Dolomite STIP Addendum

Information about STIP/STIP Backfund

  1. Can you provide a link to your previous STIP proposal (round 1 or backfund)?
    [Dolomite] [FINAL] [STIP - Round 1]

  2. How much, in the previous STIP proposal, did you request in ARB?
    1,000,000 $ARB

  3. What date did you start the incentive program and what date did it end?
    Start: November 9, 2023
    End: March 27, 2024

  4. Could you provide the links to the bi-weekly STIP performance reports and Openblocks Dashboard?
    https://forum.arbitrum.foundation/t/dolomite-stip-program-updates/19625/13
    https://www.openblocklabs.com/app/arbitrum/grantees/Dolomite

  5. Could you provide the KPI(s) that you deem relevant for your protocol, both in absolute terms and percentage change, month over month, for the first of each month starting from October 2023 until April 2024, including the extremes? If you don’t know what KPI might be relevant for you or how to properly define them, please refer to the following document:[Arbitrum DAO] OpenBlock Labs Incentive Onboarding Spec

TVL

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
TVL ($M) 7.078 7.551 15.974 31.283 36.227 45.036 65.662
MoM change - 6.7% 111.5% 95.8% 15.8% 24.3% 45.8%

Transactions (monthly)

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
Total TX 7,041 16,212 24,427 25,858 17,427 24,759 25,855
MoM change - 130% 51% 6% -33% 42% 4%

Total trade volume (monthly)

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
Volume ($M) 0.956 8.840 10.177 37.925 34.637 23.420 28.479
MoM change - 825% 15% 273% -9% -32% 22%

*not incentivised activity

Borrow fees (monthly)

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
USD 7,878.81 8,937.8 34,441.28 86,994.41 84,75.74 81,127.17 245,210.12
MoM change - 13% 285% 153% -3% -4% 202%

Unique user growth (monthly)

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
New Users 544 3008 3039 2115 851 1120 1714
MoM change - 453% 1% -30% -60% 32% 53%
  1. [Optional] Any lessons learned from the previous STIP round? What would we change with oARB if Dolomite is granted STIP.B?
    The primary complaint we heard from users with significant capital deposited was that completing tasks from the XP program is not feasible from such high-value wallets. In exchange for the capital they’re providing, they really wanted Dolomite to implement a threshold number (like $100,000+ in net equity across their deposits/positions) that allows them to receive the 3.75% preferential discount per week. This way we can still encourage high net worth users to participate who, for various reasons, feel like they cannot utilize the XP program. We’ll explore this for STIP.B if we’re able to receive an extension.

New Plans for STIP Bridge

  1. How much are you requesting for this STIP Bridge proposal?
    We are requesting 500k $ARB for incentives

  2. Do you plan to use the incentives in the same ways* as highlighted in Section 3 of the STIP proposal? [Y/N]
    Yes

  3. [Only if answered “no” to the previous question] How will the incentive distribution change in terms of mechanisms and products?

  4. Could you provide the addresses involved in the STIP Bridge initiative (multisig to receive funds, contracts for distribution, and any other relevant contract involved), and highlight if they changed compared to the previous STIP proposal?
    Dolomite Foundation multi sig - 0xa75c21C5BE284122a87A37a76cc6C4DD3E55a1D4

  5. Could you share any feedback or suggestions on what could be improved in future incentive programs, what were the pain points and what was your general evaluation of the experience?
    The biggest pain point for Dolomite was the process of obtaining incentives as a “newer” protocol vs the others that have been on Arbitrum since the beginning. We hope to see a more streamlined submission process for mature projects that doesn’t detract from builders focused on building. We feel like mature projects that have a track record don’t need the same level of scrutiny as a new project that hasn’t launched yet (for example).

Special Notes - Impact of Using oARB during STIP

Choosing to create a novel distribution mechanism for the ARB that the Arbitrum DAO allocated to Dolomite was the best decision we could have made. While oARB was initially met with friction, the adjustments we made to allow for a longer vesting in exchange for free oARB conversion was met with significant usage, TVL growth, and positive sentiment. We even mixed in our XP Program into oARB vesting, enabling level 4+ users to accelerate their vesting to 3.75% discount per week instead of 2.5%

At the end of STIP, we had 1,785 long-term oARB vesters who have 723,004 ARB locked up with oARB for vesting, which matures between May 22, 2024 and December 31, 2024 (depending on when they began vesting and if they achieved level 4+). Due to their lingering oARB vesting positions, they established a relationship with Dolomite that will bring them back to the dapp continuously for months to come.

The Arbitrum DAO should be extremely pleased with the results of the oARB distribution mechanic. Dolomite successfully warded off predatory value extractors, was able to lock up almost 75% of the ARB that was granted to Dolomite for months beyond the end of STIP, and even created a sink for the paired ARB that is coupled with each oARB vesting position. This sink and time-based vesting process has resulted in more distributed ARB sell pressure (as opposed to concentrated sell pressure) and more users that are committed to Arbitrum over the long term.

Interestingly, if you dig into the profile of each long term oARB vester, you’ll notice a few strategies that were executed for this pairing process:

  1. Borrow the ARB for oARB pairing on Dolomite. This was a particularly smooth UX flow, since users were able to tap into Dolomite’s virtual liquidity for this borrowing process (paired ARB is sourced from user’s Dolomite Balances). It spurred additional borrowing activity for Dolomite which led to more transactions, sequencer revenue, and fee accrual for Dolomite and the Arbitrum DAO.
  2. Acquire ARB for oARB pairing across the various DEXs in the Arbitrum ecosystem. The realization for many that Arbitrum was going through a renaissance of activity led some to acquire a long term position in ARB, and they didn’t mind locking it up in an oARB vest for months.
  3. Withdraw ARB for oARB pairing from CEXs. We noticed various users would withdraw ARB from CEXs like Binance to their wallet and then would deposit this ARB on Dolomite to initiate the pairing process. This user journey was especially exciting to see unfold, because it brought activity back on chain that was otherwise lost to Binance being used as a place to custody the users’ assets.
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Hello @corey ,

Thank you for your application! Your advisor will be SeedLatam Gov @SEEDGov

Please join the LTIPP discord and ping your advisor in the general chat so they can create a new channel and start communicating with you.

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Hi @corey we are waiting for you in the discord !

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Following feedback on the proposal to establish the STIP Bridge, it was agreed to involve the LTIPP Advisors in this process with the mission to “help applicants gain insights into their proposals. This not only guides applicants through the process but also ensures that the DAO will review better proposals.”

Despite the inclusion of Advisors, this process does not involve the Council, leading us to believe that this addendum places a significant burden on the delegates who must review all the proposals. One of the reasons for the LTIPP was precisely to avoid this excessive burden. Moreover, the optimistic model adopted in this phase could raise concerns about the real control the DAO will have over these proposals, as reviewing six months of data for each applicant is time-consuming.

For this reason, we decided to accompany each application we reviewed with a brief report. We ask the delegates not to take this as an in-depth or definitive basis for deciding your vote, but rather as a high level overview that can potentially raise questions for your own analysis.

Regarding Dolomite, STIP KPIs were:

Retained TVL
Growth of TVL
Unique wallets before and after the campaign

The introduction of oARB as an incentive mechanism has proven to be a success across all metrics, many of which remained stable over time even after the incentives were removed.

Conclusions

The results shown during the incentive distribution are very positive, with the applicant having achieved the objectives set for the STIP. Therefore, it makes sense for them to propose continuing with the execution of their plan without any modifications.

The following reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.

While L2BEAT is also the DAO Advocate for the ARDC, we’re also delegates in Arbitrum DAO and we want to make it absolutely clear that the below reflects our opinion in our capacity as delegates and not as the DAO Advocate.

As Dolomite STIP application was flagged in the ARDC Research Member STIP analysis as one requiring additional investigation from delegates, we would like to challenge the bridge application so that delegates can form their opinion on whether the DAO should approve or reject additional funding for their inventive program.

We would like to emphasize that our posting of the challenge is not a statement as to whether or not this application should be funded, but merely an administrative act to solicit delegate input. We encourage Dolomite to respond to the comment in the ARDC analysis and provide further clarification on the effectiveness of their incentive program.

Below we quote the mentioned comment:

The oARB incentive mechanism could be seen as Dolomite selling ETH for ARB by some, and the protocol is aiming to implement it for the Bridge. It might be beneficial to have a wider community discussion regarding the incentive structure to establish clear rules around this—it’s likely that other protocols would want to utilize a similar mechanism, especially given that Dolomite’ growth numbers have been quite impressive, but the ethics around the oARB mechanism are somewhat unclear.

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I voted to approve funding for this STIP addendum due to strong performance in the first round of STIP.

On behalf of the Arbitrum community members who delegated their voting power to us, we’re voting For this proposal.

Dolomite achieved exceptional growth across key metrics during the initial 1M ARB STIP from November 2023 through March 2024. TVL skyrocketed 772% from $7.5M to $65.7M, monthly trade volume jumped 222% from $8.8M to $28.5M, and critically, monthly borrow fees soared 2,644% from $8.9K to $245K, demonstrating real revenue generation.

The novel oARB vesting mechanism proved highly effective in warding off extractive farmers and locking 723K ARB from 1,785 users through December 2024, well beyond the STIP end date. This approach boosted borrow activity, drove ARB withdrawals from third parties to Dolomite, and stimulated on-chain DEX volume for ARB pairs as users sourced tokens for the oARB vesting process.

We believe the oARB model strikes a reasonable balance between incentivizing genuine adoption and promoting long-term ecosystem alignment. The 2.5% weekly vesting (accelerated to 3.75% for active XP program participants) creates a steady drip of rewards while mitigating sell pressure. And the ETH pairing requirement establishes a non-trivial opportunity cost, deterring pure yield farmers.

For the 500K bridge round, maintaining the same proven incentive structure is logical. The potential addition of a $100K+ deposit threshold for preferential 3.75% weekly vesting, based on high net worth user feedback, could further enhance capital efficiency and TVL stickiness. We’ll be curious to track the uptake and impact if implemented.

Dolomite’s point about streamlining the grant process for mature, battle-tested projects is valid. A tiered diligence framework based on protocol track record and live history could help the DAO allocate resources more efficiently while still maintaining appropriate safeguards.

We appreciate Dolomite’s proactive transparency and detailed explanations around the oARB system. The on-chain data and clear KPI tracking give us high confidence that the initial 1M ARB allocation delivered outsized returns for the Arbitrum ecosystem. Continuing the program at a measured 500K level to build on this momentum is a sound use of resources in our view.

While we recognize some delegates have raised concerns about the game theory implications of trading ETH for ARB via oARB, we feel Dolomite has been thoughtful in calibrating the incentives to drive net-accretive behavior for the protocol and broader Arbitrum DeFi landscape. The results to date appear to validate this approach.

Should any unintended consequences or imbalances emerge, we trust Dolomite will iterate in good faith to preserve ecosystem health, as they have thus far. But absent clear evidence of harm, we believe the oARB experiment warrants further support and study as an innovative alignment mechanism.

Therefore, we’re voting to renew Dolomite’s funding at the requested level and look forward to monitoring their continued growth and contributions to the Arbitrum community.