We really like this program, thanks for the efforts here who is going to be distributing incentives and setting the amounts, how will that be tracked? And the season selection committee, how will this be decided?
Will there be a way to see that for $1 spent there is x amount generated for the network? Through timeboost stuff or other sequencing fees?
We asked these questions on the relevant governance call as well, but would be good to have the answer put out here.
This proposal raises significant concerns from a market-driven perspective. While I appreciate the goal of increasing DeFi activity, Iâm skeptical about the approach and execution framework.
First, the tokenomics donât make sense. Artificially incentivizing liquidity through emissions often creates mercenary capital rather than sustainable ecosystems. Market forces should determine which protocols deserve capital - not committee-driven subsidies that distort natural competition.
Several key issues stand out:
Iâve seen similar incentive programs across ecosystems, and they typically lead to temporary TVL pumps followed by immediate exits once incentives dry up. This doesnât build sustainable value for ARB holders.
If weâre serious about DeFi growth, we should consider alternatives:
I understand the desire to compete with other L2s, but copying ineffective token emission strategies wonât differentiate Arbitrum.
We really like the direction DRIP is heading. It clearly takes lessons from STIP and LTIP by focusing on specific goals, aiming for more sustainable growth, and improving how incentives are managed. From our perspective, this has the potential to be a more effective and scalable way to grow the Arbitrum ecosystem. That said, there are still a few areas we would love to see strengthened. One big question is around DAO involvement, since the current setup gives the committee full control over planning and execution. More clarity on how seasonal goals are chosen, how partners are selected, and how success is measured would go a long way. The 80 million ARB budget is quite large, so it would help to break down how much goes toward direct incentives versus operational costs like marketing and distribution partners.
We would also like to see a clear rubric or selection criteria for eligible projects, similar to what Optimism uses, to help guide applicants and make decisions more transparent.
Regarding accountability, how will we know if a individual project is underperforming? Relying too heavily on subjective evaluation could lead to inconsistent outcomes and make it harder for the community to assess impact. We think one potential solution worth exploring is tying incentives directly to predefined milestones and performance targets. This model would require projects to clearly articulate their goals, timelines, and expected outputs up front, and only receive funding incrementally as they meet those benchmarks. Not only would this create a more objective framework for measuring progress, but it could also help de-risk funding decisions and ensure that resources are being allocated to initiatives that are actively delivering value. Adopting a milestone-based approach could strengthen accountability, reduce waste, and make it easier to course-correct when things arenât working as expected.
Long-term sustainability is another concern. Past programs showed that once incentives ended, usage often dropped off. We think adding mechanisms like vesting and stronger sybil resistance can help drive more lasting engagement.
On the marketing side, requiring co-marketing makes sense, but smaller teams might need some support or guidance to make the most of it. We also think having a unified UI that displays all participating projects is a great move. It would be even better if the UI includes a simple onboarding experience to help users quickly understand what each project does, how to participate, and how to earn rewards. Making it easier for users to get involved can really boost the visibility and impact of the program. Overall, we are supportive of DRIP and excited to see it roll out, and with more clarity around transparency, costs, accountability, and user experience, we believe it can set a strong precedent for future incentive programs.
We strongly support dedicating more resources toward restoring Arbitrumâs leading position in the DeFi ecosystem.
We greatly appreciate and fully support this research-backed methodology. Itâs refreshing to see a program being shaped by deep analysis and subject-matter expertise â a key element that was notably missing from previous incentive efforts. A more structured, targeted design will help deliver more effective, measurable results.
While incentives are clearly effective for onboarding new liquidity and users, we believe complementary activities should accompany this to ensure long-term retention and ecosystem growth. Close collaboration with DeFi protocols will be crucial.
There are two main angles here:
One question: Will strategies be dynamically adjusted throughout the season based on performance metrics, or will they remain fixed? Our concern here is fund optimisation â a more flexible structure that allows mid-season adjustments could help ensure capital is allocated as efficiently as possible.
We strongly agree that this is a key requirement. Co-marketing ensures visibility and awareness beyond the initial incentive push and drives community momentum.
Finally, we recommend that the committee publish a transparent report at the end of each season. This should highlight what worked, what didnât, and what learnings are carried into the next cycle. This will improve accountability and enable continuous improvement for future seasons.
Thanks for putting up this new initiative to support the DeFi ecosystem.
We appreciate the systematic approach to isolate single DeFi actions in order to better analyze the impact of incentives. Additionally, being protocol agnostic makes a credibly neutral chain, which we think is also positive. Nonetheless, we echo some concerns other delegates have raised regarding the assumption that single-action incentives will have a different outcome than previous incentives and how the program will report to the DAO, given the delegated execution into the Season Selection Committee.
We agree TVL is often misused as a vanity metric for protocol performance. In addition, Arbitrum benefits from network activity and not value accrual. For this reason, we think other metrics can better serve as protocol cutoff to be eligible for incentives, specially those that directly benefit Arbitrum, e.g., daily/weekly active users, transactions or fees paid to the network.
Thanks for putting this up, Entropy.
This is a strong proposal with clear upside. Itâs great to see Arbitrum moving toward a more structured incentives framework â especially with projects like Morpho also thinking along the lines of adopting similarly strategic approaches in their own grants programs.
That said, we want to highlight a few concerns:
Several delegates have already raised concerns about the level of authority granted to the SSC.
Plus, with the MSS looking to sunset, the concentration of power in a small group becomes even more pronounced. Thus, making us even less comfortable.
The proposal itself acknowledges that the three-month timeline is somewhat arbitrary. While the committee has the right to adjust this, the fixed initial duration could lead to seasons ending prematurely or extending unnecessarily based on factors not immediately apparent. This could impact user participation and the overall effectiveness of the incentives if the timeframe doesnât align with the targeted activityâs natural lifecycle or market conditions.
While the proposal states that âoverlapping seasons running in tandem that may make evaluation more difficult should be avoidedâ, the possibility of this occurring, or the challenges in ensuring clear separation and evaluation, remains a potential concern. If seasons unintentionally influence each other, it could obscure the true impact of each individual incentive program.
Also, if the SSC decides to go above a three-month per season timeline, since this current timeline is arbitrary, the program could go beyond a 1-year mandate. How would that be handled? Would more funds be requested to complete the four seasons? Or would the program be cut abruptly at the end of the 12 months?
Finally, just highlighting this comment from pedro;
It would be beneficial to understand how the SSC plans to extend the impact of the program beyond each season â especially in terms of partner retention and user behavior post-incentive.
Overall, we support the direction of the proposal, but believe these are critical details worth addressing to ensure the program is robust, measured, and future-proofed.
The following reflects the views of GMXâs Governance Committee, and is based on the combined research, evaluation, consensus, and ideation of various committee members.
Thanks Entropy for the proposal. While we see the learnings of the previous incentive programs been implemented and incentives having more targeted approach. Also, most of the points are already covered here in the comment section.
Really appreciate the thought and effort behind this proposal â overall, I support the initiative and think itâs a valuable direction for encouraging more activity and growth across the Arbitrum DeFi ecosystem.
That said, I wanted to highlight a couple of points for further consideration:
The core idea behind DRIP is to use incentives not to subsidize usage by simply increasing returns higher than the prevalent cost of capital, but to tip the scale in favor of Arbitrum where organic product-market fit is emerging and can be catalyzed via incentives. Weâre not trying to manufacture demand from scratch for products with market share that has already stabilized and there are no systemic changes to be made, instead, weâre targeting activities that are organically emerging (think new product releases, parameter changes, protocol migrations, etc.) where capital can incentivise users to relocate to Arbitrum, so that when incentives turn off, Arbitrum maintains its position as the best organic place to execute a certain activity in its competitive environment. Some aspects of creating the best natural environment include deployments of apps that create new utility for a specific action, which is where the BD perspective is most important, but incentives would never be gated to one specific protocol. This structure is driven by learnings from past incentive programs, where outperformers (in terms of retention and capital attracted per dollar spent) exhibited common attributes: enabling new or better UX activities with organic PMF for verticals and products where Arbitrumâs market share was previously minimal or growing. In short, we believe that no matter the incentives design, user retention cannot be achieved without the underlying product/activity actually being among the best available on the market, but naturally, we canât promise exceptional retention metrics with 100% certainty.
The DRIP is open to the community for help in ideation, contribution, and SPs; itâs just the end decisions that lie solely with the AAEs. Without the DRIPâs structure, weâd decrease the potential for ideation and takeaways from the community. Entropy will be acting as a point of contact to make sure this input is taken into consideration. Itâs additionally worth mentioning that expenses and performance data will all be made publicly available.
Appreciate the passion and agree that transparency and DAO voice are essential. That said, youâre misguided. The evaluation partner doesnât decide anything unilaterally, they provide open, public dashboards and feedback to guide the program, not dictate it. The 80M ARB is a capped max, not a blank check. Funds are only deployed when users actually participate, and unused funds are returned. The committeeâs discretion ensures programs can adapt quickly based on real data, not bottlenecked by gridlock. Most importantly, DAO members absolutely can shape the direction of DRIP through season suggestions, public evaluation, and proposal feedback. This isnât a rejection of DAO governance, itâs a rejection of vague, bloated programs without clear responsibility areas that fail to deliver. Itâs a rejection of rent-seeking theatrics in the name of decentralization at the expense of Arbitrumâs position in crypto.
Yes, there will absolutely be opportunities for community input throughout the DRIP process. Weâll be actively calling on the community to help ideate (and already have been) on the most impactful season goals and service providers. That said, input will be weighted based on relevant expertise. For example, builders with product-market fit in a targeted vertical or contributors with procurement experience will naturally carry more influence when evaluating potential program design or partners.
This is something we discussed quite a lot internally and called on Castle Cap for feedback as well. We wanted to have some flexibility in case there were excellent partners not on our radar who could make the program quantifiably better. We want to make sure that we have the opportunity to onboard partners that will add value, but believe that internally at Entropy, AF, and OCL, we have quite a lot of bases covered and really just need help in the areas of optimization and distribution. We donât want to pigeonhole ourselves into a number that removes the flexibility, and OpEx as a % of total expenses will naturally be dependent on how much capital weâd end up distributing during seasons. Like we say in the proposal:
Transparency into pricing will be given to the community after decisions are made.
We strongly believe that these entities are all aligned in only spending ARB in positive ROI ways and would like to go into this with a sufficient budget to make sure we can have a real impact that can capture a large category like wstETH. As mentioned in the proposal, in the condensed example section, capturing the wstETH market alone will likely cost in the realm of 1 entire season or more (given that this may need to be paired with incentives to bring over looping/lrt vaults, more liquidity in DEXs for LTVs, etc). At current prices, the total value of the program is ~$23M (assuming all ARB is distributed and used on OpEx), compared to the ~$140M of realized expenses for the DAO on STIP, STIP.B, STIP Backfund, and LTIP. The programâs value roughly aligns with the DAOâs annualized YTD income (excluding Timeboost). We believe we can have more retained impact with this budget than the totality of the ~$140M spent thus far.
If and when a season is successful, if the committee believes that there is further room for catalyzation toward the point of âcritical mass sustainabilityâ, further budget may be requested from the DAO. We believe that this budget is sufficient to get the data we need and potentially even catalyze one or a few markets, depending on their size.
Vesting may or may not be included in the design of a particular season, depending on the target audience. Having said that, based on past research on Arbitrumâs incentive programs, different incentive distribution structures donât seem to have had a large difference on long-term retained usage. The DRIP is focused on high-retention activity created by organic drivers, and if vesting tokens may help toward that goal for a specific season, itâs possible to be included.
Analysis is ongoing, and distribution is at a regular cadence, for example, once per week. This will be performed by the distribution partner, and incentives will be directed directly to end users.
As outlined in the proposal, the scope for the distribution partner includes creating a dedicated frontend. We think this should be something that is fully Arbitrum-branded and âownedâ by the DAO.
Each season will be planned meticulously, with real-time performance data being published. If we are seeing a decreasing impact, incentives will likely be tapered instead of a hard stop. This is to ensure that the program isnât spending unnecessarily. Adjustments will be heavily prioritized during the season. That said, the kill switch is also an important mechanism to have in some low-likelihood scenarios, like protocol or user abuse.
Our opinion is that both investments and incentives are needed. When it comes to more mature market sectors where Arbitrumâs presence is lagging, e.g., looping, we donât think investments are a viable route to penetrate this since the market leaders are already well established. Betting on a new team in such a sector could create larger, tangible returns for the DAO, but we must also focus on supporting the ecosystem, making Arbitrum the best place for DeFi activity.
As a clarification, the DRIP is asking for 80M ARB, not $80M. This accounts for ~2% of the DAOâs unissued ARB, and at the current price, roughly equals the DAOâs annualised YTD income (excluding Timeboost). We fully agree that the DAO requires a holistic budget, but we shouldnât let perfection be the enemy of progress, and given the above figures, we think the allocation is justified as an ecosystem growth initiative. Further justification for the programâs size can be found in our response to Argonaut and Zeptimus above.
KPIs need to be designed on a season-by-season basis, which the evaluation partner, together with the committee, will be in charge of doing or approving in the case that the season recommendation comes from the community. KPIs that will be monitored across seasons would include: user retention, induced activity per $ spent, and total market share gains.
With the exception of security-related whitelisting or a TVL/protocol-maturity requirement, all protocols offering a product for the incentivised activity will be eligible for participation. When it comes to partner selection, to our knowledge, none of the committee members has a conflict of interest with providers in these verticals.
Real-time performance data and the programâs costs will be made publicly available, with KPIs being designed on a season-by-season basis. The evaluation partner, together with the committee, will continuously monitor performance. In the case of continued underperformance, the committee isnât afraid of halting the program completely.
The DAO will be kept updated on a seasonâs performance.
Ad spend will not be covered, but there will be expectations and standardized structures when it comes to marketing. Marketing performance metrics will also be followed, but as long as guidelines are followed, they will not affect a protocolâs eligibility in future rounds. Since protocols must pass security-related whitelisting or a TVL/protocol-maturity requirement, such that users arenât incentivized to use protocols that arenât safe, we expect that the number of protocols with no marketing capabilities accepted into a season will be minimal.
Targeted activities/products will be clearly communicated before a seasonâs initiation, such that the market and protocols have ample time to digest the information and prepare. We expect that some liquidity will move from other avenues within Arbitrum to the incentivized activity until a new equilibrium forms within the ecosystem. We think this is inevitable to some degree since Arbitrumâs landscape of opportunities will change when incentives are turned on. However, by focusing on activities where Arbitrumâs potential for increased market penetration is large and striving to create the best environment for said activities (parameter changes, new protocols or products, etc.), the thesis is that capital flows to Arbitrum from other ecosystems and stays here. We expect the evaluation partner to be able to monitor the origin of capital that is used for activities that are being incentivized.
This will be designed by the distribution partner and accepted by the committee (weâd additionally note that sharing this information publicly would make farming incentives easier). Wallet eligibility will depend on the parameters set for a specific season.
As stated earlier, KPIs will vary depending on the season. Across seasons, shared metrics will include user retention, induced activity per $ spent, and total market share gains.
One fear with this path is that most excluded protocols will challenge, creating strain on the community, and potentially leading to significant pressure to create one-off programs that harm the ability to evaluate a program in an isolated environment. By trusting the committee that will have a holistic view of each individual component and nuance of a program, we reduce the risk of backlash from protocols. For example, if 3 DEXs are willing to match incentives for a specific program, but 1 is not and gets excluded, we donât want them to have the ability to pressure the community, who may not have the full picture on why they were excluded. Bringing the drama to the forum may do more harm than good for all involved. Having said that, the committee will be in close contact with all relevant protocols to ensure adequate communication.
We agree that these are important building blocks for the DeFi ecosystem. However, we are fearful that for most of the assets and asset pairs mentioned above, itâll be difficult to incentivize activity that is retained after incentives end, since creating a systemic shock would be challenging. We welcome community suggestions on structured seasons that would accomplish retention for LPing the specific assets mentioned above.
We see the value in increasing DAO representation in the committee, but are against the idea of doing so just for the sake of having committees. If there are specific community members who fill gaps in the current committeeâs competencies, we are happy to consider adding members. Itâs also important to remember that AAEs represent the DAOâs best interests, and the combination of the currently proposed committee, together with the evaluation and distribution partners, has the required resources to execute on the mandate.
If the v2 mandate has ended before a DRIP season can be initiated, the committee has the authority to enlist a security firm that is capable of doing the whitelisting.
Language will be added that specifies ARB will be sent to a foundation-controlled multisig with DAO-clawback capabilities. We are happy to stipulate the same for the distribution partner, but given the delay in the onchain proposal, this may not be very beneficial in practice.
While the Foundation hadnât divested a notable amount of the ARB as of the end of 2024, itâs not transparent how much of the 250M has already been committed. The public data is incomplete.
Capital in the Foundationâs budget is for a range of purposes beyond what DRIP targets. DRIP is not meant to replace those efforts, but to complement them. While the AFâs growth strategy to date has been largely one-off important grants, DRIP focuses on a more holistic strategy for a given sector. Together, these 2 strategies work together to make sure we have support for those coming into the ecosystem as well as within the ecosystem itself. DRIP is not about just partnerships, itâs about capturing an entire vertical and everything involved with doing so.
We foresee this leading to situations where most decisions are vetoed, meaning that changes would commonly go through a public forum discussion, after which a 7-day Snapshot voting period might even be required to reach a clear consensus.
Protocol/product (in the context described in the above comment) selection is more concerned with making sure that users arenât incentivized to utilize something that has possible security vulnerabilities or is so new that their stability hasnât been proven yet. Each season will define which specific products/liquidity pools and activities will be eligible for incentives, and the decision should mainly be driven by the underlying market size as well as what Arbitrumâs potential is to increase its market share sustainably within these through systemic shocks. Seasons wouldnât be as general as âutilize the ETH/USD pair, no matter in what contextâ.
Mainly through a combination of market share changes for a KPI(s) relevant to the incentivised activity, tracking the source and ending locations of capital used for the incentivized activity, and retention of incentivised activity per $ spent. The evaluation partner will be in charge of spearheading these efforts. Specific behaviors and structures that drive long-term retention have been identified through research done on Arbitrumâs previous incentive programs.
The programâs main goal is to get capital/activity to move over from other ecosystems into Arbitrum through incentives and retaining that capital/activity by creating a home base for it through a systemic shock before incentives begin, resulting in an organic market-leading value proposition. This is to be accomplished by focusing on targeted activities/products where Arbitrum has high potential for increased market penetration.
Incentives should be distributed proportionally across eligible protocols based on the activity that they generate. Using the example given in the proposal: protocol A reaches $100M of wstETH that is used as collateral with at least a 15% LTV, while protocol B reaches $200M. Both protocolsâ users gain a 2% incremental APR on their collateral, but protocol B is indirectly getting more incentives since it is generating more of the targeted activity. Consistency in incremental yield within the ecosystem is important, such that the baseline cost of capital within Arbitrum stays stable (although nothing would stop protocols from increasing this yield through additional native incentives). In our opinion, itâll be more important to look at the average performance of a season, but real-time protocol-specific data should also be made available. Specific parameters will be modified by the committee together with the evaluation partner, which we donât think the whole community could manage in real time.
The maximum allocation per season is 20M ARB. The 1-year mandate refers to the committee having the ability to initiate seasons within this time period. A season would never be cut abruptly. Additional funds may be requested in the future, depending on the success of seasons (if analysis shows that add-on incentives could further amplify organic market share growth) and the DAOâs financial position.
The season described in the proposal is an example, and there are no set rules that incentives have to be used for derivative tokens or the lending vertical. As long as incentives can be used to amplify an activityâs/productâs organic PMF, and the underlying market size not captured by Arbitrum is substantial, this activity/product would be ideal for a DRIP season. Entropy will be acting as a point of contact to make sure input from high-performing protocols is taken into account.
Weâre currently working on a separate proposal that prioritizes Arbitrum-native builders over everything else.
DRIP incorporates learnings from Arbitrumâs previous incentive programs as well as strategies brought up during the detox period. Mainly, itâs extremely targeted, tries to minimize pressure put on recipient protocols, and targets activities where the potential for retention is high through sustainable market share penetration. As such, our strong opinion is that running other generalized incentive programs on top of the DRIP would be counterproductive, likely even parasitic.
This might be a silly suggestion, but I think the name of the program could be adjusted.
âDrip: the DeFi Incentives Programâ sounds like itâs targeted at users who are already familiar with Arbitrum distributing liquidity mining incentives, which is something thatâs been common in DeFi for years.
But this program has a much more focused and BD-oriented approach. A different name could potentially catch the attention of projects that arenât currently on Arbitrum and might otherwise overlook the program, thinking itâs only about incentives for protocols that are already here.
âStrategic Ecosystem Partnershipsâ or something like this.
Thanks for the response on this @Entropy - can at least some wording to this effect be included in the proposal? Seeing that the issue of community feedback/input is a recurring theme of feedback on this proposal, it would be great to make it explicitly clear in the proposal community input will be sought and taken into account. This is a simple but nontrivial addition to make.
I appreciate the shift toward targeted incentives rather than generalized programs, addressing key lessons from previous initiatives. The season-based format is also great as it allows for continuous evaluation and iteration.
Perhaps splitting each season into âsubâ seasons with a gradual release approach (like 2M for the first month, 6M for the second, and 12M for the third) tied to performance could be more effective. It would allow you to test with smaller amounts first, measure the results, and then make data-driven decisions about whether to scale up spending, tweak the approach, or pivot to a different goal. This would be especially useful because insights from incentivizing one activity (like wstETH lending) may not map cleanly to another (like RWA liquidity).
It would also be valuable to see some CAC vs. LTV analysis included in the evaluation partnerâs public dashboards. Understanding how much weâre paying per user action versus the long-term value they bring will help ensure the program is generating positive economic value for Arbitrum over time.
Hey @Entropy, thanks for the proposal 
Having our own proposal - a completely different one - Iâll let myself ask some questions, just to understand and learn from what you proposed.
Competition from other ecosystems
Taking a look at Merklâs or RoyCoâs dashboards, itâs a ranking of ecosystems offering the highest APY / APR on specific assets. From my understanding, this proposal aims at putting Arbitrumâs boosted APRs into these rankings which facilitate users moving their funds in search for highest yield between different DeFis. As long as we donât focus on Arbitrum-native products (neither USDT nor wstETH are), how do we want to ensure that other ecosystems with higher budget wonât basically win over users acquired in the program with even higher incentives or after the program ends? Is there any non-compete agreement with distribution partners?
Mercenary capital
Taking a quick look at leaderboards we can quickly calculate that top 10 wallets gather around 60% of rewards within a specific campaign. Itâs pretty similar for most campaigns and was mentioned as a problem within the LTIPP campaign. Why would it work differently in case of DRIP?
Lack of retention
This is a a fundamental challenge of all user incentive programs - for example, ZkSync Ignite achieved its goals but had its TVL drop right after spending 300m $ZK and closing the program without further renew. Lack of retention was also being discussed in Uniswap DAO and their most important reason to run the program anyway was the launch of Unichain.
Maybe Entropy, AF or OCL has some important motivations that Iâm not aware of but it would be great to know these In the long-term, such âincentive warsâ is just spending a pretty hefty amount of money to be in the top APR ranking for 3 months to just get back to the baseline - but maybe thereâs some reasoning that I donât see. Just trying to learn here! 
Thanks!
Kamil
Thank you, your responde addresses multiple of my objections. Especially the understanding that this is not about incentives as protocol growth for ROI but incentives as a strategic tool.
The original post didnât make this super clear, so Iâd suggest redrafting it before a vote.
Now, for incentives as strategic tool, Iâd be great to understand whoâs defining said strategy beyond this program, because it will likely need a concerted effort across units. The SOS proposal currently is halfway through and itâs unclear to me how it will relate to this and whether the output can indeed provide strategic guidance here. Failing that, will it be the AES developing said macro strategy that then this program can help execute on?
Now, seeing it as a strategic tool, thereâs a risk of deepening an organisation design mistake of organising by functions instead of by market verticals. This is avoided if the scope of this is really DeFI (or DeFi+say Arb token price), which is mentioned but could be a bit more clear by saying what will be excluded (e.g. gaming, or incentives for defi protocols growth, or whatever).
Iâm still unsure about the 80mn ARB number. The justification seems to be that before we wasted a lot of money, and not one about âthis is the minimum needed to validate this before we scaleâ. Even if here weâre talking about validating multiple things (capability for various strategic initiatives) itâs still a new mechanism with operational/system design risks.
If this is about DeFI liquidty and we just want to have a large budget to do targeted initiatives, that makes sense to me. But then thatâs the bit that could be more explicitly on a redfrat.
The name really needs changing. Why more acronyms? also DRIPs is already a tool for funding OS software dependencies, built by Radix
Section Changed: Abstract
Change:
Added: âThe DRIP is built on ARDCâs findings from past incentive programs and aims to create opportunities to rethink how incentive programs can better serve long-term ecosystem health rather than just short-term growth spikes.â
Justification:
- Primary supporting feedback: Priority #1 from @Euphoria (SimScore 42%): âFirst off, weâd like to thank @Entropy for putting the much-awaited DRIP proposal. We see initiatives like DRIP as opportunities to rethink how incentive programs can better serve long-term ecosystem health rather than just short-term growth spikes like we had in our earlier incentive programs.â
- Priority #2 from @Argonaut (SimScore 41%): âWe see a high potential in the application of this approach, which we understand has been developed based on ARDCâs findings from past incentive programs.â
Section Changed: Abstract
Change:
Added: âThe committee will ensure that the whole community is involved in the selection process for the proposed seasons, while still maintaining operational efficiency.â
Justification:
- Primary supporting feedback: Priority #2 from @Argonaut (SimScore 41%): âWe see a high potential in the application of this approach, which we understand has been developed based on ARDCâs findings from past incentive programs. We definitely see this approach as valuable and feasible at the same time and still promising in terms of future results, but we are not quite sure if we understand correctly if the whole community will be involved in the selection process for the proposed committee that will choose the moments and goals for each season that is to begin, beyond Entropy, OCL, the Foundation itself, key stakeholders and partner companies. Maybe this has to do with the fact that the seasons are 3 months each and taking these members selections every 3 months period is overwhelming. Would you mind clarifying this?â
- Priority #5 from @chamadao (SimScore 37%): âWe really like this program, thanks for the efforts here who is going to be distributing incentives and setting the amounts, how will that be tracked? And the season selection committee, how will this be decided?â
Section Changed: Abstract
Change:
Added: âAdditionally, the DAO will receive regular updates on the programâs performance, including detailed evaluations at established frequencies (e.g., mid-season, end of season).â
Justification:
- Primary supporting feedback: Priority #3 from @Tane (SimScore 40%): âFurthermore, regarding the evaluation process itself, how does the proposal envision the DAO evaluating the overall success or failure of the DRIP program? Specifically, what is the planned frequency for these evaluations (e.g., per season, mid-season, annually)? What key metrics and criteria will be used to assess the programâs performance against its goals?â
Section Changed: Motivation and Rationale
Change:
Added: âWe intend to track and evaluate key metrics throughout and after each season, including user retention after a season ends, capital efficiency per ARB spent, and other relevant measures to assess the programâs performance against its goals. This will help determine the overall success or failure of each season and guide future iterations.â
Justification:
- Primary supporting feedback: Priority #3 from @Tane (SimScore 40%): âFurthermore, regarding the evaluation process itself, how does the proposal envision the DAO evaluating the overall success or failure of the DRIP program? Specifically, what is the planned frequency for these evaluations (e.g., per season, mid-season, annually)? What key metrics and criteria will be used to assess the programâs performance against its goals?â
- Priority #10 from @Euphoria (SimScore 33%): âCould you elaborate on which key metrics will be prioritized for analysis, beyond just raw usage? For example, are there plans to evaluate user retention after a season ends, or capital efficiency per ARB spent? Having a few shared metrics across seasons might also help the DAO compare performance longitudinally.â
Section Changed: Rules of a DRIP Season
Change:
Added: â- Each season will have clearly defined evaluation criteria established before launch, with specific key performance indicators (KPIs) that will be used to assess the programâs performance against its goals.â
Justification:
- Primary supporting feedback: Priority #3 from @Tane (SimScore 40%): âFurthermore, regarding the evaluation process itself, how does the proposal envision the DAO evaluating the overall success or failure of the DRIP program? Specifically, what is the planned frequency for these evaluations (e.g., per season, mid-season, annually)? What key metrics and criteria will be used to assess the programâs performance against its goals?â
Section Changed: Selection Process
Change:
Added: âHowever, the committee will implement measures to ensure transparency and fairness in the partner selection process, with public reporting mechanisms to maintain accountability.â
Justification:
- Primary supporting feedback: Priority #9 from @Tane (SimScore 34%): âThat said, we have some concerns about the governance structure and operational details. The season selection committee includes entities with significant influence in the ecosystem, which raises questions about impartiality and potential conflicts of interest. Could you clarify what measures will be in place to ensure transparency and fairness in season and partner selection? Will there be public reporting or community oversight mechanisms?â
Above are the revisions suggested by SimScore/ Constrained AI including the exact quote justifications for the revisions. Here is a demo of side by side proposal comparison. DeFi Renaissance Incentive Program (DRIP) - Proposals - Arbitrum
We will be presenting a SimScore Proposal shortly, using DRIP as a demo to illustrate how simScore will be integrated into discourse.
Here is the SimScore Analysis that the proposal edits and justifications are based on Arbitrum Renaissance Incentive Program - Google Sheets
Here is SimScore Key Terms page, explaining what Priority #, SimScore% mean and how they are determined. Your connected workspace for wiki, docs & projects | Notion
Thank you to the team for this proposal and all the work that went into it. Iâve gone through the proposal and a part of the discussion and wanted to offer some respectful thoughts for consideration before the vote.
Committee composition & process
Why was this specific committee selected? What motivations and criteria will guide wallet eligibility decisions?
Since I donât want to just criticize but offer an alternative, I propose the following in order to improve transparency and broader representation. Iâd suggest including delegates collectively as a member of the committee. Their vote could count as two votes, with a 4/5 majority required for approvals. Delegate votes could be gathered via a 3-day Snapshot vote, with the majority position â regardless of turnout â being cast as their collective vote.
As an additional or alternative mechanism, introducing soft DAO signaling via Snapshot before a new season begins could help surface community alignment and increase confidence in the committeeâs decision-making, even if such votes are non-binding.
While I understand and appreciate the importance of governance minimization, I believe it should not come at the expense of effectiveness â let alone the long-term sustainability of the DAO
On goals vs. execution
The goals outlined (e.g. becoming the top venue for lending a stablecoin) are ambitious and valuable. That said, I believe we need greater focus on how these goals will be executed. The strategy, mechanics, and iterative structure behind achieving these outcomes will be critical, especially in such a high-budget program. Clarity around how success is defined and how programs will adapt is essential.
Budget clarity
Iâm still trying to fully understand the rationale behind the 80M ARB budget. Iâd appreciate more detail on how this number was determined, what portion is expected to go to operations vs. incentives, and how the capital efficiency of the program will be measured.
Iâll continue reviewing the proposal more deeply before the vote, with the goal of offering feedback thatâs as thoughtful and useful as possible. Thank you again to everyone pushing forward this important discussion for Arbitrumâs future.
Ok, as someone that first got into Arbitrum because of DeFi, Iâm down to back proposals that are specifically designed to strengthen that position. With that in mind, Iâm happy to add some feedback that seems to be shared by some other folks on the forum:
Season Selection Committee
As pointed out by @SEEDGov, and especially because this a program intended for at least a year, I think the DRIP could definitely benefit from having 2 or 3 (if you want to retain the â of votes for season) extra committee members as it could ensure a wider scope when it comes participation from smaller projects and transparency and audit concerns voiced by others.
Financials
I wonât go too deep into the numbers presented here, but since this is an experimental program, could it be wise to set an initial budget allocation for season 1 out of the 80M ARB requested? As correctly pointed out by @Entropy in the proposal, marketing has usually been the weakest link in past programs, and having some type of increasing curve that allows more partners to be added onto seasons 2, 3 and 4 can boost the financial incentives for anyone missing out on season 1.
I agree with @kamilgorski in making sure these seasons bring a competitive edge to them that can help Arbitrum stand out from competitors and also stick to the program for its full length.
On a similar note, @0xDonPepeâs suggestion of setting a hard cap on certain operating costs can help plan out the money side of things and provide a clearer picture of the DRIP as whole, regardless of the 80M ARB requested being a max limit and not carte blanche.
That said, I believe this proposal is headed in the right direction, and provided all transparency and public dashboard data info is handled properly, I look forward to taking part in the DRIP!
The following reflects the views of L2BEATâs governance team, composed of @krst, @Sinkas, and @Manugotsuka, and itâs based on their combined research, fact-checking, and ideation.
We are generally not convinced about the concept of incentives and their efficacy in attracting and retaining capital and users in the long term. That said, we are not experts in that domain, and as such, we are inclined to rely on those who have a stronger background in incentives. Beyond feedback on the high-level concept of incentives, we can offer our perspective on aspects that can be improved or better clarified in this particular proposal.
A crucial aspect that we should all be clear about is who is responsible for managing the program itself and ensuring its success. While Entropy, Arbitrum Foundation, and Offchain Labs will form the selection committee, the proposal does not clarify who is going to manage and coordinate work of all the parties involved in the programâs execution.
We would like to know who will monitor the success of the program, make adjustments as needed, and also be responsible for pausing or canceling the program if it is not delivering the expected results. We believe that this responsibility should not be diffused within a tripartite committee, but that there should be a clear point of contact with whom delegates can communicate to get more information, file complaints, or request changes.
It might be a good idea to have the OpCo be in charge of the program, with Entropy, AF, and OCL serving as the selection committee. With this setup, OpCo will be explicitly responsible for ensuring the programâs success, ensuring proper coordination between the committee and partners. However, it creates a dependency on OpCo, which isnât operational yet, and itâs unclear whether it will be ready to take on this responsibility when it is finally operational.
While we are supportive of Entropy being both in the committee and serving (at least partially) as the Evaluation Partner, there is a question of continuity. Hereâs what we mean by that:
We appreciate the thinking behind DRIP and share the goal of making Arbitrumâs incentive programs more targeted and measurable. However, we see little in the way of processes and quantifiable outcomes or KPIs that we can use to better understand exactly what weâre voting for. Currently, the proposal appears to be simply approving 80M ARB for incentives and trusting that it will be put to good use.
It is not clear to us who is going to be responsible for designing the seasons and their goals - are these supposed to be coming from the partners, the committee, or from the public RFP? Who is responsible for sourcing proposals for seasons and working on them to ensure they are designed with Arbitrumâs interests in mind? We understand that the SSC will be responsible for selecting programs and allocating capital to them, but who will work on the programs themselves? How is the process going to look like and what are the expected milestones? Without that information, the DAO cannot track the programâs progress and help it achieve success.
Itâs also not clear what is expected of the DAO and delegates regarding this program - how is the DAO going to be informed about the programâs progress, and should delegates be providing feedback? To whom, at what stage? In the comments, it was mentioned that the funds will be held in a structure that will allow for potential clawback, but when and how should the delegates even be considering that? And when should they not be using this nuclear option, what other options should be used for providing feedback? We believe having those details clarified in the beginning will help set proper expectations and avoid confusion and conflicts later on.
While holding a temp-check to gauge the DAOâs sentiment towards approving an incentive program in general, and the DRIP in particular, is a good move, weâre not so sure if it needs to proceed directly to a Tally vote, at least not before clarifying the details. All the parties involved in the design of the details of the program are not requesting for any budget to cover the expenses, so they can start the work as soon as they receive the confirmation from the DAO that the DAO is supportive of the overall direction and the size of the program.
As L2BEAT, while weâre not against the proposed program, we cannot, at this time, justify voting in its favor without first getting clarifications on the points above.
Thank you to @Entropy for putting this proposal together. It represents a thoughtful and well-intentioned step forward for the DAO. Broadly, we support the direction outlined, with a few points of emphasis:
Some areas that we believe would support even greater confidence in the proposal are:
Previous programs have shown that short-term incentives often struggle to create lasting usage. The evaluation partner and Season Selection Committee must understand DeFi flywheel effects to design programs that thoughtfully taper incentives as organic usage develops. Weâd love to hear the Arbitrum Foundation and Offchain Labs support this proposal and speak to the strategies they aim to pursue.
Who is the directly responsible individual for executing the program? A program of this size managing multiple service providers likely needs a head to ensure alignment across all parties and committee members.
While a hard stop after three months is likely the cleanest political path, the DAO should consider a situation where it forfeits hard-won adoption without strategies for gradually âweaningâ off incentives. The Season Selection Committee must have robust theses for each vertical/product a season pursues.
Recent events, such as the Foundationâs unilateral and discretionary pause of STEP 2/TMC allocations, have highlighted uncertainties around DAO objectives being efficiently executed once ARB is transferred. Itâs unclear what policies led to this decision. This is not an attempt to place blame but rather an admission that there may be unforeseen bureaucratic friction in additional programs placed under similar structures of direct Foundation management.
If there are foreseen policies restrictive to this program, weâd ask that they be communicated pre-emptively. Depending on the nature of the program, the DAO could explore alternative structures, such as establishing non-custodial stewardship with a service provider (regardless of whoâs selected), similar to a recently executed liquidity program with Uniswap DAO, where transferred funds were placed directly in a governance owned Aera/Merkl integrated vault.
Ultimately, the DAO is in a frustrating position awaiting the launch of OpCo and the recently proposed Arbitrum Foundation vision. @krst points out many of the same questions we have, although these are not necessarily reasons to avoid the proposal.
