[D2 Finance] LTIPP Application Draft - FINAL


Applicant Name: HWxFrank

Project Name: D2 Finance

Project Description: D2 Finance is a Multi-Strategy Hedge Fund, 100% on-chain, 100% non-custodial

D2 Finance brings the sophistication of a top-tier hedge fund on-chain. Single click deposit into Institutional Grade Options Based Strategies focused on risk adjusted returns through decentralized, actively managed vault architecture, tailored to varying risk levels. Major integrations are GMX, Camelot, Lyra, 1inch, TraderJoe, AAVE, Rodeo.

D2 Finance aims to harness its existing and burgeoning institutional fund contacts to facilitate on-chain asset exposure through institutional grade infrastructure, with fully transparent and verifiable risk parameters on-chain.

Team Members and Roles: D2 Finance has no employees; it relies on stewardship of BWS Labs until relaunching as a DAO under https://www.midao.org/. BWS Labs may hire and/or engage key contributors according to their areas of expertise.

Contributors Past and Present:

  • Trading- Luca (Portfolio manager in volatility strategy for multiple Billions Dollar AUM Hedge Funds)
  • Growth/Ops - Frank (also Rodeo)
  • Communications/Community - Vate (also Mithical)
  • Chief Risk Officer - Alex
  • Investor Relations - TBD (onboarding ongoing to target presence in HK, Singapore and EU markets)
  • Solidity Contractors → D2 does not retain a dev team, instead we utilize a reflexive partnership model whereby we work directly with partner protocol dev teams to integrate their product with the D2 Trading App in return for true product usage and volume. This enables D2 to scale without limitations.
  • Solidity / FE Contractors → FarmerCarlton (also Rodeo)
  • FE Contractors → Phoenix (also Kairos)
  • Socials / Events → Pauline and Shannon
  • Graphics / Meme- > Simone
  • Legacy Contributors: BowTiedIguana, BowTiedPickle, BowTiedOriole, Edis, Greypixel,…
  • 21 D2 Rangers actively participate and are crucial in the decision-making process.

Project Links:

Contact Information

Do you acknowledge that your team will be subject to a KYC requirement?: Yes

SECTION 2a: Team and Product Information

Provide details on your team’s past and current experience. Any details relating to past projects, recent achievements and any past experience utilizing incentives. Additionally, please provide further details on the state of your product, audience segments, and how you expect incentives to impact the product’s long-term growth and sustainability.

Team experience
The D2 Finance core contributors are uniquely positioned to take advantage of our deep experience running complex volatility strategies for Multibillion dollar Hedge Funds as well as proprietary institutional grade tooling adapted to DeFi:

Head of Trading: Luca

  • Portfolio manager for Multi-Billion Dollar AUM Hedge Funds
  • Specialization in volatility strategies
  • Proven TradFi track record and DeFi native

Chief Risk Officer: Alex

  • Extensive experience in Traditional Finance risk management at a director level
  • Board advisor for multiple institutional digital asset firms
  • Proven TradFi and Digital asset track record
  • Proven Compliance / Risk background to attract institutional money

Growth/Ops: Frank

  • Experience running a multi-discipline engineering team for a >100m Oil & Gas company
  • Embedded DeFi native since 2017, full time DeFi BD and operations since 2020
  • Strong network on Arbitrum and EVM chains

Investor Relations: on-boarding

  • D2 is currently on-boarding 2 investor relations personnel based in Hong Kong
  • Both IR candidates have been recommended from Luca’s past clients and have networks within the target family offices in Asia Pacific region

Execution Trader: Natalia

  • D2 Finance has on-boarded an execution trader with strong experience as an execution trader in traditional finance as well as familiarity with Defi trading structure
  • Experience includes FX sales, Blackrock portfolio EU FX, MM emerging markets at Morgan Stanley

What novelty or innovation does your product bring to Arbitrum?

D2 Finance brings a unique and innovative value proposition to the Arbitrum ecosystem consisting of; D2’s distinct position to on-board institutional capital to Arbitrum, a direct positive feedback loop to integrated protocols, and unique implementation of complex strategies typically reserved Multi-Billion AUM Hedge Funds through accessible non-custodial smart contract vaults and the strategic use of epochs to align investment opportunities with market conditions.

D2 Finance has already generated significant volume within the Arbitrum ecosystem and through our partners (>$8.28m of volume directed through partners), indicating a strong proof of concept.


To our knowledge, no other Active Vaults protocols boast the number of integrations we offer, all of which have been audited, or provide the direct benefit to the Arbitrum ecosystem through true volume in terms of TVL / Volumes ratio.

We’re not aware of any other protocol that has managed to generate over $8.28 million in total volumes within the ecosystem (not including the ~$10 million in Lyra) that goes directly through our partner protocols boosting their volumes and fees earned, from a starting point proof of concept and capped TVL ($220k). Our vaults were quickly filled to capacity, hitting the cap put in place on TVL for security reasons. Now, we’re poised for scaling.

Institutional Grade Infrastructure
Our platform features advanced, institutional-grade infrastructure, including a unique non-custodial smart contract vault. This vault is developed with custom, audited code (available for review at D2 ), allowing users to deposit capital during specific funding epochs. Furthermore, it facilitates trading on the secondary market on Camelot as if it were any other token, offering the most straightforward UX to engage with or withdraw from complex strategies with a simple swap.

These epochs are tactically aligned with the current opportunity landscape, setting us apart from the typical offerings in the DeFi vault sector that often rely on static strategies. This dynamic approach positions us to stay ahead, effectively navigating the markets where static strategies, which are commonly offered by other DeFi vault protocols, may become less effective over time.

Each of our options-based vaults employs a distinctive trading strategy, meticulously designed to take advantage of diverse market inefficiencies while adhering to transparent and verifiable risk parameters on-chain. This approach enables exposure to varying levels of risk in an accountable manner.

We aim to bring institutional capital looking for digital asset exposure into the D2 vaults, which creates long term sticky capital and trading volume in the ecosystem.

Camelot DEX
As our Vaults are deployed 100% on Camelot, any TVL on D2 is also a TVL increase for Camelot.
We are proud to have been one of the first members of the Round Table.

Is your project composable with other projects on Arbitrum? If so, please explain:

Our project utilizes the infrastructure of key Arbitrum protocols to facilitate our trading strategies, driving real volume through our partner integrations including:

  • GMX (perps, LP)
  • Camelot (swaps, token, secondary market)
  • Lyra (options markets)
  • Rysk (options markets)
  • Premia (options markets)
  • Stryke (prev. Dopex)
  • AAVE (lending/borrow market)
  • and more (ie. 1inch, TradeJoe, Silo, Dolomite, Rodeo, etc)

Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?

No, D2 Finance employs some of the most complex managed trading strategies available in DeFi including a mix of:

  • Volatility arbitrage strategies, Relative Value opportunities ( e.g. options vs LP), and funding arbitrage.
  • Our strategies are deployed and managed according to the strategy mandate mimicking a true dynamic hedge fund and not just a wrapper on a static strategy.

Our strategies are typically reserved for Funds with Multi-Billion AUM, comparable will be similar to other pod shops like Millennium, Citadel, Brevan Howard, etc., once we reach scale.

How do you measure and think about retention internally? (metrics, target KPIs)

Retention is considered as TVL growth in the vaults and “sticky” capital in the vaults. The targets include:

  • Growth: Targeting >200% MoM growth
  • Epoch Retention: 70% Vault TVL rollover
  • TVL : Growth from 200k to 20M over 12 months via Institutional Ticket On-boarding and whitelisting targeted user base

Relevant usage metrics - Please refer to the [OBL relevant metrics chart 22](OBL Data Reporting + KPIs - Google Docs). For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section:

D2 Finance does not fall under the typical categories listed in OBL chart 22, rather we replicate a top tier hedge fund on-chain. As such our key metrics should be measured in TVL, performance, trading volume across arbitrum, and fees generated.

Volume & TVL

  • During the Proof of Concept Phase (closed testing with TVL caps and private funds only) D2 traded >$8.28mil notional volume of trading through the Arbitrum ecosystem with ~$220k TVL in vaults over 2 epochs (epoch = 1 month).

  • This volume was directly utilized in our partner protocols in the Arbitrum ecosystem



Note: Lyra v2 volume, which accounts for ~$10mil, is not included in the dashboard above (due to their subaccount structure, providing data requires a deeper integration which we are working to provide directly with Lyra, specifically to aggregate data between all subaccounts to show a total volume consistent with dune analytics.) However this is will not be ready by the Final Proposal deadline

Our LYRA++ helper vault trading data can be found here: https://www.optionly.com/trader?account=0xaa0495ab8c414ccc4f1a1c1b0aaf39adde107012#

Fees Generated:

  • D2 Finance generated $15k in protocol fees over 2 epochs (1 epoch = 1 month in this case)


Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan: Yes

Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest (Note: this does NOT disqualify an applicant): No


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

On what other networks is the protocol deployed?: Arbitrum native and Arbitrum only up to now.

What date did you deploy on Arbitrum mainnet?: The first Vault with non-internal capital was deployed on Dec 22, 2023

Do you have a native token?: Yes

  1. $D2 is native token

  2. xD2 is a pre-staked and re-stakable $D2 (ie ETH → wstETH)

Its value is strategically linked through multiple mechanisms to the performance of the vaults. The primary function of the architecture is its ability to be re-staked in partner protocols, heralding the commencement of the xD2 wars in Q2 2024.

Re-staking xD2 in partner protocols will enable xD2 holders to accrue:

  • Real yield backed by vault performance
  • xD2 yield from the xD2 wars allocation
  • Yield on partner protocols’ native tokens

Cementing our position in line with our partners GMX, Camelot which are true real yield champions of DeFi.

More details on how xD2 uniquely integrates the best elements of Lido, Eigen Layer, xGrail, and esGMX:

The xD2 wars are not just a one-off event; they are a deliberate design to allow distributions to our vaults and ensure most of the pie stays with our long-term holders.

Past Incentivization: N/A

Current Incentivization: D2 Finance has received a grant from GMX of which 25k ARB has been utilized for incentives.

D2 has been able to utilize the 25k ARB incentives to help achieve over $3.4mil trading volume through GMX V2 and achieve notable performance ROI in the vaults.

  • ETH++ Vault performance (2 epochs): 1.00 → 1.50 (50% return in 2 epochs)
  • Rodeo++ Vault performance (1 epoch): 1.00 → 1.11 (11% return in 1 epoch)

As we typically trade against the OI (open interest) imbalance, we also add liquidity to the side where it is needed. This, by definition, helps GMX to scale.

We have also heavily invested in GM strategies to improve liquidity in BTC GM, ETH GM, and ARB GM.

Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program? [yes/no, please provide any details around how the funds were allocated and any relevant results/learnings(Note: this does NOT disqualify an applicant)]

As noted above, D2 Finance received a grant from GMX as part of their integration allocation of the STIP program.

D2 was able to utilize the 25k ARB incentives to help achieve over $3.4mil trading volume through GMX V2 and achieve notable performance ROI in the vaults.

The incentives were used in the same manner we propose to incentivize the ARB++ vault (see Section 3 and 4) providing excellent risk adjusted returns and achieving 100% retention in the ETH++ vault

Protocol Performance: [Detail the past performance of the protocol and relevance, including any key metrics or achievements, dashboards, etc.]

Volume and TVL

During the Proof of Concept Phase (closed testing with TVL caps and private funds only) we drove $8.28M+ notional volume of trading through the Arbitrum ecosystem with ~$220k TVL in vaults. (not included in the Dune dashboard is ~$10M of notional volume via Lyra options)


  • D2 Finance generated ~15k in fees over 2 epochs


The performance of our ETH++ Vault across two epochs has been outsized considering risk has been mostly delta neutral, soaring from 1.00 to 1.50, which translates to an astounding 50% return in just two epochs. Meanwhile, the Rodeo++ Vault showcased its prowess in a single epoch, jumping from 1.00 to 1.11, marking an impressive 11% return. This stellar performance underscores the dynamism and potential of our strategies.

A key driver of success lies in the strategic utilization of ARB grant incentives, a move that has definitively proven D2’s capability to harness the power of $ARB to supercharge our ARB++ Vault. By leveraging $ARB, not only does D2 drive significant trading volume, but we also position the $ARB token as a cornerstone asset in our strategies. This allows users to not just retain their $ARB upside but also to rake in enticing, risk-adjusted positive yields.

Protocol Roadmap: [Describe relevant roadmap details for your protocol or relevant products to your grant application. Include tangible milestones over the next 12 months.]

  • March 19: Launch of ARB++ Tactical Vault
  • March 31: oD2 options market
  • March 2024: On-boarding Investor Relations x2
  • March 2024: On-boarding Execution Trader
  • March 2024: D2 DAO formation for Front End ownership
  • April 2024: Integration with Silo
  • Q2 2024: Launch of GRAIL++ Tactical Vault
  • Q2 2024: Registration of BVI Entity Completion (process on-going)
  • Q2 2024: SMA agreements with initial institutional funds (Follow-up Investor event May 02)
  • Q2 2024: Speculative market on vault fees
  • Q2 2024: Tokenization of Ranger multiplier (boosted fee accumulation)
  • Q3 2024: Full “institutionalization” of D2

Audit History & Security Vendors: [Provide historic audits and audit results. Do you have a bug bounty program? Please provide details around your security implementation including any advisors and vendors.]


Prior to launch, two in-house security experts created a program of internal checks and affirmations to ensure all team members followed security procedures. This included:

  • inventory and ownership of all protocol secrets;
  • secure master passwords and 2FA for all accounts (e.g., mail, social media, Github);
  • smart contract access;
  • multi-sig wallet access;
  • ownership and access to keys;
  • secure transfer of secrets and sensitive information between team members.

Smart Contracts:

  • D2 Finance architecture is fully audited by Paladin Sec: D2

Front End:

Additionally we monitor Cloudflare DNS records for expected values and D2 Finance web properties for expected security headers once per minute, and sends alerts to Discord and PagerDuty when a mismatch is detected.

Security Incidents: None


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: 195,000 ARB

[Justification for the size of the grant 23](LTIPP: Framework and examples for grant size definition - Google Docs):

  1. As a baseline, there are currently no protocols offering meaningful solutions to deposit single-sided ARB and earn attractive yield.

In order for ARB to compete as an attractive single-sided baseline asset against other opportunities, a suggested target APR for the ARB++ vault is 20-30%.

Note: ARB++ consists of a real strategy, as we take risk trading APR targets are dependent on market opportunities and not indicative of promised performance

Based upon a 12 week growth target for D2 to achieve 3.5m cumulative platform TVL:

  • 30% * 3.5m = $1,050,000 per year
  • $1,050,000 / 4 (LTIPP running for 12 weeks) = $262,500
  • $262,500 / 1.75 (current ARB price) = 150,000 ARB tokens.
  1. D2 is positioned to significantly boost notional volume within the Arbitrum ecosystem, as evidenced by our performance data. This can catalyze a virtuous cycle around the ecosystem.

A key differentiator for D2, in terms of ROI for the Arbitrum DAO, is that ARB invested in D2 is effectively amplified within the ecosystem—potentially tenfold—in terms of both volumes and fees for other protocols as well, unlike the static nature seen in other vault protocols.

Demonstrating the scalability of our strategy (through generating meaningful volumes) will make accessing Total Value Locked (TVL) through direct institutional contacts considerably easier for D2. While having connections with capital for us isn’t a challenge, proving that it merits their time for thorough due diligence on D2 is vital. Hence, highlighting volumes stands out as the most effective way to attract sticky TVL, crucial for D2’s long-term expansion.

For instance, a family office may initially commit to a $500K or $1M investment, but this is contingent upon their confidence in the scalability of the operations. If convinced of the potential for successful expansion, they could be willing to increase their investment to a $10M ticket. The return on time invested in the due diligence and engagement process is particularly important to attract institutional investors.

Consequently, we propose reallocating a majority of our volume-based incentives to boost notional trading volume via our partners, helping achieve our objectives. This will not only underscore our product-market fit (PMF) to a wider audience but also encourage further D2 integrations, fostering ecosystem growth and increased volumes

Milestone 1 - Target Cumulative Traded Volume $5M across Arbitrum: 35k ARB + 15k if hit together 1M TVL
Milestone 2 - Target Cumulative Traded Volume $15M across Arbitrum: 50k ARB + 15k if hit together 2M TVL
Milestone 3 - Target Cumulative Traded Volume $25M across Arbitrum: 65k ARB + 15k if hit together 3.5M TVL

Adding up to our Total ask: 195,000 ARB

As we have already traded ~$15mil notional volume at a capped TVL, we believe our proposal to generate additional volume directly benefiting ecosystem participants is not only very achievable but also provides one of the best benefits to the greater ecosystem of any proposals in the LTIPP program.

ARB++ Vault Strategy
The grant will be fully utilized to incentivize deposits into our ARB++ Vault, aimed at harnessing the long-term growth potential of ARB, optimizing for periods of volatility with advanced options strategies.

Full ARB++ details: D2 Finance: ARB++ Market Launching on Camelot | by D2 | Mar, 2024 | Medium

Aside: As a long term consideration, our projected capability, when factoring in both ETH++ and ARB++ vaults, is around 25 million USD. The addition of other vaults could potentially increase our capacity to between 50 and 100 million USD, depending on market conditions.

With a conservative estimate of a 10 million TVL and the expectation of operating at least 4 vaults with monthly epochs, we anticipate conducting 48 epochs annually. Trading with a 10 million TVL across these 48 epochs could generate several hundred million dollars of activity within the Arbitrum ecosystem.

Grant Matching: Potential incentivization coming from xD2 wars. xD2 is a re-stackable token (ie. ETh–>wstETH) that mirrors staked D2, which is deposited in a LP on Camelot with range 10x the price at the start of the epoch.

Its value is strategically linked through multiple mechanisms to the performance of flagship (ETH++) and tactical vaults (ARB++, Grail++, etc.). The primary function of xD2 is its ability to be re-staked in partner protocols. xD2 is backed

  • Real yield backed by vault performance
  • xD2 yield from the xD2 wars allocation
  • Yield on partner protocols’ native tokens

xD2 represents a comprehensive strategy for asset optimization and value accumulation for long-term holders, designed to prevent leakage to mercenary capital.

Grant Breakdown: D2 will utilize the full grant incentives for the ARB++ strategy vault which is launching on 19th March 2024, in conjunction with our AMA with Arbitrum.

Akin to a tradition Hedge fund structure, users will deposit $ARB into the ARB++vault during the funding period, funds are then used as collateral in the ecosystem during the trading epoch and further absolute strategies are run ontop to generate risk adjusted returns over the bi-monthly epoch. Upon conclusion, users have the option to withdraw their ARB +pnl (also as ARB) to realize boosted yield or leave funds deposited for the following Epoch. Its important to note, funds deposited as ARB remain as ARB

Total: 195,000 ARB

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 from our token swap in the safe.

Treasury Address:


Contract Address:

  • ETH++: 0x27D22Eb71f00495Eccc89Bb02c2B68E6988C6A42
  • ARB++: To be deployed March 19
  • GRAIL++: To be deployed after ARB++ first epoch
  • Lyra++: 0x183424d5AE5ec9fd486634BC566d0f75AD9C9109
  • xD2: 0x1c17a39B156189BF40905425170a3Ff62fb650DA


Clearly outline the primary objectives of the program and the Key Performance Indicators (KPIs), execution strategy, and milestones used to measure success. This helps reviewers understand what the program aims to achieve and how progress will be assessed.

Objectives: The primary goal is to incentivize ARB++ TVL and become the primary single click option for users to be able to receive yield on top of ARB while maintaining exposure to the ARB token. Through tactical use of the incentives, we are able to generate enticing risk adjusted ROI and meaningful REAL volume through the Arbitrum ecosystem AND offer a place for users to deposit ARB to earn yield.

Execution Strategy: [Describe the plan for executing including token distribution method (e.g. farming, staking, bonds, referral program, etc), what you are incentivizing, resources, products, use of funds, and risk management. This includes allocations for specific pools, eligible assets, products, etc.]

D2 Finance will use 100% funds to incentivize ARB++ vault, giving the ecosystem the premier place to keep upside on ARB and get yield on Top.

ARB++ aims to displace all other single-sided staking type solutions in the Arbitrum ecosystem which have fallen drastically short of expectations.

With ARB++, funds deposited as ARB remain as ARB being utilized strictly for collateral within the ecosystem. Based on the strategic use of collateral, D2 is able to engage in absolute strategies ontop. This ensures the strategy maintains exposure to ARB, reduces downside volatility, and offers risk-adjusted returns onto. All pnl and incentives will be as ARB at the end of the epoch, effectively simulating single-sided staking type payoff and growth in ARB token volume.

This design methodology has an extremely high ROI for grant funds because the $ARB is utilized to generate potentially large volume and fees for Arbitrum partner protocols AND incentivizes users to deposit based on boosted risk-adjusted returns they receive at the end of the trading epoch

Here’s the flow for a typical Epoch:

ARB++ Funding Period

  • user deposits $ARB into ARB++ vault (via Camelot)
  • LTIPP streamed $ARB deposited (by D2 multisig into vault)

ARB++ Trading Period

  • Trader Management system gets access to utilize funds dictated by smart contract & strategy mandates
  • ARB is used as collateral in partner protocols
  • further volatility strategies are run based on market opportunities

ARB++ Withdraw Period

  • all funds are returned to $ARB++ vault by Trader App, as $ARB
  • users can withdraw their original funds + pnl (which is effectively boosted by the $ARB from LTIPP), as $ARB
  • or they can do nothing and allow their funds to roll over til next epoch
  • user shares in vault are tracked by ARB++ erc-20 token which accrues value, not unlike interest bearing token, based on pnl

The primary goal of the ARB++ Vault is to deliver superior performance compared to the average user’s allocation within the Arbitrum ecosystem, doing so on a risk-adjusted basis over the long term. We are dedicated to navigating the complexities of the decentralized finance landscape to maximize risk-adjusted returns for our investors.

Risk Management:
The ARB++ Vault maintains delta exposure ranging from 20% to 60% of ARB. This strategic positioning enables us to average lower downside volatility by efficiently utilizing optionality, thus providing a cushion against market downturns.

Investment Duration:
Investments in the ARB++ Vault are organized around monthly epochs

Camelot DEX
We are working closely with Camelot to ensure ARB++ has a strong secondary market, including deep liquidity, to become the premiere place to maintain exposure to ARB and earn risk adjusted yield ontop

Vault incentives: 195,000 ARB

What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric? [Provide relevant design and implementation details]

  • KPI target is 70% vault retention Epoch over Epoch solidified through our performance returns.
  • Additionally, boosted yield as pnl services the purpose to incentivize deposits into the vault for those looking to maintain exposure to ARB and earn yield ontop. This can be particularly attractive to users and protocols who hold ARB over the long term.

As our target PMF is institutional capital and sophisticated HNW individuals specifically in the Asia Pacific region at first, typical capital allocations into well performing funds are measured in years. This is where we aim to target long term, incentivizes and performance data will help us achieve on-boarding this capital.

Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy. [Please also justify why these specific KPIs will indicate that the grant has met its objective. Distribution of the grant itself should not be one of the KPIs.]

We will measure the success of this grant using the following KPIs:

  • TVL growth targeting >200% epoch over epoch
  • 70% vault retention Epoch over Epoch
  • Target $25m notional volumes generated exclusively through the ARBITRUM ecosystem over the LTIPP program

Grant Timeline and Milestones:


  • Hit $3.5m TVL on Arbitrum only across D2 Vaults
  • It is unlikely we have a a linear scaling as people will more likely “chase performance” for well-known behavioral dynamics.

e.g. we may have stellar epoch and able to fill the vault the first time we open for deposits, or it may require multiple epochs (short term performance is mostly driven by luck)

Trading Volume:

  • Milestone 1 - Target Cumulative Traded Volume $5M across Arbitrum
  • Milestone 2 - Target Cumulative Traded Volume $15M across Arbitrum
  • Milestone 3 - Target Cumulative Traded Volume $25M across Arbitrum

Users will be able to realize ARB + pnl at the end of the trading epoch. All deposits and incentives with remain as ARB.

We want to specify that we run REAL strategies, in absence of wash trading. So we will invite the DAO to examine data accurately. All data is verifiable and transparent on-chain. The Conditional Milestone funds would also be used to incentivize vault performance for the ARB++ strategy upon meeting the agreed upon target.

See https://dune.com/d2_finance/d2-finance-analytics.

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem? [Clearly explain how the inputs of your program justify the expected benefits to the DAO. Be very clear and tangible, and you must back up your claims with data]

Securing a grant from the Arbitrum DAO will empower D2 to catalyze substantial growth and innovation within the Arbitrum ecosystem, underpinned by a strategic and data-driven approach. Our proposal delineates a multifaceted strategy designed to leverage the grant in a manner that not only augments the ecosystem’s vitality but also ensures tangible benefits for the DAO. The rationale and expected outcomes of our program are as follows:

  1. Enhancement of Ecosystem Volume: By deploying capital through our ecosystem partners, D2’s strategies are meticulously crafted to generate significant trading volume. This influx of activity is anticipated to significantly bolster the fees accrued by the underlying protocols, verifiable through our TVL/Volume trading ratio. See our Dune dashboard for Proof of Concept Data and volume generated through the Arbitrum ecosystem: https:*//dune.com/d2_finance/d2-finance-analytics

  2. Optimization of Open Interest Balance: Our trading methodologies are typically designed to counterbalance open interest (OI) disparities on GMX, thereby injecting liquidity precisely where it is most needed. This strategic liquidity provision aids in facilitating GMX’s scalability and operational efficiency, ensuring a more balanced and resilient trading environment.

  3. Strategic Utilization of the ARB Token: Central to our strategy is the elevation of the $ARB token as a pivotal asset within our trading frameworks. By increasing the volume and utility of $ARB across the Arbitrum ecosystem, we aim to not only preserve but also enhance its value proposition. This approach is expected to yield attractive, risk-adjusted returns for $ARB holders simulating single-sided staking payoff. IE boost volume of ARB across the ecosystem, reduce ARB sell pressure, and provide a vault to earn yield ontop of ARB.

  4. Leveraging Institutional Expertise and Networks: The D2 Trading team is recognized by its institutional experience, particularly highlighted by Luca’s tenure as a Portfolio Manager specializing in volatility strategies for hedge funds managing assets in the multi-billion dollar range. By tapping into our extensive network and leveraging our proven track record in traditional finance, we are uniquely positioned to attract long-term capital investments to Arbitrum, thereby securing its position as a premier destination for institutional investors.

  5. Promotion of Ecosystem Growth: As D2 escalates its operations, we are poised to emerge as the preeminent traders on Arbitrum’s options platforms. This escalation in volume and user engagement is expected to serve as a beacon, attracting protocols from other chains and stimulating innovation within existing protocols. The resultant deepening of liquidity and expansion of market offerings will significantly enhance the ecosystem’s attractiveness and utility.

In conclusion, the allocation of a grant to D2 from the Arbitrum DAO is not merely an incentivization but a strategic utilization of DAO funds aimed at building out institutional grade infrastructure and on-boarding institutional funds in the Arbitrum ecosystem. Through a combination of sophisticated trading strategies, institutional expertise, and a focused approach to ecosystem growth, we are committed to delivering substantial and measurable benefit to the DAO and Arbitrum ecosystem. We are not aware of any other protocol offering the same direct measurable benefits spreading to partner Arbitrum protocols applying in the LTIPP program.

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: Data and Reporting

OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL 19. Along with this list, please answer the following:

Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard? [Please describe your strategy and capabilities for data/reporting]

First Offense: *In the event that a project does not provide a bi-weekly update, they will be reminded by an involved party (council, advisor, or program manager). Upon this reminder, the project is given 72 hours to complete the requirement or their funding will be halted.

Second Offense: Discussion with an involved party (advisor, pm, council member) that will lead to understanding if funds should keep flowing or not.

Third Offense: Funding is halted permanently

Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.)

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 (D2 Finance) agree and acknowledge the above data and reporting requirements as described in Section 5


Lyra++ deployed today :saluting_face:

And already generating volumes on GMX


Hello @HWxFrank ,

Thank you for your application! Your advisor will be Castle Capital @Atomist.

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.


I like D2 because its all thogourhly planned and well executed, you can see a professional team is behind it.
Also like the ability to adapt to new trends like Bera and implementing mechanisms from top protocols.
With only a small capital they generated ton of fees, cant imagine how it is going to be with institution capital flowing into the vaults. Whole Arbitrum ecosystem will get benefited


The D2 team has done a magnificent job integrating a wide variety of protocols. As can be seen by the underlying strategy vault, D2 strategies participate in over a dozen protocols. I think this is well balanced and should pass - good luck kings.


Nothing but praise to the D2 team. Despite taking a long time to get to this point, they are indeed proving to generate a great amount of volume & fees across the arbitrum ecosystem as well as giving their vault depositors great ROI. The amount of integrations & quality collaborations they’ve been able to get so far has also been quite impressive.
Although they are still in the infant stages, I believe there is definite room for growth across existing and new vaults - I believe they will hit the outlined Milestones easily.


The D2 team has come a long way in making their framework a reality. The project is driving volume across the entire Arbitrum ecosystem and is presenting an option for family offices and degens alike to get the trading exposure and protection that is only possible with a professional. Its good for the users and its good for the Arbitrum ecosystem. The team has faced criticism in a previous proposal. I’ve witnessed them demonstrate excellent returns with their own capital while keeping long term supporters informed along the way. As TVL increases, its exciting to see how much and ARB stipend would further juice gains for users and drive volume to all the protocols mentioned in the application. Exciting times ahead.


@cliffton.eth @raam

Would you kindly mark our proposal as FINAL (and also fix the spelling mistake in title “Application”)

Thank you sers

1 Like

Hey there, I’ve amended the proposal title to reflect that this is FINAL. All the best!


In support of this application.

In simple terms D2 Finance brings a unique and certainly desirable offering to the ecosystem while being highly composable and net positive for a number of large DeFi protocols on Arbitrum.


D2.finance Response to Arbitrum DAO Delegates’ Feedback and Revised Proposal

Executive Summary:

  • ETH++ and RODEO++ vaults from February 23rd to March 8th were in withdraw only mode (with no trading activities). The spike on the data, mentioned by delegates, was only due to the fact that vaults were not within the trading epoch. As of April 18, we have now traded over $11.35 million volume across Arbitrum protocols + $14mil volume in lyra options alone with a 75% ROI on the ETH++ strategy since inception, demonstrating our ability to drive volume and perform without incentives per our strategy mandate.

  • Outside the periods when the vaults were closed, we observed an organic and accelerating trend in volumes even spread out in different weights between different protocols, which correlates with the available opportunities.

  • We have provided detailed descriptions of our ARB++ strategy and its positive impact not only on the protocols we are integrated with but the ability to act as a buffer for ARB, especially at scale

  • Based on a simple regression analysis of historical data, our milestones are not only achievable but also conservative, especially when considering Lyra’s trading volumes, which are not reflected in Dune data.

  • Evaluating other protocols who passed the screening, our metrics in terms of TVL / ASK or Volumes and especially retention stickiness rates look robust, as ETH++ has 100% retention.

  • D2 Finance will update our Grant Multi-sig address to 0x6f1e46C80b8e1C528B05801a5668C01D9f99d258

Grant Size Modification: D2 Finance is committed to taking feedback from the council seriously and has such amended our grant ask to 100K ARB

LYRA++ Vault Data in Million USD notional ( we traded about 1000 ETH contract since March 3rd)

Raw inputs from https://api.lyra.finance/public/margin_watch?subaccount_id=1207

As Lyra is not compatible with Dune, all screenshots for manual verification are in appendix.

ETH++ Vault performance has returned 75% ROI since inception and notably provides excellent returns during vs ETH during marketing volatility and downturns per strategy mandate.

Detailed Feedback from D2:

We want to take this opportunity to thank our advisors (Castle Cap) and the screening council for their valuable feedback regarding our proposal. Below we address the feedback and implement suggested changes to strengthen our proposal towards the overarching goal to grow D2 and Arbitrum through mutual benefit and composability within the ecosystem .

1. Addressing the “Spike” in Metrics and Achieving Stickiness

Delegate’s Concern: Metrics spikes and concerns over user retention and liquidity stickiness post-incentivization.

Response: The observed ‘spike’ in D2 Finance’s trading metrics during late February was not related at all with GMX grant simply the vaults were not trading (only small helper vaults like Lyra ++ were trading).

Specifically, the temporary cessation of trading activities for our ETH++ and RODEO++ vaults from February 23rd until March 8th was aligned with broader operational objectives, including refining our application for the Arbitrum DAO grant, enhancing our front-end interface, and bolstering our trading team with experienced hires, such as a new Chief Risk Officer.

This period of strategic pause was instrumental in solidifying D2 Finance’s foundations for long-term growth within the Arbitrum ecosystem. This pause was fully communicated in our discord, used as the primary communication channel to vault participants.

It’s noteworthy that during this interlude, we maintained a 100% retention rate for ETH++, underscoring the deep trust our users place in our protocol’s direction and management. Furthermore, the decision to temporarily pause Rodeo++, despite its impressive performance (yielding an 11% return in a single month, equivalent to an annualized rate of over 100%), was a testament to our commitment to optimal resource allocation and ecosystem synergy, particularly in response to the unavailability of sufficient leverage for the platform’s strategy.

Our approach to protocol management—characterized by careful security measures and strategic cap adjustments—has not only ensured operational security and performance but has also cultivated a loyal user base appreciative of our long-term vision and responsive strategy adaptation.

Moreover, our trading strategies are designed to be flexible and responsive to market conditions. For instance, our strategy’s adaptation in early February allowed us to capitalize on favorable volatility conditions, resulting in significant trading volumes on GMX due to gamma to delta hedging activities leading up to the February 23rd expiry. Upon relaunching ETH++ in March under vastly different market conditions , with higher volatility ( Implied Volatility went from mid 50s to mid 80s), we shifted our focus towards strategies that emphasized gamma and vega neutrality.

This strategic adaptability, combined with our commitment to user security and protocol performance, reinforces the intrinsic value D2 Finance offers to its users and the broader Arbitrum ecosystem. The diagram below, while a simplification, illustrates the strategic considerations and adjustments made in response to evolving market conditions.

ETH++ Vault performance has returned 75% ROI since inception and notably provides excellent returns during vs ETH during marketing volatility and downturns per strategy mandate.

2. Lack of Information on ARB++ Vault Strategy

Delegate’s Concern: Insufficient details were provided on the actual strategy employed by the ARB++ vault.

Response: The ARB++ vault employs a strategy that maintains delta exposure ranging from 20% to 60% of ARB, designed to navigate market conditions efficiently while minimizing downside volatility while keeping ARB upside. ARB++ acts as a natural buyer in “market dumps’ ’ hence if ARB++ achieves reasonable TVL, it can work as a shock absorber for the ARB ecosystem. Example of last week trading in GMX for ARB++:

In our ongoing efforts to maintain transparency and foster understanding of our strategic initiatives, D2 Finance regularly publishes detailed communications about our trading strategies and vault operations.

For example, our Medium article on the launch of the ARB++ vault was included in the original proposal as a detailed breakdown of the strategy.


The medium offers an in-depth look at the underlying mechanics and strategic objectives of this particular financial instrument. This level of detail is a testament to D2 Finance’s commitment to transparency and aligns with our goal to deliver long-term, risk-adjusted performance to our investors.

Additional 100% on Chain guaranteed that anyone can check the strategy themselves in real time.

E.g. this is the ETH++ address which has a longer track record to verify compliance with the strategy mandate



It is important to clarify that the strategies we employed exclusively on Arbitrum are meticulously designed to align with our mandate and are distinct from those suggested by Wintermute, which we acknowledge might not be optimal. Our strategies are formulated with the primary goal of optimizing risk-adjusted returns, ensuring the stability and growth of our vaults in the long term. This strategic direction not only differentiates us but also underscores our dedication to delivering value to the Arbitrum ecosystem and our investors.

3. Concerns Over TVL and Reward Distribution

Delegate’s Concern: The grant size exceeds current TVL and concerns over ARB rewards benefiting a small group of users.

Response: The decision to cap TVL was a deliberate security measure, ensuring the vault’s integrity and performance could be maintained without compromising user assets. This cautious approach reflects D2 Finance’s commitment to security and its strategic plan for controlled growth.

  • The cap on TVL is a deliberate security measure (to ensure compliance) until our upcoming DAO vote to enable deposits from our front end. We anticipate exponential growth in TVL at that time, which will implemented prior to grant streaming.
  • We’ve adjusted our ARB request to 100,000 ARB putting the TVL/Grant ask in line with protocols who passed the screening round

When comparing claiming ARB concentrations vs https://www.openblocklabs.com/app/arbitrum/claims we display a decent distribution which is set to expand with the opening of our Front End access to the wider market participants.

The grant is seen as an enabler for expanding the TVL cap responsibly, thereby allowing a broader user base to benefit from the protocol’s offerings without diluting the security or performance.

This strategy aligns with the principle of prioritizing user security while fostering inclusive growth within the Arbitrum ecosystem.

4. Justification for Requested Grant Size and Expected Native Yield

Delegate’s Concern: The requested grant size was ambitious, and the expected native yield of the strategy vault wasn’t considered, which could offset the need for the amount of ARB requested.

Response: D2 Finance’s approach to generating native yield is deeply rooted in sophisticated active trading strategies, similar to those utilized by market makers and asset management firms. These strategies are inherently subject to market volatility and are designed to capitalize on this volatility to achieve a positive expected value (EV) over the long term. Thus we do not have a base yield at the start of an epoch; instead, our yield is dynamically generated based on the performance of our active trading strategies.

The request for specific grant size from the Arbitrum DAO is timed with the release of the new FE, ensuring that the grant distribution process will be streamlined and accessible, moving beyond the current limitations of depositing solely through Arbiscan for compliance reasons which limited TVL up to now. With that friction removed we believe we can have exponential growth.

With that saide, as noted above we have taken council feedback to heart and adjusted our ARB request to 100,000 ARB putting the TVL/Grant ask in line with protocols who passed the screening round

Such strategic foresight is vital for a growing operation like D2 Finance. The initial phases of our strategy’s implementation play a pivotal role in shaping market perception and bolstering user confidence.

New Front End Design: In progress

Closing Notes

  1. We observed an organic and accelerating trend in volumes which correlates with the available market opportunities.

  2. Our milestones are not only achievable but also conservative which benefit the Arbitrum ecosystem.

D2 Finance thank the council for their valuable feedback and under that considerations, update our grant request to 100,000 ARB


Lyra screenshots from manual verification. (we do not have any software that is not essential on trading workstation, thus we apologies for the quality)

1 Like

updated stats and performance of ARB++.

I cant resist a chuckle at the whimsical dance of a grant denial regarding the feedback as stated by some of these delegates. Lets start with “Spike in Metrics & Stickiness”.
How could any delegate that did some proper due diligence not have found out that vaults where paused. So when they pause and restart you got a spike in metrics, blimey!..
Furthermore “Achieving stickiness” here it gets even more weird, eventhough users where able to redeem there position during the pause. There was a 100% retention rate from the users during this period.
Lets then have a closer look at the “Lack of Information on Strategy”??? Hello Dear Delegate, it’s an ON-CHAIN Hedge Fund…I will stop here and resist the urge to explain what ON-CHAIN means for the clearity on the use of strategies.
Do delegates have a point when they raise concerns that the grant size is greater then the TVL, perhaps. However we must realize that the token won’t be ‘farmed’ by vault users but will be incorparated in strategys deployed by the protocol. Considering at the time of the proposal there was ~10M of volume generated in the entire Arbitrum ecosystem. By denying a grant for D2 Finance the delegates dont do justice to the famous speech in 1963, where was stated that “A rising tide, lifts all boats”.

also to note that protocol TVL is understated in debank, as does not count PNL accrued.

Thus updated tvl is 330k USDC.

ETH++ ( base asset USDC)
ARB++ ( base asset ARB)
LYRA++ ( base asset USDC)
GEARPENDLE++ ( base asset USDC)
RENZOSILO++ ( base asset ezETH)
dgnETH ( base asset WETH)

1 Like

To the Esteemed Members of the Arbitrum DAO Council,

I write to you today as a staunch supporter of D2 Finance’s revised proposal and their request for a 100,000 ARB grant, strongly advocating for its approval. The detailed response provided by D2 Finance not only addresses all concerns previously raised but also substantiates their strategic and operational advancements which, I believe, significantly benefit the Arbitrum ecosystem as a whole.

Strategic and Financial Justification

Operational Transparency and Strong Performance Metrics: D2 Finance has commendably clarified the misunderstandings regarding the spike in trading metrics, attributing them to strategic non-trading periods which were well communicated to their users. The impressive trading volume of over $25 million and a consistent 75% ROI on the ETH++ strategy since inception unequivocally demonstrate robust performance and strategic acumen. Such metrics are indicative of D2 Finance’s capacity to bolster trading activity and liquidity on Arbitrum, which is critical for our network’s growth and resilience.
Adaptive and Secure Trading Strategies: The response regarding the ARB++ vault strategy highlights a sophisticated approach to market volatility, aiming to minimize downside risks while capturing upsides effectively. This strategy not only supports ARB during market downturns but also enhances the overall stability of the Arbitrum network. The detailed breakdown and the on-chain transparency provided for these operations should alleviate any concerns about the strategic intent and execution capabilities of D2 Finance.

Proactive Community Engagement and Risk Management: The temporary pause in trading activities was a strategic decision aimed at enhancing operational capabilities and aligning with broader ecosystem needs. This pause, along with the 100% retention rate, underscores the trust and satisfaction among users, reinforcing the value of D2 Finance to its stakeholders. Furthermore, the decision to cap TVL, coupled with a controlled, strategic growth plan, showcases a prudent risk management strategy that aligns with the best interests of the Arbitrum community.

Economic and Ecosystem Impact

Grant Size and Economic Rationale: The revised grant request of 100,000 ARB is aligned with both the scale of operations and the precedent set by other protocols within the ecosystem. This request is backed by rigorous analysis and conservative milestone projections, ensuring that the grant size is both justified and optimally designed to foster substantial growth in TVL and user engagement.

Long-term Strategic Benefits: D2 Finance’s strategies are designed not only to benefit their own users but also to contribute positively to the broader Arbitrum ecosystem. By driving consistent volume and engaging in market-stabilizing activities, D2 Finance acts as a catalyst for liquidity and stability, thereby attracting more users and developers to the platform.
In conclusion, the comprehensive and thoughtful response provided by D2 Finance to the feedback from the council, combined with their demonstrated performance and strategic foresight, strongly justifies the approval of their grant request. This grant will enable D2 Finance to expand its contributions to the Arbitrum ecosystem, enhancing both market stability and the protocol’s attractiveness to new users and investors.

I urge the council to approve this grant, thereby supporting a valuable player in our community that has shown commitment, transparency, and a deep understanding of the market dynamics that drive the success of decentralized finance on Arbitrum.



Superb response which more than addresses the concerns raised.It does seem that although the details were available for anyone to find, many aspects of the project were not understood or overlooked.

Fully support the approval of this application.

1 Like

ARB++ Epoch 1 Update:

We are thrilled to share the results of the first epoch of ARB++. ARB++ epoch 1 resulted in our best Epoch to date across all vaults, with +30% in a month (equating to ~360% APR if annualized)

The remaining GMX incentives utilized in Epoch 1 equated for only 8% of performance, demonstrating the potential of the vault strategy to standalone on its own merits. Further support from the LTIPP grant will help us scale and promote ARB++ as a key place to earn risk-adjusted returns using ARB as collateral.

Full details to be posted after Camelot secondary market adjusted to reflect intrinsic.

1 Like

After careful consideration, we have decided to abstain from voting on this proposal. Our primary concern is that the current amount of ARB tokens being requested, 100,000 ARB, does not seem to align with the actual traction and usage of the product to date.

The reported trading volume of $11 million since October 2023 is quite low compared to the substantial grant size being proposed. In our view, a grant in the range of 30,000 to 50,000 ARB would be more appropriate and proportionate to the current state of the project.

While we recognize the team’s ambitions and future growth plans, we believe it is prudent to start with a more modest funding allocation that is commensurate with the product’s existing user base and activity levels. Providing a larger grant now risks over-capitalizing the project relative to its demonstrated market traction.

If the team were to revise their request to fall within the 30,000 to 50,000 ARB range, we would be prepared to support the proposal. This would demonstrate a more reasonable alignment between the grant size and the current state of the product’s adoption and usage.

Given the mismatch between the proposed grant size and the reported metrics, we will be abstaining from voting on this proposal in its current form. We encourage the team to consider our feedback and submit a revised request that reflects a more proportionate funding amount.


It appears you voted against the proposal rather than abstaining, sir.

Could you please elaborate on why Yearn Yes for 300k despite having minimal Total Value Locked (TVL) on Arbitrum? Additionally, the performance of any of their vaults does not align with that of our vaults…

Yearn product in Arbitrum

ETH++ and ARB++

We are unclear about the points of reference you used. Could you please elaborate? It’s worth noting that D2 is native to Arbitrum, whereas Yearn is not. We could also cite several other applications that have been approved for multiples of our requested amount with less TVL than us (such as Factor).

Our TVL of 350k has been capped during this proof of concept phase to stress test the system, so it’s not really the metric you should consider. Also, ETH++ had a 100% retention rate, and we chose not to open deposits until the UI was ready, which it is now. But AGAIN is still much more to other proposal than council deemed acceptable or the Yearn proposal that you voted yes for.

@BlockworksResearch @Frisson @gauntlet

We would like to better understand your decision to abstain on our D2 proposal while voting yes for other protocols with less TVL, Yields, and/or potential benefits to Arbitrum.

Your valuable feedback would greatly help us better position now and for the future. We welcome the discussion at anytime (preferably prior our LTIPP snapshot deadline of May 02)

Would you be able to kindly DM here or through the following at your preference:
TG: Telegram: Contact @HWxFrank
Twitter: https://twitter.com/D2_Finance

Thanks for your time and consideration