Double-Down on STIP Successes (STIP-Bridge)

[SavvyDAO]

NOTES:

• Updated on April 10th : This is version 3 to prepare for Tally. Please read the update below for changes .

• Join the Twitter space: “Arbitrum STIP-Bridge Tally proposal - open delegate call” on Thursday, April 10th at 5pm UTC. Set a Twitter reminder (or add to your calendar) here !

Abstract

This proposal introduces the STIP Bridge, aiming to sustain and enhance Arbitrum’s market leadership by extending support to key protocols amidst intense competition from other Layer 2 solutions. It serves as a strategic interim solution, maintaining incentive alignment and ensuring continuous engagement of vital projects within the Arbitrum ecosystem until the Perpetual Incentives Program is initiated.

Motivation

The Arbitrum ecosystem is currently facing unprecedented competitive pressures, with significant incentive programs launched by rival Layer 2 networks threatening to attract our established protocols away. The STIP Bridge is crucial for retaining these integral projects, ensuring they remain committed to Arbitrum by providing timely, targeted incentives. This initiative is essential to preserve network growth, user engagement, and overall ecosystem stability in a highly dynamic market environment.

Rationale

Aligning with Arbitrum’s mission to support and nurture its development community, the STIP Bridge embodies our commitment to our builders and their contributions. It strategically addresses the imminent risk of losing key ecosystem participants to competitors by offering a seamless transition in incentive support. This approach not only retains critical projects and liquidity within Arbitrum but also sets a solid foundation for the impending comprehensive Perpetual Incentives Program, reinforcing our long-term vision of innovation and community empowerment.

Specifications

Eligibility

• Any protocol funded under STIP or the Backfund is eligible to apply for a bridge grant coinciding with the LTIPP distribution window.

• This will allow Arbitrum to ensure protocols that had success during the STIP campaign can retain their users and continue to focus on building on Arbitrum.

Maximum Funding Size:

Maximum funding requests under this bridge grant are capped based on a percentage of the prior funding received under STIP:

• Greater than 500k ARB: may make a funding request of up to 50% of their prior funding.

• Less than or equal to 500k ARB: may make funding requests up to 100% of their prior funding, capped at 250k ARB.

STIP Performance Audits

To give the community a better understanding of how protocols utilized their STIP grants, audits will be conducted.

OpenBlock Labs has been monitoring protocols included in STIP and reporting their data using dashboards.

OpenBlocks will be providing closing remarks on all protocols they have data for. These summaries will include:

• The percentage of STIP allocation that recipients used

• The amount of unused funds recipient protocols returned to the incentives multisig

• Should be any remaining amount of full allocation

• Success metrics compared to similar control protocols

• Insights into oddities that occurred during the incentive period

Additional analysis opportunities:

Additionally, this proposal team has already asked the ARDC that once they are prepared to provide additional analysis and insights to prepare for LTIP.

This is also a great opportunity for Arbitrum community members to use the data that OpenBlocks has been sharing in their open-source dashboards to create their own analysis. Community-driven analysis of the success of STIP will bring many interpretations of the data and help delegates make the most informed decisions. This analysis could be compensated via a portion of the research bounty budget from LTIPP.

Advisors Help

The advisors from the LTIPP (JoJo, SeedLatam, Castel Capital) proved to be a tremendous help to applicants as they ensured protocols received quality feedback, a better understanding of how much ARB they should request, and possible incentive mechanisms to use. Additionally, the Advisors stay on to support the protocols during the program allowing each team to better learn and iterate through testing.

The LTIPP advisors have agreed to assist similarly during the STIP bridge. Protocols applying to the bridge will have the opportunity to meet with an advisor. This will help them gain insights into their proposals. This not only helps guide applicants through the process but also ensures the DAO will have better proposals to review.

The advisors will hold office hours during the Addendum period to help answer questions protocols have, and to discuss with them through the Discord infrastructure already leveraged during LTIPP, in a way they could provide feedback on both previous results and/or new mechanisms to integrate.

Program Manager Role

The STIP Bridge will include a program manager to help ensure the program runs smoothly. As seen in other programs, a single manager is required to ensure efficient and effective operations and to deal with the unexpected situations that ultimately appear.

Project manager responsibilities:

• Ensure Addendums are properly posted

• Administer deadlines for various phases of the program

• Handle COI with advisors

• Help facilitate the posting of snapshots

• Help coordinate with the multisig to ensure funds are properly distributed

• Update grant recipients on program progress as streams start, run, and end

Matt Stein from StableLab will serve as the program manager.

How To Apply - Addendum on STIP Forum post:

Any STIP protocol wishing to apply will fill out the Addendum template

After filling out the Addendum, protocols will post it in the newly formed “STIP Bridge Addendum” section of the forum. These posts should be titled “[Protocol Name] STIP Addendum”

Applicants will be able to meet with an advisor during office hours to get feedback regarding their incentive plan and grant amount as protocols did with LTIPP.

Applicants will have around two weeks to submit their Addendums. Beginning when the Tally vote becomes active and ending when the tally vote ends.

Applicants can edit their Addendums as many times as they want until the deadline. Once the Tally vote ends Addendums are final and can no longer be modified.

Challenge and Review Period

During this time between the tally vote and the optimistic snapshots, delegates will have a week to review Addendums and prepare to post challenge snapshots for applicants they believe require a closer look.

Any delegate with at least 500K ARB delegated can put up a challenge snapshot using this challenge template.

Voting and Approval Mechanism:

Optimistic Approach

An optimistic voting mechanism will be used to mitigate the potential for delegate fatigue from voting on 50+ proposals while still holding projects accountable for their overall performance within STIP and in general.

This optimistic model hopes to reduce the load on all delegates but ensure that the DAO’s full attention is placed on the more contentious proposals.

Initial Voting Mechanism

The Tally vote will earmark funds to allow the DAO to distribute up to the maximum permissible grants.

After applying with an Addendum, all properly submitted projects will be included in a single optimistic approval snapshot.

Should this snapshot pass, all included protocols not challenged by a separate challenge snapshot will be awarded their requested grant.

Challenge Snapshot Process

Any delegate with enough voting power to post to snapshot can put up a forum post and an associated snapshot proposal that will result in a full DAO vote for the individual grant streams for it to be approved.

Delegates may seek a full DAO vote at their own discretion if they believe that a project did:

• (a) not fulfill their STIP requirements,

• (b) failed to deliver tangible results during the STIP period or

• (c) the amount sought in the bridge application would not result in an effective utilization of the DAO’s funds.

This will allow the DAO delegates to focus their available attention to more closely examine contested applications. To be accepted into the bridge program alongside the unchallenged proposals, the proposal to fund must receive a supermajority (66%) of votes in favor.

Possibility of Extension

In case the full long-term incentives program gets delayed, this proposal will have a built-in extension method to prevent another gap between incentive programs.

If 4 weeks before the end of STIP Bridge incentives distribution, another incentive program has not passed a snapshot, then we will post another extension directly to Tally that extends funds for protocols that received funds from LTIPP and/or STIP Bridge.

Steps to Implement

• Send funds to LTIP multisig

• Have applicants post Addendums

• Conduct Performance audits

• Conduct Optimistic snapshot vote

• Have DAO members challenge contested proposals on the forum

• Conduct individual Snapshot votes for any challenged application

• Have successful applicants complete compliance

• Start streams along a similar timeline as LTIPP protocols

• Monitored incentives throughout the program as done in STIP

Timeline

This is a rough timeline. We aim to start the STIP Bridge around the same time as LTIPP.

Event

Dates

Summary

Tally Proposal

April 12th - April 28th

The proposal is voted on in Tally.

Audits conducted

Present - April 28th

OBL and any other interested members of the community will analyze and report the success of protocols in past STIP performance

Addendum & Advisor Feedback Period

April 13th - April 28th

Applicants will post their addendums. Applicants can work with the advisors and edit their applications until the deadline when the addendums will lock

Challenge and Review Period

April 29th - May 6th

Gives delegates a week to review each protocol and decide if a challenge snapshot in necessary

Optimistic Snapshot

May 6th - May 13th

A single snapshot will be posted to optimistically approve funding for all protocols that correctly submitted an addendum

Challenge Snapshots

May 6th - May 13th

Individual snapshots are posted by delegates for applicants who are deemed to need a closer look.

Incentives

12 weeks

Incentives are streamed to applicants from the multisig

Overall Cost: 37.6M ARB

Incentives Budget: 37,500,000 ARB

See estimated amounts here

Operational Cost: 100K ARB

A maximum of 100K ARB will be used for the operational budget. This could be used to cover the costs of the advisors, pm, multisig signers, additional audits, and or any other expenses that come up while operating the proposal. A separate snapshot will be published to allow the DAO to decide how these funds will be spent.

Additional Documents:

• Addendum template for protocols

• Delegate challenge template

[dk3]

I agree with this as the 2024 meta thus far is follow the new hot thing with incentives/points. We (Premia) ended our STIP program on March 5th, and this is what we have seen, so I imagine many ecosystem projects will encounter similar patterns. (Luckily we invested in OB growth during the stip period, so we can maintain volumes without committed capital in vaults/aka tvl)

Will be interesting to see the projects that alter their spending allocation for the Bridge, or ones that were able to explore different strategies and can really show pound for pound impact of where the incentives are being utilized best. Nonetheless from a Project perspective we do find this helpful and supportive of developers so we can focus on building and growth going into summer when things really start to heat up

Let’s do it.

Also @SavvyDAO the spreadsheet column “F” is missing some values btw

[Bob-Rossi]

@SavvyDAO

While LTIPP and various other programs are driving towards a permanent incentive program, Arbitrum must aggressively compete NOW for network growth.

The current iteration of the LTIPP is a 12 week trial run to gather data for a longer LTIPP framework. Anyone who got STIP funds cannot participate in the LTIPP. I understand the reasoning behind it, but lets call a spade a spade — we’ve created a scenario where the 'Long-Term" Incentive Program is in actuality functioning as a 3rd round of the STIP. Which I’ll emphasize is totally fine as the Arbitrum grants space takes its shape, but I think that context should be clear for my next point:

I think a better solution is just to take what has been learned through STIP rounds 1 & 2, as well as this LTIPP trail run, and have a true LTIPP that is open to all projects regardless of prior inclusion in either of those three funding runs. If we start planning for that now we have a good 3 month window to hit the ground running come July for a seamless transition into a true, all inclusive Long-Term grant program.

[brisket]

Let the treasury raiding continue!

How was STIP a success exactly? In my world, ARB has been the worst performer of the large tokens while arbitrum marketshare has remained stagnant since the beginning of the program.
But you’re right let’s double down, what arbitrum really really needs at this point is another round of incentives for:

• compound fork LP pool, Aave fork LP pool, liquity fork LP pool etc…
  This way all those great great projects can continue to unload their bags.

The endemic corruption in the arbitrum ecosystem has become a running joke in the blockchain world. Shame on the delegate that let this happen and shame on Offchain Labs for letting this situation worsen by the day. The explosion of activity that happened on Solana should have happened on Arbitrum, the UX is just as good. Instead we made sure that the dolomites of this world get showered with token while everyone looks elsewhere.

[Romy]

I strongly agree with this.

Many protocols have successfully executed their STIp KPI, and they need and would gain tremendous advantages from prolonging this STIP program.

Number and sizes also seem extremely coherent with what I would expect protocols to receive. Very bullish on this.

I took the liberty to already create an RFC on the Abracadabra Forum to allow users to educate themselves on it and cast their vote. It can be found here.

[corey]

1. Dolomite doesn’t have a native token. We have no “bags” to unload

2. Dolomite is not an AAVE nor Compound fork. We made everything ourselves and experienced considerable growth that is sticky because of the composition of oARB users

3. Please create an original argument that doesn’t look like a Chat-GPT-originated post

Pointing fingers aside, Dolomite would love to support this STIP-Bridge proposal to keep our lending rates more competitive with rates on other networks.

I think the approach to take with STIP-Bridge is to look at what it takes to remain competitive with other networks that are distributing points or native token rewards. Speaking for Arbitrum as a whole, we should try to stay “on par” with competing networks so there isn’t a strong reason to see liquidity flow to other networks once STIP is over.

[brisket]

You don’t need a token to grift. Dolomite is pocketing the spread between Borrow and lending rate as well as penalty fees so dolomite has every interest into entering the game of pat in the back with Jonesdao, dopex and co to pump their numbers.
The truth is that, if you remove incentives absolutely noone would choose to use dolomite over aave and face terrible UI + high smart contract risk. But in the end the arbitrum DAO decides to shower dolomite with token not aave, despite it being vastly more inefficient in ARB spent per $ of TVL brought. All this because this grant program has become a shameless game of grift from top to bottom.

[Djinn]

Big fan of the optimistic approach. Reduces burden on delegates while allowing folks to flag projects as necessary based on their project reputation and STIP performance.

Not a huge proponent of extensions, but with the current market / network competition, we’ve got to put our best hitters forward.

[corey]

Dolomite hasn’t pocketed any spreads between borrowing and lending despite the admin fees being accrued. They’re sitting in the smart contract until we transition to a DAO and the DAO decides what to do with them.

Moreover, AAVE didn’t follows the rules for the grant submission process and their application was rejected because of that. Them not receiving a grant did not come at the expense of Dolomite getting one.

It sounds to me like you enjoy the status quo and “kingmaking” AAVE instead of trying to push the industry forward or enable competition. Dolomite offers several novel features that AAVE doesn’t have and can’t support unless they release a new version entirely. Dolomite is the only Arbitrum-native lending protocol that hasn’t suffered a security incident since our launch in October of 2022. Dolomite also fulfills a specific role in the market by offering long-tail asset support you can’t find elsewhere, mixed with returning DeFi-native rights to users.

You should look more closely at the facts and usage patterns of our protocol before grandstanding about things you have no idea about. What exactly have you built or done to contribute to Arbitrum aside from complaining?

As a matter of fact, most of your points revolving around grifting just describe the practices any for-profit DeFi protocol utilizes to earn revenue and literally pay to keep the lights on. Should GMX turn off fee accrual because they subsidize trade fees with ARB? Give me a break.

[brisket]

“Providing long-tail asset support” has been an excuse to spin-up low effort lending protocols since 2021: cream, scream , agora, apple, the list is endless. They all have something in common, they disappear as soon as the token subsidies stop.
Doing it in 2021 when we were all discovering defi was understandable but it is not in 2024. Arbitrum is a fantastic platform, it deserves much better than the list of low effort projects that are leeching its treasury.
You all thought that we’d get a token bonanza like last cycle and it did not happen because the floor quality to make it has increased 10 fold. So now you’re switching to treasury raiding.

The only thing I am doing for the arbitrum is calling out the token squandering. It’s extremely unlikely to be effective though, I’ll give you that, since most of the delegates have their hands involved in the grift.
All I’m hoping is that if people keep calling it out, one day offchain labs will wake up and say something.

[cp0x]

I don’t really understand the meaning of this proposal.
There are grants that are allocated to projects. These projects requested a certain amount for a certain period of time.
Why, instead of analyzing the work of a specific project, we will give 50% of the grant without any verification.
I believe that this proposal does not benefit the development of the ecosystem, but rather keeps projects afloat through grants.
The point of grants is to give an impetus to good projects, and not to support bad decisions only at the expense of DAO funds - projects must learn to earn money themselves after receiving a grant.
You can correct me if I’m wrong about something.

[Tenzent]

Coming from Silo - we would of course support this.

Giving a proportionally smaller grant would help to ween off markets from incentives and probably provide some good insights that data providers like Openblock could study to determine efficiency of the STIP rather than a cold turkey cut into a different program. As things are the LTIPP will 100% promote capital flight from STIP protocols, since you are starting incentives in one place and cutting them off elsewhere. Although we have already planned for this it would be fantastic to get a smaller supplemental version of the STIP to help ‘bridge’ the gap to the LTIP.

Nothing against using KPIs either to gauge placement if that’s something the DAO should want although I will say what a KPI is varies greatly by protocol and I’m afraid people would basically default to TVL since there isn’t a great grading rubric in place for vertical specific metrics. (I am saying this even though Silo is particularly strong in basically all metrics because it isn’t fair to protocols with different focus.)

I also strongly resent the hate towards Dolomite here - they are by no means an AAVE/Compound fork and indicating they are shows a lack of knowledge and disregard for the tremendous work behind building a lending protocol from scratch and securing it.

[axlvaz_SEEDLATAM.eth]

@SavvyDAO

Eligibility and Ask Recommendations

Eligibility

• Any protocol funded under STIP is eligible to apply for a bridge grant coinciding with the LTIPP distribution window.

Maximum Funding Size:

Maximum funding requests under this bridge grant are capped based on a percentage of the prior funding received under STIP:

• Greater than 500k ARB: may make a funding request of up to 50% of their prior funding.
• Less than or equal to 500k ARB: may make funding requests up to 100% of their prior funding, capped at 250k ARB.

With the metrics that the protocols uploaded, is there any general analysis of what worked and what didn’t? who achieved the objectives? liquidity and user retention?

While I quite agree with the proposal, I think that keeping the incentives in place will not allow us to see the real results.Considering that the LTIPP is in the process of implementation, we should at least do an analysis with all the available STIP data.

[tnorm]

I will do my best to be agnostic as a STIP vet who’s historically taken to dismantling, critiquing, and calling on the DAO to improve upon the program. I will also disclose that now as a part of Boost Studios, I am likely a benefactor of this proposal.

After reflecting…a few (redundant) thoughts:

STIP - Defining Success

The primary friction with this proposal is the fact that delegates will be asked to vote on whether programs were “successful”. As mentioned ad nauseam, because STIP didn’t define applicant success, every analysis conducted on grantee success is inherently subjective and (to no one’s fault) destined to fail in understanding the nuances of any one application.

@Tenzent

Nothing against using KPIs either to gauge placement if that’s something the DAO should want although I will say what a KPI is varies greatly by protocol

To Tenzent’s point, it’s difficult to retroactively measure success based on “win conditions” that were never provided up-front. Any extension of the STIP program inherits this critical flaw and, unless amended, will further perpetuate it.

L2 Competition - Competitor’s Defining Success
The proposal also cites L2 competition as a key rationale. While the intent to support the Arbitrum ecosystem immediately is commendable, and arguably critical, I urge delegates to not blindly emulate the actions of other ecosystems, and rather understand both competitor positioning and Arbitrum’s own objectives.

Other Layer 2 and EVM chain ecosystems like Mantle, Blast, and Optimism have defined specific visions for success with a clear focus on optimizing for onchain metrics such as TVL, transaction volume, strategic assets, protocol traction, delegation, and integration/alignment. For example:

• Mantle Journey: Awards retroactive grants based on TVL and Transactions.
• Blast Points: Are awarded for TVL in strategic assets (ETH, WETH, and USDB).
• Blast Gold: Awards integration w/ Blast Points API and subjective-alignment with Blast.
• Optimism RPGF: Is leaning into onchain results as guidance for RPGF following recent controversies.
• Optimism Airdrops: Rewarded onchain actions in governance and creator economies.

Moreover, many new ecosystems have innovated at the chain level, funneling sequencer revenue back into network-aligned behavior, potentially providing more sustainable incentives than short-term token grants. Perpetual incentives grants from the treasury may actually not compete here, and a direct strategy would likely require greater innovation than just extending STIP-style grants.

Objective and Metric Based Grants - Building Programs that Define Success
Upon completion of incentive campaigns, most would want to evaluate the campaign, take a measured understanding of lessons learned, and re-establish their definition of success to inform the next iteration. Ecosystem grants are a bit like airdrops, they tend to reward and direct behavior. You should set the goals you want to see, and reward those who can best achieve them.

Arbitrum’s ecosystem success hinges on a data-driven, strategic approach to incentives. The DAO must design incentive programs that achieve measurable success, and draw from strategies across project-centric, metric-centric, and objective-centric grants.

I understand the sentiment for protocol support, that teams are challenged to appease both venture and liquidity demands in a competitive environment, but I don’t think this style of program is sustainable without greater alignment on metrics and objectives to guide protocol’s toward verifiable, and sustainable growth.

Conclusion
If the DAO proceeds, I’d encourage it to define onchain metrics for important verticals to the DAO (TVL, transaction fees, segmented users, DAUs, strategic assets, etc.) and aim to amend previous errors by setting the stage to reward projects who perform positively. Without a definition of success for STIP projects, there isn’t an obvious path to success for STIP proposals.

[Aiham.eth]

On behalf of the Silo Finance team, we cast our full support for the proposal. The STIP program has proved significant success for the entire ecosystem. For the lending vertical, its efficacy cannot be overstated. The STI-Bridge will enable Arbitrum projects to remain competitive relative to the larger DeFi ecosystem.

[ruslanklinkov]

Agree with @cp0x
I think we need to consider this proposal with a certain amount of criticism. Perhaps the projects need to be more proactive, to show a product first and preferably one that would surprise us. First the value and only then the reward and funding. Otherwise we can waste money and fund projects that are frankly bad. I propose to discuss this in more detail.

[BlueClarity]

On behalf of the Trader Joe Governance Council, we believe Arbitrums actions now are paramount to retaining its significant edge in the L2 space. Removing support for a large number of protocols, including many flagship protocols, would be at some detriment to the ecosystem and give users greater reason to start discovering newer ecosystems that are launching and competing. The next months are key.

OpenBlocks have shared enough data for what is a value return and what necessarily ‘isnt’ a good value return: OpenBlock Labs STIP Efficacy + Sybil Analysis (2/24)

Support this proposal and move it forward.

[Bobbay]

This is an interesting ask, and I can see the benefits of further supporting Arbitrum’s flagship protocols. All STIP benefactors will clearly be in favor of this proposal as it benefits them, so I encourage delegates who aren’t associated with a protocol to share their opinion on this proposal from a neutral standpoint.

As it stands, I echo Tnorm sentiment especially around defining success. We all want to help Arbitrum protocols flourish, but in a sustainable manner, that considers the long term ecosystem of Arbitrum DAO and Arbitrum ecosystem.

As of now, I see this proposal as the initial draft that needs further fleshing out around certain details before the DAO drops another 37.5M ARB. Specifically on the following:

• The optimistic approval process is a great way to reduce the burden on the delegates; however, how does one initiate an objection?
• Also, will this objection have to be public? This might deter some people
• How do you define the successes of STIP?
• Who will confirm whether a STIP applicant is deemed successful so they can apply to this “bridge”?
• Eligibilty needs further clarification - Any protocol can apply? Only successful STIP protocols can apply?

P.S. As a multisig signer of LTIP, I’m not fussed about signing more for this, but this additional clicking via my ledger requires a grant of 42,690 Arb for physio. gotta avoid RSI somehow.

[JoJo]

Beside my personal considerations, I am a bit surprised that delegates are not engaging too much with this discussion, either in a positive or negative way. Interesting. Is it either apathy on giving grants, or it is just passive acceptance that as a DAO we need to keep the ball rolling to compete against other L2, or just people didn’t had the time to read it because of many stuff happening at once? Not sure which one is the answer.

[LodestarFinanceDAO]

The Lodestar DAO supports the proposal to extend the STIP incentive program.

Since its inception, the STIP program has proven its success across every measurable aspect within the Arbitrum ecosystem. It has not only catalyzed Total Value Locked (TVL) and user growth but has also fostered an environment ripe for partnerships and collaboration among its grantees.

In the wake of the launch of numerous new Layer 2 solutions in the upcoming months, the extension of the STIP program is not merely beneficial— it is also strategic: We firmly believe that this move is pivotal for Arbitrum to maintain and solidify its leadership in the Layer 2 space.