SECTION 1: APPLICANT INFORMATION
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:
- Official landing page: https://d2.finance/
- Docs: https://gitbook.d2.finance/
- Medium articles: D2 – Medium
- D2 Twitter: https://twitter.com/D2_Finance
Contact Information
- Point of Contact’s TG handle: https://t.me/HWxFrank
- Twitter: https://twitter.com/D2_Finance
- Email: hwxfrank@d2.finance
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
https://dune.com/d2_finance/d2-finance-analytics
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)
Performance:
- ETH++ Vault performance (2 epochs): 1.00 → 1.5 (50% return in 2 epochs)
- https://dexscreener.com/arbitrum/0x3e5972ef94697841d4e69be5c7bdce588e2cdefd
- Rodeo++ Vault performance (1 epoch): 1.00 → 1.11 (11% return in 1 epoch)
https://dexscreener.com/arbitrum/0xe992252368098f644679c77fbb9c975a807721f2
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
SECTION 2b: PROTOCOL DETAILS
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
-
$D2 is native token
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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:
https://medium.com/@D2.Finance/xd2-improving-on-the-liquid-staking-model-867642d31670
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)
https://dune.com/d2_finance/d2-finance-analytics
Fees:
- D2 Finance generated ~15k in fees over 2 epochs
Performance:
- ETH++ Vault performance (2 epochs): 1.00 → 1.50 (50% return in 2 epochs)
see ERC-20 vault token intrinsic value: https://dexscreener.com/arbitrum/0x3e5972ef94697841d4e69be5c7bdce588e2cdefd- Rodeo++ Vault performance (1 epoch): 1.00 → 1.11 (11% return in 1 epoch)
see ERC-20 vault token intrinsic value: https://dexscreener.com/arbitrum/0xe992252368098f644679c77fbb9c975a807721f2
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.]
Op-Sec:
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
SECTION 3: GRANT INFORMATION
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):
- 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.
- 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:
Multisigs
Contract Address:
- ETH++: 0x27D22Eb71f00495Eccc89Bb02c2B68E6988C6A42
- ARB++: To be deployed March 19
- GRAIL++: To be deployed after ARB++ first epoch
- Lyra++: 0x183424d5AE5ec9fd486634BC566d0f75AD9C9109
- xD2: 0x1c17a39B156189BF40905425170a3Ff62fb650DA
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
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
Goals:
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 epochsCamelot 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:
TVL:
- 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:
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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
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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.
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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.
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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.
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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
