Program Finances: Season 1
February marked the conclusion of DRIP Season 1 with Epoch 12 ending on February 18, 2026.
The initial budget was a combined 24M ARB, broken down into 16M ARB for the base budget and an additional 8M ARB for discretionary allocation. In total, 16,705,263 ARB was utilized for incentives, approximately $4M at the time of allocation, and distributed across participating protocols and asset pools in the following manner:
As of today, ~3.03M ARB (~21%) remained unclaimed, with users having a 6-month claiming window for Aave rewards (EOD August 18th, 2026) and 3 months for all other participating protocols (EOD May 18th, 2026). When taking into account the ~506K ARB used to cover the entirety of DRIP’s operating expenses, there is 62,788,803 ARB remaining in the DRIP wallet.
Season 1 Retrospective
The full DRIP Season 1 retrospective has been published, covering the program’s performance from September 3rd, 2025 through February 18th, 2026. Here are the highlights:
Results: To measure capital efficiency, we used an adjusted cost effectiveness metric, calculated by taking the total market size of participating protocols across all chains, multiplied by the change in their Arbitrum market share, relative to the dollar value of ARB allocated. This approach isolates Arbitrum-specific gains from broader market movements, which is critical given ETH price declined over 50% during the season. The adjusted ratio came in at 51 across the full season, meaning that for every $1 of ARB deployed, the Arbitrum total market size of participating lending protocols grew by $51. For USD assets, the unadjusted metric was used since stablecoin-denominated markets are largely insulated from broader price fluctuations, reaching a cost effectiveness of 76.
To put these figures in context, we benchmarked DRIP Season 1’s adjusted cost effectiveness against comparable incentive programs. As shown in the chart below, DRIP achieved the highest adjusted cost effectiveness at 51, while deploying significantly less capital than most peers with just $4M compared to LTIPP’s $21.5M and Unichain’s $21.8M budgets. While each program operated under different market conditions and with different objectives, the comparison reinforces the case that focused, actively managed incentive deployment can deliver meaningfully better capital efficiency than broader, higher-spend approaches.
Ecosystem expansion: In regards to new deployments, Morpho, Euler, Maple Finance, InfiniFi, Reservoir, and Resolv Finance launched on Arbitrum as a direct result of the DRIP program. On the asset side, yield-bearing stablecoin supply grew from $130M to over $1B and Arbitrum’s declining ETH circulating supply reversed course, surpassing 840K ETH. Arbitrum’s DeFi ecosystem also saw downstream improvements outside of lending market growth as DEX liquidity for new assets peaked at $120M and Pendle markets reached ~$500M in combined TVL.
Protocol performance: Morpho was the standout lending protocol with 593% market size growth and an adjusted cost effectiveness of 198. This was largely because it was the only protocol where the full incentive strategy could be executed as designed. Fluid delivered steady, efficient growth, while Aave’s raw market size figures reflected ETH price decline more than program performance.
What we’d improve: In hindsight, the program would have benefited from more dynamic control over incentive timing, particularly for ETH assets where a compressed window likely limited long-term retention. We also learned to recognize earlier when protocol-level constraints make continued allocations unlikely to generate durable results, rather than allowing external sensitivities to slow reallocation decisions.
Lessons carried forward: The clearest takeaway from Season 1 is that debt liquidity is the most effective lever for growing lending markets. This is done by attracting deep stablecoin supply and then directing which collateral assets have access to it. Incentives delivered their highest impact at the 0-to-1 stage of market development, and the program worked best as an accelerant for builders/projects who already had strong products and clear value propositions. Additionally, future seasons will lean further on structures similar to the Bitget & Steakhouse distribution partnership, where incentivized participants contribute more directly to DAO revenue.
The full retrospective report is available on X.
Looking Forward: Season 2
As mentioned in the January update, the current ARB price range has led our team to believe that it makes more sense to briefly pause incentives before beginning Season 2. At this point in time, we’re targeting Season 2 to be mid-late April.
The DRIP proposal states that all seasons must be started prior to July 1st, 2026. We’re aware of this deadline and are drafting a proposal to provide a more detailed rationale for an extension, in addition to other possible tweaks to DRIP’s structure based on lessons learned throughout the first season.
Disclaimer
Participation in the DeFi Renaissance Incentive Program (“DRIP”) involves risks. Leveraged strategies such as looping can result in liquidation or total loss of funds. ARB rewards do not compensate for potential losses. You should carefully assess your own risk tolerance before participating.
Nothing in this post or the DRIP program constitutes financial, legal, or investment advice. All participants are solely responsible for their own decisions and for complying with all applicable laws and regulations in their jurisdiction.
Rewards are not guaranteed. The amount and distribution of ARB depends on program parameters and user activity. Program terms, eligible assets, and budget allocations are subject to change at the discretion of the ArbitrumDAO.
Merkl, the Arbitrum Foundation, and the DRIP Committee are not responsible for smart contract risks, protocol vulnerabilities, or losses incurred on third-party platforms. DRIP is a community-governed initiative: Entropy Advisors manages program operations but does not control ArbitrumDAO governance or treasury decisions.
Merkl, the Arbitrum Foundation, and the DRIP Committee shall have no liability to you should they fail to make a payment of rewards to you, for any reason, including without limitation whether this be in relation to the amount you do or do not receive or a payment that does not go to your nominated wallet address. If you receive a payment that is not intended for you or if you receive more than you should have received, you shall, upon request, immediately return this to an address nominated by the Arbitrum Foundation.