[FINAL] Frax Finance STIP Addendum

Information about STIP/STIP Backfund

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

  2. How much, in the previous STIP proposal, did you request in ARB? 1,500,000 ARB

  3. What date did you start the incentive program and what date did it end? STIP incentive started 2nd of December 2023, ended 29th of March 2023

  4. Could you provide the links to the bi-weekly STIP performance reports and Openblocks Dashboard?

  1. Could you provide the KPI(s) that you deem relevant for your protocol, both in absolute terms and relative change, for the first of each month starting from October 2023 until April 2024, including the extremes?
    We discussed our performance overall in our final report here, but for more clarity, here is the detail about our performance:

TVL of Assets on Arbitrum

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
TVL ($M) 19.29545742 18.19180723 18.67245863 20.51942233 39.80920158 49.62237655 40.38514779
TVL % 0% -6% 3% 10% 94% 25% -19%

Volume of Assets on Arbitrum

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
Daily Volume ($M) 2.388997259 4.943673311 8.998165087 11.32284387 4.717266854 4.074762763 4.820510479
Daily Volume % 0% 107% 82% 26% -58% -14% 18%

Throughout the Arbitrum STIP program, we made significant strides in expanding our Total Value Locked (TVL) within the Arbitrum ecosystem. Leveraging strategic partnerships and innovative strategies, we successfully increased our TVL by nearly threefold, surpassing the 50 million mark. The graph below illustrates this remarkable growth trajectory over the course of the program, showcasing the steady rise in TVL and highlighting our commitment to fostering a robust DeFi environment on Arbitrum.

Graph 1: TVL Growth Over Time

This substantial growth in TVL not only demonstrates the growing confidence and participation of users within our ecosystem but also reflects the effectiveness of our liquidity strategies and engagement initiatives. By attracting more assets and liquidity into Arbitrum, we have contributed to the network’s overall vibrancy and liquidity depth.

STIP Grant Expenditure for each type of asset
Moreover, our collaborative efforts with approximately 30 different protocols played a crucial role in creating, bootstrapping, and nurturing liquidity pools, thereby enhancing the economic value within Arbitrum. This collaborative approach fostered a thriving ecosystem and contributed to the overall growth and development of DeFi on Arbitrum.

Additionally, we initiated Fraxlend on Arbitrum, providing users with advanced lending and borrowing capabilities and further enriching the decentralized finance landscape on the Arbitrum network. These achievements underscore our ongoing dedication to innovation, collaboration, and sustainable growth within the Arbitrum ecosystem.

  1. [Optional] Any lessons learned from the previous STIP round?

We gained insights into the diverse demand for various products from the previous round and identified optimal strategies for maximizing incentive efficiency. Additionally, we recognized the effectiveness of user education in showcasing new opportunities and enhancing participation within the ecosystem. These lessons learned have significantly contributed to refining our approach and ensuring targeted and impactful allocation of resources in the extended STIP grants.

New Plans for STIP Bridge

  1. How much are you requesting for this STIP Bridge proposal? 750,000 ARB
  2. Do you plan to use the incentives in the same way* as highlighted in Section 3 of the STIP proposal?
    We plan to maintain a similar approach with some minor adjustments to our economic strategies. These adjustments include the following:

Increasing yield-bearing assets budget: During the STIP period, we allocated only a tiny portion (5.7% of total budget) of our grant for the incentivization of sFRAX, FXBs, sfrxETH, and FPI (Yield bearing assets) pools and vaults, and we were under the assumption that they could be picked up by the market as ideal yield-bearing assets for collateral (in Lending and CDP markets) but we observed that due to limited liquidity for these assets on Arbitrum they were not used as collateral very much. So for extended period of STIP we are aiming to increase budgets for these tokens and allocate same size of incentives as FRAX and frxETH for them. And for this plan we are going to deploy similar Incentivizer AMOs for each asset so tracking would be the same as what we had for STIP period.

Introducing incentives for borrowers with yield-bearing collateral: As a continuation of the previous item, we want to allocate incentives for borrowers who are using our yield-bearing assets as collateral, This was not possible for us before in many lending protocols due to technical limitations, but Merkl recently added a solution for it, and we have a plan to use it in order to kickstart the flywheel for these tokens.

Increasing protocol lending directly in Arbitrum: during the STIP period, we managed to introduce three different lending markets on Arbitrum, and we used minimum AMO lending to kickstart the market and then tried to grow these markets by incentivizing lenders (except ourselves), but we observed that due to inflated market, we could not attract enough lenders to move the needle. So, for the extended period we plan to cut that budget on Fraxlend lenders, and instead, explore natively minting FRAX on Arbitrum and participate in lending through Fraxlend AMO based on the market demand for borrow. This approach will remove incentivization for one side of the lending market for Frax Finance assets and make borrowing assets more accessible and stable for potential liquidity providers.

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

We plan to maintain a similar mechanism (using tier based incentivization strategy with dynamic rates based on the TVL of each pool) to incentive distribution as outlined in section 3 of the STIP proposal. However, we intend to make some adjustments to our economic strategies and change our allocation of incentive budget for each Frax Finance assets, These adjustments are as following:

Asset STIP Budget Allocation Bridge STIP Budget Allocation
FRAX 51.6% 30%
frxETH 42.7% 25%
sfrxETH 2.7% 20%
sFRAX, FXBs, FPI 3% 25%
  1. 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?
    The address will be:
  • Multisig to receive the incentives: 0xe61D9ed1e5Dc261D1e90a99304fADCef2c76FD10
  • Contracts that will distribute the incentives:
    • FRAX Incentivizer AMO Address (All of FRAX pools are being incentivized through this contract): 0xefa5D36deBF5191328b17f2Ff74090DAdfda9A70
    • frxETH Incentivizer AMO Address (All of frxETH pools are being incentivized through this contract): 0x3C6d74267b01E00B2C8F541ff132A7b03bcC6c70
    • sFRAX Incentivizer AMO Address (TBD)
    • sfrxETH Incentivizer AMO Address (TBD)

The multisignature used to receive the incentives and contracts for distribution of incentives will be the same.

  1. Could you share any feedback or suggestion on what could be improved in future incentive programs, what were the pain points and what was your general evaluation of the experience?

In reflecting on our experience with the previous incentive programs, we’ve identified a few areas for improvement and future considerations. One key suggestion is to incorporate target-based incentives into the program. This addition would ensure that scalability is accompanied by sustainability, providing clear goals and milestones for participants to strive towards.

Furthermore, implementing a protocol matching system for coincentivization could significantly enhance the program. Our experience in the first month highlighted the time-consuming process of finding suitable allies in Arbitrum. With a matching system, we could identify more win-win opportunities and accelerate the collaboration process, ultimately maximizing the impact and success of the incentive program. To expand that, we propose to have a forum or group where different participants in this program can find each other and commit to participating in incentivization of a single liquidity/lending pool together. This can cause a collaboration of 2-4 different parties with a single KPI. For example, in the case of a stable liquidity pool for FRAX on a DEX, there are the following participants that can work together:

  • First Asset Creator (e.g., Frax Finance with FRAX)
  • Second Asset Creator (e.g., Curve with crvUSD)
  • DEX (e.g. Curve)
  • Vault Creator (e.g. Beefy Finance)

Hello @Frax.Finance ,

Thank you for your application! Your advisor will be Castle Capital @CastleCapital @Atomist.

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.

1 Like

Thanks @Matt_StableLab