[FINAL] Furucombo STIP Addendum

1. Can you provide a link to your previous STIP proposal (round 1 or backfund)?

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

59,500 ARB

3. What date did you start the incentive program and what date did it end?

01/08/2024 to 03/28/2024

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

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?

  • KPI 1 - Volume: From the start of the STIP campaign, Furucombo Lending Dashboard trading volume on Arbitrum increased from 5.25M to 35.5M, resulting in an increase of 576%
  • KPI 2 - User Count: From the start of the STIP campaign, the user count using the Furucombo Lending Dashboard on Arbitrum increased from 125 to 196 unique users, resulting in an increase of 57%
  • KPI 3 - Number of Transactions: From the start of the STIP campaign, the number of transactions on the Furucombo Lending Dashboard on Arbitrum increased from 1,090 to 2,643, resulting in an increase of 142%

Dashboard to track numbers can be found here (note that it does not yet count Protocolink transactions, and both the Lending Dashboard and soon Create Mode will utilize Protocolink. We will update the dashboard as soon as possible to include these kinds of transactions)

6. Any lessons learned from the previous STIP round?

We found that the incentive campaign brought in many wash traders, where our intention was to promote real users. We will change the campaign in the bridge version to remove the risk of wash trading by targeting developers and adjusting the economics when targeting end users. This will be beneficial not only for the end user, but the developers and protocols that integrate our API/SDK as well. This is therefore not just a benefit for us, but also all the protocols that build with us in terms of lowering development costs, improved security, better incentives and economic models, and improving their product by offering more features and functions that would otherwise not be available.

New Plans for STIP Bridge

7. How much are you requesting for this STIP Bridge proposal?

350,000 ARB

(200,000ARB will be utilized for rewards for lending dashboard users, and 150k towards protocol rewards to users who utilize Protocolink, such as Radiant’s Unwind feature)

8.Do you plan to use the incentives in the same ways* as highlighted in Section 3 of the STIP proposal?

No

9.How will the incentive distribution change in terms of mechanisms and products?

It is our intention in this version to promote the use of Protocolink by our partners and developers. If a protocol or developer utilizes Protocolink API/SDK to route transactions, a portion of the overall volume will be incentivized and rewarded. This is different from our previous campaign because we will not only be incentivizing retail users, but builders as well. Therefore we will provide 150k rewards towards user incentives for protocols that route transactions through Protocolink.

As mentioned, the first change we want to make is to include an incentive to builders who build using our public API/SDK. Protocolink, our API/SDK, is one of the most robust SDK’s in the industry today. Through the composability of Furucombo, Protocolink allows developers to take advantage of the functions and features available through Furucombo, such as advanced position management, zap in/out of lending positions, multi-send, and more. Additionally, by a developer or protocol utilizing Protocolink, we can significantly reduce the cost of development for developers, as well as reducing security risks. Through our studies, we have calculated that developers can save approximately 77% development costs by utilizing Protocolink for their Lending SDK needs. This can be demonstrated by our collaboration with Radiant protocol who is utilizing our API/SDK to unwind positions directly on their interface. These rewards will incentivize developers to utilize Protocolink so that they can provide rewards directly to their users through the integration. We believe that this can help to strengthen the developer community on Arbitrum and act as an incentive to develop more outstanding dapps to deploy on chain due to the developer friendly environment.

The second change will be to focus on how we can avoid wash trades on Furucombo, and to promote real users. This began to happen once the $ARB token saw a big price swing and it was profitable to perform trades to earn tokens. We still want to provide incentives to users, but we noticed that a volume based approach for all functions on the Lending Dashboard caused the back and forth trades from occurring. Therefore we will focus again on the advanced features, such as Collateral Swaps, Debt Swaps, Leverage, and Deleverage. Additionally, we will adjust the rewards based on the token amount (instead of price), to target a specific percentage of rewards. Furthermore, we will provide users with gas incentives. Because of the complex transactions when performing position management, gas fees can vary anywhere from a few dollars to as high as over five dollars. By providing gas incentives, it will allow users to be able to manage their positions without having to worry about the cost of performing the transactions on the network. The plan will be to reduce the cost for position management to zero or slightly profitable, but not enough that we will attract wash traders. If we notice that the positive value is too high, we will adjust the rewards to compensate to control the back and forth trades. With these changes, we believe this will greatly reduce the back and forth swaps and will focus more attention on real users attempting to adjust their positions.

The goals for this campaign will include:

  • KPI 1 - Increase volume through the Protocolink API through our partner integrations (such as Radiant’s Unwind feature) by providing user incentives
  • KPI 2 - Increase real volume on users doing position management advanced actions (collateral swap, debt swap, leverage, and deleverage)
  • KPI 3 - Increase the amount of users that are able to use these functions (~50% increase, previously we seen a 57% increase)
  • KPI 4 - Add more protocols that utilize the Protocolink API/SDK for transactions (& provide incentives to those users)

The final details will be determined upon the creation of this campaign including recommendations from the community and Arbitrum Foundation.

10.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?

  • Multisig Address
    • 0x99D40438543041e3CC53ac1fE8FF2B8f68996C79

11.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?

Overall the experience was good. It would be nice to be able to assign incentives based on our own schedule, as opposed to staying static to an overall schedule. We believe that we could have run the previous round of rewards for a longer period of time, and therefore could have provided incentives for longer. Other than that, we really appreciate that Arbitrum is focusing on developer incentives and providing us the ability and opportunity to continue to build and provide the best possible experience for users for managing their positions, and performing transactions in DeFi.

Hello @Blazar ,

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.

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Made changes based on the recommendations from our advisors @CastleCapital & @Atomist, thank you for the feedback!

Our proposal can now be marked FINAL @cliffton.eth.

Before you approve any further funds for Furucombo, please check our post @Matt_StableLab @CastleCapital @Atomist

None of the funds from the previous STIP were distributed to their users, they scammed us!

Following the ARDC recommendation, we believe that this proposed addendum requires further review by the DAO. Therefore, we challenge its optimistic approval so that the delegates can form an opinion on the merit of renewing the incentives received during the STIP.

We are publishing the review conducted by Blockworks for greater visibility and advice to the applicant to provide an explanation for the concerns raised.

“Minimal growth visible during program. Stated that most usage derived from wash trading, which led to the protocol withholding funds. ARB has been sent to Kraken, unclear how all funds have been used throughout the program. Project asking for 350K ARB (received 59.5K ARB in the first STIP). New incentive program not exactly defined.”

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I voted to reject funding on this STIP challenge because the funds in the first round of STIP were poorly used.

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

We commend Furucombo for the strong growth metrics achieved during the initial STIP round, with Lending Dashboard volume increasing 576%, unique users rising 57%, and transactions growing 142% from January to March 2024. It’s clear the incentives were effective in driving adoption and usage of the platform.

However, the realization that volume-based rewards attracted significant wash trading raises concerns about the quality and sustainability of this growth. While Furucombo’s proposed changes for the bridge round aim to address this, questions remain about how effectively they will deter mercenary actors.

Allocating 150K ARB to incentivize builders utilizing the Protocolink SDK/API is a promising direction. The potential to reduce development costs by 77% and enable devs to pass rewards through to their own users could strengthen the Arbitrum DeFi ecosystem and attract new projects. We would have liked to see more specifics on the criteria for qualifying integrations and reward distribution, but the concept has merit.

For the 200K ARB Lending Dashboard incentives, focusing on advanced features, rewarding based on token amount, and providing gas rebates to enable free/slightly profitable transactions shows Furucombo is thinking critically about how to target genuine usage. The plan to dynamically adjust rewards if wash trading persists is also encouraging.

Setting a goal of another 50% increase in Lending Dashboard users and onboarding more partners leveraging Protocolink are solid targets. But without more details on the strategies and rationale behind these figures, it’s difficult to assess their feasibility or potential impact.

Ultimately, while we’re encouraged by Furucombo’s thoughtful iterations and pivot to enabling developers, we feel the 6x increase in requested funding to 350K ARB is premature given the lingering wash trading concerns. We would have preferred to see a more measured approach, perhaps a 2-3x increase, until the revised incentive mechanisms demonstrate clear traction with high-quality users and integrations.

We recognize Furucombo’s feedback about allowing personalized reward schedules and believe this is something the DAO should consider for future rounds to maximize each project’s impact.

In conclusion, we believe the most prudent course is for Furucombo to first prove out their new strategies at a smaller scale and then return with a follow-up request once there is robust evidence of curbing wash trading and driving sustainable ecosystem growth. We look forward to seeing their progress and revisiting funding at a later date.