incentivizing liquidity in the vaults, we can drive more trading volume and, in turn, will increase the fees generated by our vaults, which will help us sustain our operations and continue to innovate.
To demonstrate our commitment and belief in our project, we’re initially requesting a grant of only 125k (comprising 100k for vaults and an additional 25k for GMX/DSQ liquidity). This represents approximately 1/3 of the TVL. We wish to highlight that we will seek the further 375k only if the vaults, set to expire on 19th January, reach their maximum capacity (CAP). The maximum request will, in any scenario, not exceed the Cap.
Indeed, as our vaults go live, we project a surge in liquidity needs, especially once the market grasps the full breadth of our offering. This anticipation aligns with our strategy for the second version (v2) liquidity, as we predominantly envision utilizing v3 exclusively for POL.
Key Performance Indicators (KPIs): We will measure the success of this grant using the following KPIs:
- Total value locked (TVL) in our vaults growing steadily toward the 10M scalability goal
- Number of users of our vaults with more than 10k USDC allocations
- Fees generated by our vaults in relation to TVL and performance
- Fees and Volumes generated for the underlying integrations
- Number of partnerships with other Arbitrum DeFi projects
We expect significant growth in all these metrics due to this grant.
Tracking TVL growth is crucial, as it directly correlates with the protocol’s success. Higher TVL translates into increased fees and reflects growing user trust and confidence in our protocol. This will be beneficial not only for our protocol but also for our partner tokens like GMX and Camelot, as it will drive higher liquidity and trading volume for them.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?: Receiving this grant will enable us to foster growth within Arbitrum in 2 key areas:
Attracting liquidity into the actively managed trading vaults
- greater volume in the trading vaults equates to more active trading volume/fees across the underlying protocols
By showing growth and proof of concept, ART, our sister protocol tailored at institutions, will have measurable back data to help onboard significant institutional funds into the Arbitrum ecosystem via the quant trading vaults.
Justification for the size of the grant: Our estimated capacity for the vault is approximately 10M USD.
A 4% boost ( ⅘ of the grant) to create a performance floor can go a long way, especially under these market conditions.
D2.finance / BWS Lab’s hybrid model leverages the specialist skills of a world-class team with a provable P&L from years of profitable trading in TradFi. Head of Trading, Luca, brings his unique investment philosophy, process, and approach to risk-managed volatility trading. Each vault at D2.finance combines tailored quantitative signals with the expertise of direct, real-time human judgment, all while leveraging the operational infrastructure and technical integrations made possible by DeFi protocols on Arbitrum.
By funding a grant for D2.finance, the funds will be put to active use within the Arbitrum ecosystem, driving a continuous flow of trading volume and fees across the ecosystem integration partners.
Beyond direct application, our vaults have an inherent advantage of indirectly bolstering Arbitrum’s appeal. Particularly with traditional finance entities that have remained on the sidelines, introducing a robust Hedge Funds offering catalyzes their interest in the crypto space and Arbitrum ecosystem. This inevitably magnifies the allure of exploring the ecosystem, leading to increased liquidity and activity on Arbitrum. Our strategy is designed not only for immediate benefits but to also serve as a magnet, drawing both conventional and emerging financial players into the fold. The greater the TVL D2.finance can capture, the bigger net benefit to the entire ecosystem through notional trading value.
V0 Notional performance:
With TVL driven by internal funds (v0 vaults ranged from 2000 to 20000 USDC) D2 vaults have been able to create already over 1 Million USD+ in notional volumes across the Arbitrum ecosystem (see EOA wallets above)
- The first epoch of the ETH++ Vault generated 300k of volumes in GMX alone:
- ETH++ Vault generated ≈3.6% fees of AUM in GMX in 1-2 months epoch, ≈20% if annualized.
As DSQ can be staked for claims on platform rewards, we expect the demand to grow with the TVL in the vaults and, as such, we aim to incentive a GMX/DSQ Camelot V2 LP pool to both meet the demand and benefit both Camelot and GMX.
Vault Incentives (4/5 of grant) will be distributed gradually based on the performance of the quant trading vaults, and distribution will be ramped up based on successful KPIs
DSQ/GMX V2 Liquidity Pair (1/5 of grant) will be distributed proportionally over a 3 month period to the Vault Incentives in order to accommodate the expected need for DSQ liquidity
A conservative estimate is that if our Vaults achieve 10M TVL / AUM we will generate north of 1M dollars of fees in the ecosystem annually.
Risk Management for the trading/vault products:
A sustained period of live trading experience is required to learn important risk management lessons. Theory alone is not enough. Our Systematic Dynamic Risk Management framework has been developed through many years of practical experience and academic research and has been battle-tested at the institutional level in TradFi.
Our core approach is to manage risk through efficient use of options and hedges dynamically optimized according to market conditions. By adding market hedges to the portfolio, we can take advantage of opportunities created by downside volatility and market crises, while still maintaining some upside potential.
Protocol Security:D2.finance has industry-leading security and risk management practices in place. Security - D2.Finance
Grant Timeline: Funds will be used over November, December (up to 125,000 ARB) and January ( up to remaining 375,000 epochs), starting from the initial grant deposit.
We understand that the funds will be streamed linearly over the 3-month grant program duration.
This funding structure ensures that resources are allocated efficiently and in line with the protocol’s performance. It also incentivizes us to achieve sustained growth and success by linking the release of funds to specific, quantifiable milestones.
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
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?: Yes, D-Squared is native to Arbitrum and was launched in Q4 2022 on Arbitrum
On what other networks is the protocol deployed?: N/A
What date did you deploy on Arbitrum?: Nov 21, 2022
Protocol Performance: BWS Labs provided performance updates regarding the vault initially hosted on the legacy protocol of dsquared.finance.
Please note that past performance is not indicative of future results.
GLP++ 86% APR (5 epochs) https://twitter.com/BondiWealthSec/status/1645687589637328896?s=20
ARB++ 33% APR (1 epoch) https://twitter.com/BondiWealthSec/status/1663034922611937281?s=20
ETH++ 31% APR (1 epoch) https://twitter.com/BondiWealthSec/status/1630469337453821952?s=20
Protocol Roadmap: Q4 2023 Live vaults
We’re delighted to inform that the audit of Paladin as 27th September 2023 is now completed.
Trading via the ARB++ and ETH++ vaults will commence on Friday 6TH October.
In the spirit of stress-testing our security, we will invite hackers to attempt to breach our system, and if successful, they will be rewarded with 100% of the hack, similar to the approach taken by Yearn Finance in the past.
Following this phase, we plan to incorporate both Luca’s and Medallion funds (Private Investor class). After one epoch, the Medallion allocations will be returned to their original addresses for those who may choose to reinvest once vaults are open (no action is required).
With a successful phased rollout of the vaults, we will accept funds into the vaults for active quant trading.
Note: For V3 Vaults we are looking to integrate other Arbitrum protocols such as Rysk, aevo, dopex, rodeo, and more alongside Chainlink CCIP, allowing liquidity from other chains to be seamlessly and securely utilized on Arbitrum
Audit History: Paladin Sec Audit: D2
Provide details on how your team is equipped to provide data and reporting on grant distribution.
Is your team prepared to create Dune Dashboards for your incentive program?: Yes, our team will create a Dune dashboard to report incentive program data and key KPI indicators. We have created a Dune dashboard to report the DSQ token sale details and will implement it similarly, see below:
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread? We agree to provide bi-weekly updates on the Arbitrum Forum thread, including the use of the Dune dashboard as a key reporting metric. We are committed to transparent communication of the KPI status and progress of grant incentives. We have committed to weekly updates on our discord to maintain transparency and accountability to our community.
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