We voted FOR this proposal during the off-chain vote. We are generally supportive of the targeted and outcome-driven program design and we hope that future programs adopt a similar approach.
From our experience running and analysing capital allocation programs for ecosystems, we’ve observed some key challenges that render incentive programs ineffective, and we believe that to a reasonable extent the DRIP program design addresses these issues:
| Incentive Program Challenge | Desc. | DRIP Approach |
|---|---|---|
| Unsuitable metrics | Incentive programs focus too much on broad, “vanity” metrics that quickly spike but eventually revert to the mean. Metrics are not tailored to each project and how it earns revenue or attracts its core user base, leading to wasted capital | Targeted metrics aligned with specific, measurable goals per season (e.g., liquidity depth for specific asset pairs, borrowing activity thresholds) and post-season retention analysis to prioritize sustainable growth over vanity metrics. DRIP seasons require singular, outcome-driven objectives (e.g., “deepest liquidity for USDT/ETH”), ensuring alignment with strategic verticals and measurable ROI. |
| Generic distribution | Giving incentives in a generic, unfocused way often results in low or negative returns | Direct rewards distribution to users based on predefined, actionable criteria (e.g., maintaining specific LTV ratios, qualifying wallet activity). ARB flows exclusively to wallets meeting season-specific goals via a distribution partner, avoiding protocol-level subsidies and ensuring incentives drive desired user behaviors. |
| Unfocused approach | A one-size-fits-all approach to incentive program design tries to support all types of protocols, assets, verticals, etc., but lacks focus, making it less effective at meeting strategic outcomes | Concentrated, vertical-specific incentives targeting high-potential activities/assets (e.g., wstETH looping, RWA adoption). DRIP adopts a “controlled experimentation” framework, iterating through 3-month seasons to refine strategies, prioritize learnings, and avoid dilution of resources across unfocused initiatives. |
By addressing these challenges through efficient program design, DRIP positions Arbitrum to allocate capital more efficiently and amplify strategic high-impact growth areas. We view this as a strong positive.
Notwithstanding, we’ve raised concerns about transparency and the lack of community involvement in running this program, alongside AAE’s growing internalization of key programs and functions within the DAO.
While we welcome the steps taken in response to this, incl. the DAO-clawback option and making an explicit commitment to seeking community input, we feel it would have been ideal to have community representation within the SSC beyond AAEs. Regarding community input, we hope the SSC lives up to its commitment and actively seeks community input throughout the program lifecycle.
Overall, we are excited about this experiment and look forward to assessing the results from the first season. When the proposal goes to an on-chain vote, we will also be voting in support.