Extension of Arbitrum’s Short-Term Incentive Program

[DeeDee]

The program had 2 primary goals.

Growth and test different incentive models to gather data.

We can’t fix the latter one, the STIPs were shaped by the delegates to adopt these models. So on that goal, the program failed.

But for growth, there is still something that can be achieved. What is the single best driver for growth? Competition. Competition leads to innovation, to efficiency. Why restrict competition by perverting the markets by using what amounts to subsidies to give an unearned advantage to some?

All the protocols past the quorum and and more than 50% ‘for’ rate were deemed good enough prospects to support to achieve better growth for Arbitrum. That was what the program was about. But why use this short-sight of the program design to go against the primary purpose of the program?

The DAO passed a growth program. Now enable growth. Don’t create artificial barriers for projects YOU yourself found good enough to allocate funds to.

[Telaga]

Great post @0xRamen!

I would like to echo many thoughts and comments here and big thanks to all who made this happen and delegates for engaging so quickly.

On Fairness: 1) There may be legitimate projects that have / are building great products and may have not been able to apply in round 1 and now will be excluded from the STIP. This also applies to many who did not make the initial 50M cut. 2) Many smaller Arbitrum native projects missed out on the ARB airdrop and are still building their connections in the ecosystem; this has meant that they have been at a disadvantage in the voting process and as noted above, many deserve to be a part of the STIP. As it currently stands the largest projects are getting a disproportionate share; arguably deserved based on their impact but this is limiting growth potential for the network.

Better proposals = more impact: We at Chronos (and many others) have had great discussions with delegates and the wider community and are keen to use feedback to make better proposals in a new round. A collection of new and improved proposals would bring higher and more widespread efficacy to the STIP / on ARB spent that is also more reflective of the community.

A new and improved round:

1. A new round with 25M (75M total STIP spend); first come-first served; pro-rata if oversubscribed)
2. 1 week review + 1 week voting
3. No project can receive more than 10% of the entire spend
4. 50% of the total is dedicated to Arbitrum native projects
5. All STIP ARB is distributed at the same time over a total of 16 weeks starting on the day of 1st distributions
6. Any remaining ARB is left unspent or subject to additional proposals

No project can take the lions share of ARB + through improved proposals brings more impact on ARB spent + gives legitimate ARB native projects that are committed to the ecosystem a chance to bring more widespread network growth + gives delegates more time to review as their workload has been quite significant

As noted by @Hubirb a capped for individuals / pro-rata distribution is a great idea to be applied across the whole STIP (personally would like to see this after a 2nd 25M round) but not sure larger voter / protocols would vote to get their ARB capped; keen to expand on this

[blazedbison]

Just echoing many of the thoughts here that its a no brainer to extend the grant to all projects who met quorum + had >50% For vote.

I will add that it would be labourious to both the projects who have already gone through a draining campaign in rallying delegates, and to the delegates to have to all vote again on a new round.

It makes the most sense to me to just extend the ~24m ARB (this would be a small amount more tha. The 69m ARB recovered from unclaimed airdroppees) to the projects who were eligible under the original criteria.

From the FAQ in the grants discussion:

What happens if the budget is exceeded?

“We do not expect applications to exceed the funding budget of 50M ARB.”

It’s great news that there was unprecedented demand for the STIP, and shows a strong and healthy ecosystem of builders.

“In the event that the budget is exceeded, the DAO may choose to unlock further funds for a third round, or backfund successful incentive proposals”

It is more than reasonable in my opinion that the DAO backfunds successful incentive proposals.

The majority of which are smaller projects and deserve to be given a chance to show their worth to the arb ecosystem.

[Smith]

Sure, but don’t make it into a whole new process as some suggest, that’s a waste of time. Everyone has had weeks to shape their proposals and do their research already.

[Pruitt]

While @404DAO’s governance team has not had a chance to discuss and agree on our stance on extending the STIP in some fashion, I would like to share some data our team put together that shows how the top 75 delegates voted. We were curious to see if delegates approached voting with the mindset that the sum of supported proposals should be kept within the budget of 50m. Below is the breakdown:

Generally speaking, this was true for the top 75 delegates who had an average “spend” of 39m, but 6/10 of the top delegates by voting power exceeded the 50m mark.

From the voting results, it’s also clear that some delegates believe numerous projects deserve some of the STIP funds.

Personally, I also lean towards supporting an option that helps fund the smaller projects that didn’t make the cutoff but passed the vote. Like many other delegates, I’m also burnt out from reviewing so many proposals, but I look forward to hearing other delegate’s opinions and taking the weekend to think about other potential options.

If you want to see more of 404 DAO’s analysis on STIP round 1, a thread with more charts and data can be found here.

[Mantis]

I would like to express my strong concern about the proposed approach. Your suggestion to extend incentives exclusively to the protocols that have passed the allocation threshold appears to have potential drawbacks. Postponing this extension would result in an unwarranted increase in workload, necessitating two distribution processes and potentially the introduction of additional rounds of proposals, along with the burden of re-processing by delegates if holding a seperate, second round.

It’s crucial to acknowledge the potential implications on the underlying value of the Arbitrum token when contemplating a distribution that excludes certain projects. This approach would necessitate every protocol to reevaluate their proposal amounts, which could introduce unnecessary complexities into the process.

As several members of this group have already emphasized, the alignment of the proposed incentives program with the broader vision behind the grants seems inadequate. Given that this is the inaugural Arbitrum DAO grants program, it is reasonable to expect some inefficiencies in the framework. However, it is imperative that these inefficiencies are identified and addressed in an iterative manner to ensure a strong alignment with the long-term success of the Arbitrum blockchain.

Let’s not add unnecessary beaurocracy.

[sahijeevan]

in a right way … keep supporting Arb Eco Sys

[frondoto]

I definitely support the extension. It was amazing to see the community (through delegate voting) choose their favorite proposals to incentivize, but seems like there was a miss-connection between the total amount requested, and the budget. It also speaks very loudly about how much developers want to build on Arbitrum. Not every blockchain can get the amount of participation (from Protocols, but also voters) in just one week. It was kind of mind-blowing.

[peter]

The question is why choose an amount of 50M but not 75M, or 100M?
It’s not just about the amount, but also about the choice of DAO and the competition for allocation. Even if the program received a larger fund, there would likely be bigger requests from protocols. So, the end result would remain the same. Chosen protocol still be chosen. It doesn’t make sense to ask for an extension after losing votes, and it seems a little pathetic to me…

[maika]

I was urged to share the write-up that I posted on Twitter/X on this forum. I know its a bit off-topic to this specific discussion but may inform some more decision making going forward with the STIP program. Here you go:

Maika Isogawa

[apoorv9]

Agree with the sentiment here. Would be good to come up with the rationale for 10M, 20M, and 30M numbers though, rather than choosing an arbitary number (like 50M last time).

[mint_cloud]

Thanks for bringing this up, as I must admit I was quite disappointed to discover Round 2 would not be happening. We were preparing Matcha (matcha.xyz) / 0x (0x.org) application in the last few days with the expectation of getting the community eyes on it on what we genuinely felt was a great program (gasless trading incentives, RFQ Market Makers on Arbitrum among other things).

We’re obviously biased, but we’d like the program to be extended.
In the meantime, do you reckon it’s worth we go ahead and share our application? Should we use the legacy Round 1 folder or Round 2 (it’s empty right now)?

Thanks for spearheading this

[Scalene]

The categories accepted largely are Dex, agregators, options, perpetuals, lending etc.

Meanwhile everyone outside the DAO are calling for increased user on-boarding via utilities that fall largely into the “other” category. In the primary list contains 2 projects, Galxe and Tally.

This is more of an observation than a complaint.

[deBridge]

Thanks for this post. Similarly to many others in the reply section of this post, we are also disappointed that Round 2 will not go through. We already put together a meaningful proposal that we expect will produce a lot of value for the Arbitrum ecosystem in a capital efficient manner.

[deBridge] [DRAFT] [STIP - Round 2]

Application Notice Dear Arbitrum community, at deBridge we were originally considering to apply for STIP — Round 2, but due to the heavily oversubscribed Round 1 and based on Snapshot voting, that funding will be allocated on a first-come, first-serve basis, we’d like to publish our application now (earlier than the official start of Round 2 submissions) due to lack of certainty whether the total of 50M ARB would be distributed evenly between two rounds. We’re posting earlier to make sure gran…

If there could be an opportunity for deBridge and many other projects aiming for Round 2 to let the DAO vote on our proposals, that would be highly appreciated. Thank you.

[sahijeevan]

all proposal are good … they have high potential to build Arb eco sys

[Djinn]

Is this going to vote?

Seems like there is a ton of support behind this proposal.

[Englandzz_Curia]

@Dog

With the recent clawback of the unclaimed airdropped ARB, there exists enough to cover the remaining 24m, and then some. I think there’s a compelling case to be made here since ~74m passed and one of the original ask options was 75m.

In my view, allocating the unclaimed 24-25M airdrop to augment the grant would be advantageous for our ecosystem. The airdrop’s primary intent was to support and nurture ecosystem expansion, especially as we are in the early phases.

However, there’s a pressing concern. Large-scale projects, given their extensive user base, could monopolize a significant portion of this grant. This dominance might overshadow smaller endeavors, potentially hindering innovation. These lesser-known projects can offer unique and valuable insights.

Therefore, I propose designating a specific portion of the grant exclusively for smaller, yet promising, projects, emphasizing those with potential for attracting funds and users.

[Britt]

Hey 0xRamen,

Thanks for taking the lead on putting this framework together for extending the STIP. I have a couple of questions for you about your proposed amount. You indicate that there were ~24M of approved requests that we weren’t able to fund, AND a decent list of folks who had started putting together drafts for round 2 already. It’s clear to me that we really underestimated the demand/interest of the ecosystem in this opportunity, which is a good problem to have imo. With that in mind, do you think that the max value you proposed of 30M would sufficiently cover the opportunities we want to fund?

I also wanted to ask what your hopes are for feedback here and what you’d like to see in terms of moving this proposal forward to a vote. If I can be of any help, please let me know!

[Englandzz_Curia]

I would like to address a discrepancy in the data you’ve presented. According to the Inspex data you referenced, JonesDAO requested 2M ARB. However, based on the actual project proposal, they only asked for 200k ARB. This error affects the total grant calculations. By my calculations, taking all project proposals into account, the correct total should be 72,250,544 ARB, not the 74,050,544 ARB you cited. (total grants - Google Sheets)

Building on this point, and acknowledging the robust enthusiasm for the STIP, I’d like to express my concerns about the proposed extension of the grant program. While there’s no doubt that all qualifying projects stand to benefit substantially from an increased pool, we must take a step back and evaluate the broader market consequences of such an expansion.

From a detailed analysis, taking into account the cumulative grant requests and the proposed 3-month program timeline, I’ve deduced that we are potentially looking at an emission rate of approximately 802,783.82 ARB/day. This number, when translated to the current market value, amounts to a staggering $642,227.05 of ARB that could be introduced into the market on a daily basis. And 72,250,544 ARB($5,7800,435.2) selling pressure in 3 months period

The market could experience significant selling pressure, leading to potential price volatility or depreciation. This doesn’t just affect traders or speculators, but every participant in the ecosystem, as the ARB’s value and stability are foundational to the success and perception of the entire project.

Lastly, while I understand the initial consensus may have leaned towards a grant program size expansion, I’d like to remind the community that our decisions should be rooted not just in present circumstances but also in considerations of longer-term sustainability and market health. It’s essential to strike a balance between incentivizing new projects and ensuring market stability.

[Viperr]

Really insightful breakdown, @0xRamen! Viperr from Rage Trade chiming in.

We wholeheartedly back the proposition of expanding the ARB budget for the short-term incentives program to allow protocols in round 2 a chance. Many protocols like ourselves were expecting this budget to be evenly split amongst both rounds, allowing a fair chance for all projects, irrespective of when they were onboarded to the Arbitrum ecosystem or what size community they have.

An extension of the budget not only shows commitment from the Arbitrum team towards fostering a growing and collaborative ecosystem but also ensures that emerging projects don’t get left behind.