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Project Description: Dolomite combines the strengths of a DEX and a lending platform into the most capital efficient and modular protocol DeFi has seen yet! Dolomite is a comprehensive cross-margin lending protocol with robust portfolio management through advanced order types, generic token routing, and its virtual liquidity system. Dolomite aims to deeply connect the Arbitrum DeFi ecosystem by enabling users to continue to utilize the advanced functionality of their DeFi native assets while they tap into Dolomite’s services.
Corey Caplan - CEO & Cofounder of Leavitt Innovations, director of Dolomite Foundation. Dual degree in computer science & business from Lehigh University. He has been building in decentralized finance since it was called “open finance” in 2017. He created one of the first DEXs in DeFi by building on top of the Loopring Protocol. He previously exited from a company he founded that sold custom CRM software to a Fortune 500 company. Corey’s entry into crypto was in 2015 when he was building game modding software for an MMO RPG video-game. The company whose game he was modding got his PayPal account suspended, which prompted him to accept Bitcoin for payment. His background in game modding resulted in developing a security-driven mindset from learning to poke holes in other systems.
LinkedIn: Corey Caplan | LinkedIn
Adam Knuckey - COO & Cofounder of Leavitt Innovations. Dual degree in computer science & business from Lehigh University. He has been coding since 13 years old. He created one of the first DEXs in DeFi by building on top of the Loopring Protocol. Adam first entered the crypto space in 2013 when Bitcoin hit $1,000 for the first time. He helped build and improve a miner for an early altcoin project on a programming forum he was active on.
Richard Seiler - Director of Dolomite Foundation, partner at RR2 Capital & investor in Dolomite (through RR2 Capital)
Josef Holm - Director of Dolomite Foundation, founding partner at Draper Goren Holm & investor in Dolomite (through DGH)
The core team that does development, Leavitt Innovations, has 6 individuals (including Adam and Corey).
Corey Caplan - CEO / CTO
Adam Knuckey - COO / Lead Frontend Engineer
Bowtied Oriole - Senior Smart Contract Engineer
Kai Masters - Senior Frontend Engineer
Bobo - Head of Growth / BD
Brandon Diaz - Head of Operations
We are a small and effective team that is focused on the initial hires being extraordinary individuals that have a deep passion for fulfilling our mission while being comfortable wearing multiple hats.
We are carefully hiring “10x” engineers that are security minded and extremely detail-oriented in their work. Being smart isn’t enough. We have no room for error when it comes to the security of Dolomite’s services and smart contracts, so we’ve set the bar very high for these high impact hires.
Our dapp, smart contracts, dev ops pipeline, subgraphs, off chain bots, etc. were all developed by these 4 engineers!
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.
The following is the liquidity mining program we plan to use to incentivize TVL growth using the granted ARB:
- Users can stake deposited USDC, ETH, WBTC, ARB, and LINK for oARB emissions.
- oARB is continuously emitted and can be vested on a first-come, first-serve basis.
- We will use a simple MasterChef or Gauge contract for the emissions
- oARB that’s emitted can be staked for x duration (in increments of 1 week up to 4 weeks) and must be paired with the same amount of ARB
- For example, vesting 100 oARB requires you pair it with 100 ARB in the contract
- We’ll represent each stake a user takes as unique NFT locks so popular DeFi dashboards can track them
oARB can only be staked if you’re a level 3 Dolomite user- So far we’ve received feedback that users do not want this to be a requirement. I’ll ask for more thoughts below.
- The level is subject to change and may be level 4 depending on XP inflation between now and the start of the campaign
- This ensures users that are farming aren’t just depositing the capital lazily
- They must use the platform and familiarize themselves with its unique features
- Reaching level 3 requires 60 XP, which can be achieved within 1 to 2 days if expedited by completing the following Achievements:
- Learn more about Dolomite XP here and its role in aligning users’ interests in Dolomite
- We will use Chainlink Functions to make the API request to our Discord Bot to write the user’s current level on-chain.
- After staking is done you can purchase the ARB for a y% discount using ETH
- The discount will depend on how long you lock oARB for.
- 1-week is a 2.5% discount
- 2-weeks is 5% discount
- 3-weeks is 10% discount
- 4-weeks is 20% discount
- As demonstrated with this discount schedule, staking to achieve the max discount requires users hold the paired ARB for longer
- The price will be determined via Chainlink oracle at the time of purchase
- This guarantees fair pricing and that farmers will make money when they execute the options
- Keep in mind, oARB must be paired with ARB on a 1:1 basis to begin vesting. This will should help offset ARB sell pressure and constrain users from vesting oARB too quickly if they accumulate a large amount (similar to esGMX and GMX vesting)
- If the ARB rewards pool is depleted, all remaining oARB tokens expire worthless
- Staked ARB (that’s paired with oARB) will be deposited in Dolomite to boost liquidity and TVL
- We want to avoid giving the tokens away for free since it encourages dumping at the expense of ARB in exchange for Dolomite’s TVL
- Users will receive their exercised oARB as ARB tokens in their Dolomite Balance
- How lucrative is this for farmers?
- Suppose we emit $333k worth of ARB over 2 months ($2M annualized). The max discount is 20%, which means $400k worth of annualized value is emitted
- If Dolomite gets $10M in TVL to stake, the max reward APR would be 4% - why?
- $2M annualized * 20% discount = $400k in value received from farmers
- $400k / $10M = 4%
- Note: this program will be even more lucrative when staked deposits are lower, encouraging more yield farmers to participate
Note, we have also applied for a grant from the Arbitrum Foundation but we have not heard any details yet on the status of the application. The use of funds from the Foundation’s grant are different; they revolve around paying for more audits and team expansion, which will enable us to complete more integrations & add more robust features to Dolomite. These integrations will further connect the Arbitrum ecosystem through Dolomite and prompt further utilization of borrowable assets.
Funding Address Characteristics: A Gnosis Safe wallet that’s ⅔ multi sig. All signers use Lattice 1 wallets from Grid+. The seed phrases that back the keys are stored on Safe Cards that are offline. For extra redundancy, the seed phrases are also backed up via Shamir Secret Sharing using a mixture of offline and cloud-based locations.
Clearly outline the primary objectives of the project and the Key Performance Indicators (KPIs) used to measure success. This helps reviewers understand what the project aims to achieve and how progress will be assessed.
Objectives: Our plan is to use the ARB to increase TVL on Dolomite so we can underwrite loans for larger positions. We’ve frequently brushed up against liquidity caps on Dolomite and have grown to $7M - $8M in TVL without any use of incentives to drive TVL. We think carefully using ARB to achieve this goal will enable a more positive UX on Dolomite for users to perform more complex looping and hedging strategies. If we can reach $15M in TVL, we can cement our position as the third largest lending protocol on Arbitrum. This would be an extremely positive signal for Dolomite’s growth in this choppy market and further showcase alignment with the Arbitrum ecosystem.
A screenshot of the top 15 lending protocols on Arbitrum as of 9/21. The TVL figures include Borrows.
Key Performance Indicators (KPIs): We will measure TVL, number of unique addresses farming, average duration used to vest oARB to ARB and retained liquidity after each campaign finishes.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:
Arbitrum’s DeFi ecosystem has been wildly successful so far because of the high level of innovation that key projects delivered. Current lending protocols eliminate this innovation by restricting what you can do with your assets when you use them as collateral for a loan. Just scratching the surface of DeFi native rights stripped away by other lending protocols include voting with ARB, claiming & compounding GLP rewards, staking your plvGLP, vesting your old esGMX into GMX using your GLP. Dolomite removes this roadblock and allows the innovation and uniqueness of Arbitrum to flourish, while enabling important financial primitives for these DeFi native assets.
What does this mean in reality? Dolomite is the only lending protocol that lets users execute full account transfers for GLP into Dolomite, allowing users to transfer their esGMX rewards into Dolomite without skipping a beat. They can claim & compound their GLP rewards as if they were on the GMX web app. They can vest their esGMX into GMX using staked-GMX or using GLP. They can even vest their esGMX while their GLP is being used in an infinite number of isolated borrow positions. These examples can be extended to other assets Dolomite has listed that have DeFi native functionalities, like plvGLP and YT-GLP. When we release limit orders and other advanced portfolio management features, users can do all of these native DeFi actions while they have limit orders set or want to TWAP into a larger position. The possibilities are endless thanks to Dolomite’s modularized architecture, virtual liquidity system and broad token support.
Dolomite is currently the most composable lending protocol in all of DeFi. This paves the way for Dolomite to connect to every major Arbitrum project, making us a hub to list their assets and dramatically increase their network effects when their assets are integrated into Dolomite’s growing list of portfolio management features.
Justification for the size of the grant: Current reward APRs tend to hover around 1% - 5% for various protocols that use incentives. Considering our target is to achieve $10M in deposits for borrowable assets, like USDC, ETH, WBTC, LINK, etc., our proposed liquidity mining program will net users 4% APR assuming $10M in deposits and $400,000 in annualized returns for those deposits. Note, this does not include any additional costs incurred to purchase ARB tokens for pairing with oARB.
Execution Strategy: [Describe the plan for executing including resources, products, use of funds, and risk management. This includes allocations for specific pools, eligible assets, products, etc.] We plan to incentivize deposits of Dolomite’s core borrowable assets, like USDC, ETH, WBTC, ARB, and LINK. These assets will likely be in high demand once we list GMX V2’s GM Pools on Dolomite and Umami’s Vaults. Even during these non-volatile market conditions, they’re producing steady yields of 7%+ as shown below:
We plan to initially weigh the token incentives similar to the weights seen in GLP:
- 40% to USDC
- 25% to ETH
- 25% to WBTC
- 7% to ARB
- 3% to LINK
As we discover what yields entice users enough to increase deposits for each asset, we can tweak the weights to optimize where deposits are needed most.
Grant Timeline: Depending on when the grant application is accepted, we will need to finish creating the mechanics for the liquidity mining program. Once the contracts are deployed we will share the verified addresses on Arbiscan in the forum post. The DAO will remit the first tranche of funds and the Dolomite team will initialize liquidity mining for the first 8-week campaign.
If this proposal is greater than 1M ARB, please provide details on any funding tranches or milestones your application aims to abide by:
Funding Tranches: We’d like to do 3 funding tranches. Each campaign will be separated into 8 weeks of emissions to measure success of the campaign and its effectiveness to increase TVL and retain users.
Milestone Descriptions: We’d like to measure retained TVL on Dolomite, growth of TVL during the campaign, and unique wallets before and after the campaign. All of these metrics are easily captured using our Subgraph. Our hope is that each campaign will raise TVL by approximately $3M until we net approximately $10M in total TVL growth. However, market conditions may curtail this growth, so we may also compare our growth relative to other lending protocols on Arbitrum throughout the time period.
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.
What date did you deploy on Arbitrum?: October 3, 2022 (deployment transaction).
Protocol Performance: We’ve organically grown to ~$7M - $8M in TVL, $2M+ borrowed and have over 6,000 unique wallets that have used Dolomite. We’re trying to drive as much utility through Dolomite as possible through high-value integrations and creating useful features like our most-recent Zap release. We closed a $2.5M seed round in May of 2023 that had noteworthy participants such as Draper Goren Holm, NGC Ventures, Coinbase Ventures, WWVentures, and 6th Man Ventures, among others. We’ve been able to highlight the strength of Dolomite’s architecture through a few key listings that required us to overcome several technical complexities, such as GLP, YT-GLP, and jUSDC. To our team, shipping continuously and giving the community the sense that Dolomite is an active project is the most important value to uphold. Our users are our motivation and delivering value to them is a tremendous high.
You can see our stats at Dolomite and see our Subgraph for querying more raw data. We also have a Dune Dashboard created by a prominent community member, Shogun (please note some data may be inaccurate and we’re working with him to fix any issues that we identify).
Protocol Roadmap: Our roadmap is generally split into 2 distinct areas: listings/integrations and new product features.
In terms of new listings, we plan on integrating with GMX V2, Camelot’s spNFTs, more of Pendle’s tokens, Umami’s deconstructed GLP Vaults, and more. There are some noteworthy aspects to a few of these listings that are worth mentioning.
GMX’s GM tokens are much more difficult to underwrite compared to GLP because of the asynchronous nature of the minting and redemption of the assets. Dolomite is uniquely positioned to integrate with this asset and boast the strengths of its modular architecture.
Camelot is a project we haven’t done enough with yet, but we think there is a lot of novelty in underwriting spNFTs (users can continue to earn boosted yield while borrowing against these assets!). Camelot’s status of being an Arbitrum-native DeFi protocol will continue to signal Dolomite’s alignment with the ecosystem. It will also help us expand beyond the GMX ecosystem and GLP.
Feature-wise, we plan on adding:
Limit orders and transforming Dolomite into a cross-margin portfolio management protocol - We think the addition of “real” limit orders (that is, limit orders that exist as on-chain liquidity, as opposed to limit orders that execute as market orders) will pave the way for Dolomite to become more of a portfolio management tool. Users will be able to create limit orders to take profit on trades or pieces of their positions, enter borrow positions, or rebalance their borrow positions. Moreover, it’ll unlock more usefulness on our Trade page which has not been our focus lately, while we’ve been fleshing out the Borrow page. We plan on expanding Dolomite’s capabilities to offer new primitives like pair trading (although technically our Borrow page already supports this in a less structured way), rebalancing active cross-margin loans, and much more. These features are quite gas intensive and require fast confirmation times to offer a strong UX - both features that Arbitrum will help us offer with ease. Lastly, limit orders will serve as another stepping stone for us to eventually add even more advanced order types that can be used across borrow positions and margin trades, like stops, TWAP, VWAP, etc.
Chainlink Automation for creating safer oracles for ERC4626 Vault tokens - Security is paramount to creating trust around a new lending protocol. We think the recent exploits throughout this bear market have marred the average user’s appetite to try some of these newer protocols and people are looking to see how some of these problems are being tackled. One of the most common exploit vectors with listing LP/Vault tokens is manipulating the price via donation or read-only reentrancy to manipulate the token’s oracle - we saw this with several other protocols. We’re developing a solution using Chainlink Automation to solve this problem by using Chainlink nodes to cache this data in a context that’s separate from lending operation - and are creating a smart contract system for Automation that functions similar to how their oracles operate (using a heartbeat and deviation threshold). Through our participation in Chainlink’s BUILD program, we will push this narrative and boast this new solution to such an important problem. This will reflect nicely on the Arbitrum ecosystem for fostering a secure and innovative DeFi environment.
This was announced on September 20, 2023 (we wrote this proposal prior to releasing the feature)!
Audit History: Dolomite’s codebase has undergone 5 audits throughout its lifetime. The core protocol is immutable and cannot be changed (this helps make the dev UX consistent and prevent bugs from being introduced later on). All deployed smart contracts have 100% line, statement, and branch coverage. Prior to deployment, all tests are run against a shadow fork of Arbitrum mainnet and are extensively QA tested. Dolomite also publishes all admin transactions that affect the protocol in the docs in the Admin Transactions section. Dolomite is actively monitored by Chainalysis CIR to offer early detection and rapid response to any potential exploit. Lastly, we completed an integration with Risk Harbor to offer depositors insurance on their funds which will launch soon. You can read more about Dolomite’s security & audit history here.
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