This proposal is the first since the Vision for the Future of Arbitrum post, it is initiated by 3 Arbitrum Aligned Entities (AAEs) and it’s style and content suggests a way of moving de facto within this new paradigm.
Given these facts its critical this proposal embodies and exemplifies the standards required for the ecosystem to build trust and establish norms for this new way of operating.
I agree with the points raised by @pedrob on auditability, @Chris_Areta on the need for mechanisms of community input - a superpower of a DAO is activating collective intelligence, great ideas can come from anywhere and the current structure would miss out by not tapping this valuable resource,
agree with @krst and L2Beat on accountability, continuity, process and metrics.
Now is the time to put in place the organisational infrastructure required to make the AAE paradigm viable and trustable, this moment is a critical inflection point where its necessary to develop new norms, lets strive to listen to all stakeholders and bring intentional care in change-management for how working relationships will need to adapt and function between individuals and entities in different roles from AAEs, Service Providers, talented individual contributors, and Delegates in the DAO.
Imo the ground work and organisational infrastructure needs to be developed and in place and referenced within the proposal, before a proposal of this magnitude can be considered for voting.
I am not against this kind of program, I see the potential, however we should really hold ourselves to a high standard when experimenting with something new of this nature and magnitude.
Right now I am not seeing how this incentive program’s novel mechanism targeting verticals over protocols, and strategic timing intervention within the development of candidate organisations further solves for sustainability/stickiness of keeping activity with Arbitrum, nor how this approach achieves the MVP or moves us towards creating economic zones of opportunity.
It would be good to have this explained more clearly, in particular how could this cost outflow of 80m ARB bring returns back into the treasury? if that’s not the paradigm, how are the AAEs thinking about returns?
Some projections of how this growth-cycle loop is envisaged would be helpful for Delegates and contributors to get behind this model.
Now more than ever in Arbitrum the parts need to support the whole, with the DAO now having gone through the process to define an MVP, with OCL offering the Sovereign Wealth Fund paradigm, the AF suggesting a new org structure around AAEs, and the DAO still being in the middle of SOS setting, this proposal may be too early before the SOS process has completed to ensure maximum coherency and congruency.
Lets get our ducks in a row and ensure with rigor all new proposals (parts) are shaped to add up with systemic integrity inside of the (whole) organisational structures and strategy we are defining.
Commentary
We appreciate the effort to bring forward a refined incentive framework with DRIP, especially the pivot toward targeting specific assets and activities. This is a welcome change from our past programs and aligns more closely with sustainable ecosystem design. That said, we’d like to see stronger justification behind certain mechanisms. Recent proposals have done well to explain the rationale for their incentive designs—empirically or rationally. This proposal needs some of that grounding, and we’d prefer to see more rigorous data to support key assumptions. Nonetheless, we believe this is a step in the right direction and support it.
Criticisms & Questions
Self-Juicing and Backdoor Dealing
What’s the risk of protocols self-juicing or making backdoor TVL deals to get more incentives here? This needs to measured/monitored somehow. Otherwise, we’re at risk of another STIP like situation.
Distribution mechanism
For the distribution partner, it may be helpful to distribute funds through Hedgey contracts again, as last time they proved to be useful for incentives management and oversight last time. This would also provide contributors a place to monitor the program individually in case they would like to make a tip to the DAO Watchdog program.
DeFi Impact: There should be greater scrutiny on impact on DeFi this proposal can have, in both directions. From Gauntlet’s past uniswap research, LPs and borrowers are elastic to a degree, and thus shift their capital in response to changing APRs. So there needs to be some justification into what yield is needed to get mass movement of these groups. I.e., will this incentive generate enough demand to beat other benchmarks like the US3M or sUSDS rates (which have outperformed Aave rates in the past)? There should be consideration of the explicit goal per season weighted against opportunities elsewhere both onchain and offchain. Furthermore, how would borrower demand respond to the decrease in borrow APR if this is to affect lending protocols.
Asset Expansion: it’s obvious to promote majors like ETH, USDC, and USDT. But what about long tail assets and less established stablecoins (i.e., sUSDe, SUSDS/USDS, etc). What about interoperable assets (OFTs, NTTs, etc, maybe this can be a direction for solver-loan program ran in tandem with a season at some point) or real-world assets (Paxos Gold, whatever else). Moreover, protocols should be given a reasonable heads up for asset promotion, as many (especially lending) will need to go through a governance process followed by risk management curation; this wouldn’t apply to USDC/USDT/ETH but can apply to interop variants, RWAs, etc.
DAO-Issued Assets & Managed Products: Long term (and of course this is likely outside of the scope of this proposal) the DAO should focus more on issuing some of these assets itself. This is not to say the DAO should fork Ethena and have arbUSDe, but rather the DAO should consider partnering with an institution to issue major assets like BTC, etc. Example: Mantle is taking an onchain asset issuance approach with their Mantle Index Fund (BTC, mETH, SOL, USD) and the DAO gains a management fee from this structure (Source).
We welcome the ambition behind DRIP and recognize its potential to streamline incentives through a more agile, season-based approach. This proposal is a strong starting point, but to fully realize its promise, we believe it must evolve structurally to better reflect the DAO’s values of transparency, reusability, and collective intelligence.
Currently, the Season Selection Committee (SSC) — composed of Entropy, Offchain Labs, and the Arbitrum Foundation — holds significant authority over the design and execution of each season. In this, we agree with @Chris_Areta:
However, as currently structured, the model lacks formal DAO oversight.
While we understand the appeal of operational efficiency, speed cannot come at the cost of legitimacy. To strengthen DRIP’s alignment with the DAO, we propose adding at least two independent DAO observers to the SSC. These observers would not hold decision-making power but would ensure greater transparency, provide early-stage feedback, and facilitate broader trust in the process. This would build on what has already been proposed:
Additionally, while we understand the need to maintain some flexibility, the current proposal does not sufficiently define how seasons will be scoped, how goals will be selected, or how success will be measured. For a program requesting funds from the DAO, we believe it is critical to provide at least a high-level framework outlining:
How goals for each season will be set
What criteria will be used to select and prioritize initiatives
How KPIs will be defined and evaluated
How will learnings be documented for future reuse
Providing even a preliminary framework would enable the community to better evaluate and support DRIP’s direction, while still allowing the SSC operational flexibility to adapt. There is also currently an ARDC Recommendation for Incentives in the works, and it should be referenced if approved as a boilerplate design specification for bootstrapped, targeted programs.
Overall, DRIP is directionally strong, and with these structural adjustments, it can potentially become a repeatable, DAO-aligned model for catalyzing growth across Arbitrum.
We’re very supportive of this program. Aave are likely one of the most experienced organisations in developing and running incentive programs and believe this is the kind of program that is likely to perform well and achieve Arbitrum’s goals.
We believe that the targeting of specific activities and assets is a solid strategy. At times it is difficult for an individual protocol to fully support these sort of activities even if they wish to. For example, if Aave were given an incentive budget to spend and we wanted to incentivise borrow asset A against asset B collateral, it is likely we would come up against supply or borrow cap issues due to low liquidity of one of these assets. Our options here would be to go to LPs or teams of specific assets and encourage them to deploy more liquidity, but we wouldn’t be able to directly incentivise this and so would be limited in how much control we have. However, if this type of strategy is applied at the entire chain level, it would be possible to carry out a phased approach of deepening liquidity, initiating borrow and supply, and then expanding this activity in a holistic way which would be far more effective and result in much better outcomes.
Looking at the example given here of encouraging borrowing of stablecoins against wstETH, we would recommend that the approach is even more explicit in incentivising this behaviour. Instead of simply incentivising wstETH deposits, which would also incentivise other strategies such as a simple wstETH deposit or a wstETH-WETH loop strategy, we would recommend directly targeting users who do precisely the actions you’re targeting - both depositing wstETH AND borrowing stablecoins. ACI has developed infrastructure for Aave - Merit, and more recently, MASIV - which is capable of handling granular incentivisation such as this. We have found this incentivisation approach to be extremely effective resulting in both direct TVL growth in addition to indirect TVL growth through deepened liquidity which benefits adjacent user strategies. As an example of how effective this can be we have seen up to $7,855 TVL growth per dollar spent in extreme cases, and an average of $2,284 TVL growth per dollar of incentive spend.
In summary, we fully support this initiative, and stand by through our service providers to provide advice and assistance in any future incentive programs.
This proposal will be delayed to Snapshot by 1 week. Changes to the proposal will include: The addition that funds will be sent to a foundation wallet with DAO-Clawback capabilities, further clarification about our desire to have community input around all aspects of seasons and vendors, and adding Entropy as a clear responsible party to be held to the successes and failures of the program. Additionally, we will be scheduling a call to discuss DRIP this week. Finally, a small addition adding more flexibility around the DRIP’s starting date for execution has been added.
Appreciate the suggestion naming is definitely important. The “DeFi Renaissance” framing is meant to reflect both new and existing use cases in Arbitrum’s most important vertical, and we’ve gotten some positive feedback around the DRIP acronym as a balance of familiarity and freshness. That said, we’re always open to refining how the program is presented if it helps broaden its reach and appeal.
Totally fair, we’ll update the following language to make the commitment to community input more explicit:
We 100% agree on the value of data-driven iteration. Our goal is to work closely with the evaluation partner on exactly these kinds of decisions. While in some cases front-loading rewards can be effective, we think disbursement strategies should be tailored to the specifics of each season. That said, we’re fully aligned on the broader principle, programs should aim to spend as little as necessary and should be cut off early if results aren’t materializing and there’s no clear path to improvement.
Good flag will be included in scope for public dashs.
The goal is to only support activity where Arbitrum already has PMF or where that fit can realistically be catalyzed with BD work and amplified through incentives. In practice, if Arbitrum is organically the best place to execute an activity, it should be sticky. If other ecosystems incentivize that activity, it’s fine, as when they turn off incentives it should flow back to where it’s organically the best, i.e., Arbitrum. The focus is on driving sustainable usage where Arbitrum is the best place to execute, not just competing on temporary yield.
We’re not relying on non-compete agreements, but we will require a custom frontend that exclusively highlights Arbitrum-based programs.
We will work closely with the evaluation partner to monitor concentration in real time, and adjust if rewards are flowing too heavily to a small number of actors. Additionally, we are already exploring setting program rules that directly discourage extractive behavior. The program is purposefully designed to give us more flexibility to intervene if capital concentration or farming in general is undermining a broader goal. It’s also extremely important to note that DRIP aims to be highly focused, while historical programs have been operating through non-targeted frameworks without operators focused on optimizing allocations in real time. Naturally, this has led to unsustainable activity as, on average, users are onboarded to protocols that don’t offer a differentiated product. As incentives are turned off, there is no incentive for capital to stay around.
The committee was selected based on context, bandwidth, expertise, alignment, and proven ability to execute across governance, strategy, business development, and implementation. Wallet eligibility will be guided by the specific goals of each season, with input from both the evaluation and distribution partners, and a focus on minimizing extraction while maximizing alignment with the targeted activity.
Each season will have a clear upfront overarching goal and specific objectives defined before launch. The evaluation partner will create a clear reward methodology, monitor progress in real time and recommend adjustments as needed to improve outcomes or cut losses early based on observed effectiveness. The exact mechanics will differ to optimize for a specific goal. Goals and execution will be decided by the committee with input from the community and onboarded partners.
The 80M ARB cap was set based on estimated capital requirements to bootstrap new verticals/products and to give flexibility for up to four ambitious seasons, each with a maximum of 20M ARB. It’s informed by prior program scales like STIP and LTIP (much smaller), while leaving room for iteration and early shutdown if a season underperforms.
The initial structure prioritizes high-context coordination, but if DRIP proves effective, expanding the committee is something the DAO could consider later. For the current size adding additional complexity and overhead may hurt the effectiveness of the program. We want to avoid reverting back to old “DAO habits” of having bloated committees just for the sake of having committees.
Yes, each season will have its own budget with a maximum of 20M.
Hopefully the question around opex was answered in our previous comment above that responded to donpepe and others.
Entropy will serve as the primary operator of the program. We are humbled to take on this responsibility and happy to be clearly defined as the operator that can be held accountable for the program’s successes and failures. If the program doesn’t manage to attract sticky capital but losses are cut quickly, that should still be considered a success versus past programs. While workload will be shared across committee members and vendors, it is our job to coordinate partner execution, publish updates, and be accountable for ensuring delivery against stated goals. Delegates can reach out directly to Entropy for clarification, feedback, or concerns. This role will ideally be moved to OpCo in line with the vision recently posted by the Arbitrum Foundation once the entity is operational.
Great flag. Our current agreement overlaps with the start of DRIP which will largely be frontloaded, but we appreciate the nudge to get into discussions with delegates about future work. We’re committed to continuity and won’t leave the program unsupported midstream no matter what. We have full confidence that even if we are not renewed by the DAO, the AF and OCL will have full ability to continue the program, either on their own or potentially through a bridge agreement between Entropy and the AF itself. Even with those predetermined options (which we will confirm with AF before we begin), ideally we can lock in our renewal/further engagement with the DAO earlier so this is not a concern for the DRIP or any other future programs that extend beyond immediate action.
The program design and implementation will be in the hands of the season selection committee, but they will, at their discretion, call on vendors, delegates, builders, and investors to help with programs. We are scoping the evaluation partner’s deliverables in a way where real-time progress can be followed by the community. The main goal of the DRIP is to meaningfully bootstrap verticals/products that have a large underlying market size but where Arbitrum’s market penetration is minimal.
We hope the DAO, including delegates, investors, and builders, will contribute to ideation around sectors and program design. While community input is welcome and valuable, it’s not a requirement for the program’s execution or success. Based on historical incentive programs across different ecosystems, it’s clear that minimizing delegate involvement in active operations leads to the highest efficiency. Having said that, Entropy will lead outreach to parties the committee believes can add the most value, and we encourage anyone interested to reach out proactively as well.
We are happy to continue integrating feedback and making edits to the proposal ahead of the onchain vote. We view the Snapshot as a signaling moment, but will ensure delegates are equipped to evaluate DRIP on execution, not just intent, before funds are allocated. That said, we would like to keep the program flexible to adapt with ongoing changes in the ecosystem, competitive environment, industry, and lessons learned while the program is live. Based on experience we have with respect to engaging with both providers and possible partner protocols, it’s not going to be possible to move this initiative forward unless capital has been committed.
We’ll let them share their views directly if they choose, but this proposal will not be moving forward without their support. Fully agreed that the success of DRIP relies fully on deep understanding of defi mechanics, cross-protocol dynamics, and how to leverage partnerships and parameters to give Arbitrum a long-term edge.
Agreed. Each season will be built around a clear thesis for both bootstrapping and sustaining usage, including tapering incentives and sequencing seasons to build on prior momentum.
Entropy will serve as the accountable party for DRIP and will take responsibility for overall execution, even when issues stem from other committee members or service providers. We expect challenges to come up, but they’ll be communicated transparently and addressed head-on. Any known operational constraints will be disclosed ahead of fund transfers, and we’ll aim to minimize friction through upfront coordination and we will further check this before moving forward to Snapshot.
Please see our response to Daniel Ospina above which we hope addresses this.
In DRIP, incentives are distributed directly to end users based on predefined onchain actions for a season. Protocols don’t receive any ARB. This structure removes the incentive to self-juice, and any suspicious patterns will be monitored by the evaluation partner in real time, so there is further disincentive to do so. That said hedgey contracts may still have a place in the program and we appreciate the suggestion.
This is exactly where the evaluation partner provides the most value. While we expect them to contribute across season design and analytics, their core responsibility is modeling incentive thresholds and optimizing for efficient capital movement, a function the committee intentionally will delegate due to limited current in-house expertise. This “reward methodology” will indeed be important.
DRIP is designed to be flexible so we can adapt to evolving narratives and opportunities. Appreciate these suggestions, they’re exactly the kind of directional input that can shape future seasons if the timing and infrastructure make sense. RWAs (specifically gold) is something already at top of mind for example.
100% beyond agree that DAO-issued or DAO-partnered assets are a long-term strategic priority. While DRIP won’t cover this directly, we’re watching initiatives like Mantle and ecosystem stables (hyperliquid) closely and see strong potential for Arbitrum DAO to explore similar structures over time, especially in cases where asset issuance aligns with revenue or lock-in.
Happy to provide more detail here. Season selection ultimately comes down to two key criteria:
Is Arbitrum already the best place to execute this activity, or can it become the best place with catalytic incentives?
Do the AAEs believe this activity is high-growth and strategically valuable long-term?
We can add language to the proposal to make these guiding principles more explicit.
As for measurement, it will be tailored to each season. You wouldn’t evaluate a trading competition the same way you’d evaluate a program for LST liquidity or RWA onboarding, KPIs and OKRs will be specific to the objective of each vertical.
We support the DeFi Renaissance Incentive Program. Targeting concrete goals such as creating the deepest USDT/ETH liquidity should make it easier to measure and evaluate outcomes compared with broad, protocol-level incentives. In addition, maintaining an extensive whitelist of eligible protocols and rewarding users for defined on-chain actions—like lending or borrowing under clear criteria—avoids giving any single platform an unfair advantage and encourages ecosystem-wide growth. We also expect higher post-incentive retention, because users will have multiple venues to choose from rather than being forced onto a single protocol only to leave once rewards stop. Our main concern is that the Season Selection Committee can unilaterally adjust parameters or terminate a season; while this flexibility enables rapid iteration, it also limits delegate influence.
OK - would you mind sharing some information about these Arbitrum products that already have PMF? It would be great to see examples & supporting data to better understand your line of thinking and why this activity isn’t already happening
It would also make it much clearer for the DAO what products this program is going to support.
I totally agree with the first statement - it’s just that user incentives are just an increase of temporary yield for these users. We don’t recognize any past or current user rewards campaign that would have a ‘fairer’ distribution amongst wallets so it would be valuable to know these new rules beforehand.
zkSync Ignite had 41% of rewards sold after claiming with native TVL dropping to almost baseline - all for 45m $ZK in rewards and 9m $ZK for service providers (16,7% of the budget).
Maybe even such a slight boost is something Entropy considers valuable enough for the ecosystem and that is totally fine but it would be great to understand why
gm, thanks for submitting this proposal and apologies for the delay in my comment.
I broadly understand and agree with the general approach.
Please correct me if I’m wrong:
This is essentially a business development program where a strategic hypothesis cascades into specific deals around assets/protocols - tested via campaigns
In order to achieve that, we want Entropy, Arbitrum Foundation and OCL to oversee the program because they are the most Arbitrum-aligned entities and have autonomy to negotiate independently - ok fair enough
I’m comfortable with the increased centralization of this type of program as it should make it an order of magnitude more effective.
Nevertheless, as proposed by others:
I would support integrating elected members into the committee:
Domain experts make execution more efficient and effective
Diversity wins and saves significant research time
Provides checks and balances with external members over the AAEs
I believe the DAO deserves to vote on the strategy for the first campaign.
We need to assess whether AF, Entropy and OCL are aligned with delegates’ direction AND have the capabilities to deliver value for DRIP - something unproven so far for this type of program.
I expect this to be included in the proposal - not the full analysis (protocols, etc.) but at least clear objectives and KPIs
We would like to highlight changes made to the proposal today:
Additional context around community input has been added
We added clear language that funds will be sent to an AF wallet with DAO-Clawback capabilities. We also added verbiage to make clear Entropy is the accountable party for this program.
Can you explain how community participation should start?
If the program starts before July 1st, there should be a period for considering proposals, and there is almost no time for that.
Am I right in thinking that the first season will start without community proposals?
Solid framework!
Love how it focuses on specific goals while keeping flexibility, and holding Entropy accountable gives confidence. The data-driven approach with multi-sig oversight makes sense - this could really move the needle for Arbitrum’s growth.
LobbyFi’s rationale on the price and making the voting power available for sale for this proposal:
While we’ve seen many discussions about this proposal, we believe it could still benefit the entire Arbitrum community if executed correctly. Given the expertise of the team involved, we are confident that this will be the case. The auction be made available.
Since the requested sum for the program is significantly higher than our voting power, we will price the instant buy at 1% of our voting power’s worth in ETH terms. This is calculated as 18,422,193 ARB * 1%, which equals approximately 29.25 ETH.
Voting Yes.
DeFi is simply the best usecase for blockchains right now and Arbitrum shouldn’t fade this opportunity. Especially with chains like Base that capture big value in this area.
I’m voting yes for DRIP cause I think it good idea to bring more DeFi users and activity to Arbitrum. It focus on real use cases and rewards users, not just protocols. Also they said Entropy take full responsibilty, so it show they serious.
We’re genuinely excited about DRIP because it feels like the first incentive program that really “gets” what Arbitrum needs: clear goals, fast feedback loops. We’re voting yes because it puts real users front and center with measurable objectives, like boosting USDT/ETH liquidity, instead of broad protocol handouts. We appreciate that Entropy is fully on the hook: all ARB sits in a foundation-controlled, clawback-enabled multisig and is released only when pre-agreed milestones are met. We value the transparency built into the design, where every ARB spent, whether on incentives or operations, is published live, and community ideas feed directly into each season’s roadmap. We support vesting and tranche-based payouts to encourage sustained engagement long after the incentive window closes. With expert partners handling distribution and evaluation and public dashboards tracking progress in real time, we believe DRIP offers a truly data-driven path to lasting DeFi growth on Arbitrum.
It would be best to swap out either Offchain Labs or the Foundation on the committee. One is beholden to the other via a service provider relationship, and given the 2/3 threshold to vote, this
could in practice just be instructing the Foundation to run this program.
This is inconsistent with Entropy being the party held accountable, since they could, in theory, object to every policy made and allocation planned.
If the threshold is to be 2/3, it’s important from a governance perspective that none of the parties be directly related entities. Governance would not generally favor a committee where one party is a service provider for the other, and this should be no exception. Given that Foundation is also custodying the funds and would be required to act on a clawback, it is probably Foundation rather than Offchain Labs that should be replaced with another member.
Alternatively, the committee could be expanded to be 3/5, but the easier solution is just to have three independent committee members.
This is especially important since the primary check on the DRIP committee is resorting to a full clawback. Governance has obvious no ability to alter the makeup of the committee as written, leaving funds revocation as the only action available (assuming the wallet empowers the governance contract itself to claw back funds rather than a “soft” assurance without technical or legal enforcement mechanisms.)
Thank you for the responses to my comment as well as to others in the discussion. I truly appreciate the commitment to building a complete and well-rounded initiative. These kinds of conversations can help all members become more effective and valuable contributors to the DAO.
Based on your answer, I’ll not only be able to better understand this specific program, but also the logic behind how such initiatives are structured. More importantly, as the conversation deepens, it becomes easier to decode the reasoning of fellow DAO members — and the better we understand one another, the stronger and more aligned our community can become. I plan to continue studying the topic and will gladly return to the discussion if any follow-up questions arise.
This is essentially a business development program where a strategic hypothesis cascades into specific deals around assets/protocols - tested via campaigns