[FINAL] KyberSwap STIP Addendum

DAO Grant Programs STIP Bridge Addendum
1

KyberSwap STIP Addendum

Applicant Name: Maxax & Hugho

Project Name: KyberSwap (Kyber Network)

Project Description: KyberSwap is a Multi-chain DEX Aggregator & Limit Order, available on 17 different chains.

Website: https://kyberswap.com/

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

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 17th of November 2023, ended 23rd of November 2023.

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

Bi-weekly STIP report: KyberSwap Bi-weekly STIP Report

Final report: [KyberSwap] Bi-Weekly Updates - #3 by sasha_mai

STIP KyberSwap Dashboard: N/A

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? If you don’t know what KPI might be relevant for you or how to properly define them, please refer to the following document:[[Arbitrum DAO] OpenBlock Labs Incentive Onboarding Spec]([Arbitrum DAO] OpenBlock Labs Incentive Onboarding Spec - Google Docs)

Unfortunately, KyberSwap Elastic was exploited from 22 November 2023, 10:54:09 PM UTC, resulting in exploitative swaps by an exploiter, which drained approximately $48.8 million of users’ funds from KyberSwap Elastic liquidity pools. The team has been supporting law enforcement and cybersecurity on track-down of the exploiter and recovery of users’ funds taken from them.

On November 17th, we launched 24 farms on Arbitrum, allocating 361,000 $ARB and 61,500 $KNC rewards: https://x.com/KyberNetwork/status/1725504031165227280?s=20 1

While we originally allocated 361,000 STIP ARB for the first phase of STIP farms, only about 69,870.9677419355 STIP ARB was spent while about 291,129 STIP ARB was recovered.

Regarding the STIP ARB that KyberSwap was allocated:

KyberSwap had been in discussion with Arbitrum STIP relevant parties about the possibility of continuing the STIP ARB distribution via our other existing liquidity protocol or via a potential fixed and redeployed version of the exploit affected liquidity protocol. However, ultimately, we decided to put a pause on all activities related to our liquidity protocols.

Beyond the initial claimed amount of 428,572 ARB, KyberSwap made no further claims and the Arbitrum Multisig already withdrew the remaining claimable amounts back.

  • Total claimed: 428,572 ARB
  • Used: 69,870.9677419355 ARB
  • Recovered: 291,129.0322580645 ARB (361,000 - 69,870.9677419355)
  • Unused: 67,572 ARB

=> Total unused + recovered: 358,701.0322580645 ARB

We have sent back 358,701.0322580645 ARB to the Arbitrum Foundation Multisig address:
Arbitrum Tx Hash

Due to the unfortunate situation, we are not able to provide any KPIs for this STIP Grant.

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

We have not been able to explore the full potential of STIP Round 1 because of the unexpected exploit of our liquidity protocol, KyberSwap Elastic. As of now, we do not plan to redeploy KyberSwap Elastic.

New Plans for STIP Bridge

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

450,000 ARB

Grant Breakdown:

KyberSwap will allocate ARB grants to different categories, to align and benefit the best the overall Arbitrum Ecosystem. The details of each category is shown in Part 9.

  • Trading Campaigns
  • Referral Program
  • Limit-Order Farming

8. Do you plan to use the incentives in the same ways as highlighted in Section 3 of the STIP proposal? [Y/N]

No, this STIP is designed for KyberSwap Aggregator & Limit-Order, our main Products in the Arbitrum Ecosystem.

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

Because KyberSwap is a special case for this STIP Bridge; we will use KyberSwap Aggregator & Limit-Order instead of a KyberSwap liquidity protocol, we will also re-use the STIP Round 1 - Section 3 template here:

GRANT OBJECTIVES AND EXECUTION

Objectives:

  • Increase on-chain activity on Arbitrum
  • Increase Volume, Fees & Revenue for Arbitrum DEXes
  • Help KyberSwap Partners gain traction from the STIP (Defillama, Pendle, DexScreener, Ramses…)
  • Increase on-chain liquidity through makers using KyberSwap Limit-Order
  • Attract new projects to utilize our KyberSwap API/Widget for integration on Arbitrum

Key Performance Indicators (KPIs):

KyberSwap, functioning as a DEX aggregator, has experienced notable growth over the past year. In 2024 alone, we facilitated a total volume of 1.3B$, securing the third position on Arbitrum in terms of aggregated volume. Additionally, our platform processed 522,000 transactions, ranking fourth in this category. With 73,636 unique visitors, we also held the fourth position in terms of visitor count.

Moreover, we have successfully integrated 48 diverse liquidity sources on Arbitrum.

Our platform has demonstrated impressive growth metrics, with a trade amount growth rate of 152%, a user count growth of 76.46%, and a trade count growth of 132.16% since the beginning of the year.

Regarding market share, we have currently captured 12.3% of the total market share among other aggregators, as of April 2024.

These statistics underscore our commitment to continuous improvement and solidify our position as one of the fastest-growing aggregators in the market. Detailed verification can be found below:

Hello
Hello912×402 15.5 KB

Figure 1 : Rank DEX aggregator by volume in 2024

615×517 18.3 KB

Figure 2 : Rank DEX aggregator by transaction in 2024

|454x305.45877477962847

Figure 3 : Rank DEX Aggregator by unique user in 2024

916×502 22.4 KB

Figure 4 : Rank DEX Aggregator by growth rate in 2024

933×522 33.9 KB

Figure 5 : The evolution of DEX aggregator market share on Arbitrum since 2021

Data source: https://dune.com/hugho/arbitrum-data-aggregator

Data compiled from @sixdegree’s DEX Aggregators Comparison: https://dune.com/sixdegree/dex-aggregators-comparison"

We believe that KyberSwap can achieve significant KPIs and continue to grow exponentially with the help of the STIP:

  1. Increase the volume of our DEX aggregator by 50% on Arbitrum(1.3B in 2024),
    which will also have a significant impact on trading volume on Arbitrum through our integration with 48 different DEXs.

  2. Increase the number of users onboarding on Arbitrum via KyberSwap by 20% (73,636 in 2024) .

  3. Increase the number of transactions by 20% (522k in 2024).

  4. Consolidate our presence on Arbitrum with a 15% market share.

Justification for the size of the grant:

KyberSwap is the top 3 Aggregator on Arbitrum based on Volume. It helped facilitate 2.2B$ volume since inception and 1.3B$ volume in 2024 up to today, 10th May 2024.

We are committed to the long term success of Arbitrum by providing the most efficient solution of on-chain trading with KyberSwap Aggregator & Limit-Order. From the beginning, the team deployed KyberSwap Elastic, an innovative concentrated liquidity protocol that helped sustain Arbitrum Liquidity for 15 months. Despite Elastic exploit in November 2023, the Team decided to offer a grant, up to 100% to impacted Arbitrum users. KyberSwap ethos has been proven for many years and supporting the DeFi ecosystem remains our priority.

Arbitrum remains the 2nd most active chain for KyberSwap Aggregator. With many API integrations like Pendle, Dexscreener, Ramses, Defillama, DeFiSaver, Beefy… KyberSwap is a first-class solution for many projects!

Execution Strategy:

1. Trading Incentives Program (70%)

This “Trading Incentives Program” intends to reward all users swapping with the KyberSwap Aggregator API from any supported clients (Kyberswap.com, Defillama, Pendle, Ramses, Dexscreener…).
Each month, 33,33% of the allocated funds in this category will be distributed to users based on the volume generated. Distribution of ARB will be proportionate to (User Volume/Total Monthly Volume) X ARB allocated over the period.

2. Referral Program (10%)

The “Referral Program” will incite KOLs and other users to bring volume activity to Arbitrum through referral links. This solution is widely used in the crypto ecosystem as an incentive to discover and try new products. We believe this is a good opportunity to bring new users to Arbitrum in a simple and efficient way. The Referrer will receive 20% of the referee allocation, on the other side, the referee will have a 10% bonus on his initial allocation.

3. Limit-Order Farming (20%)

Limit-Orders are not widely used in DeFi despite being a competitive solution to Spot Trading. With this Program, we intend to make Limit-Orders Great Again. Users which will provide liquidity (also called Makers), will receive a passive farming APR while having open orders. In order to provide efficient liquidity on the market, we will provide a bigger ARB allocation to participants that create Limit Orders near the market price of an asset.

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 to receive funds - 0x5785DB8178619EAAa9429ea5e7651Fef526eEbf2

Contracts for distribution (subject to change) - 0x6a4c79289FB5B7a7dDb71F7Eff6A2CBE59bE5E60

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?

We are unable to share any feedback for the reasons mentioned above.

We would like to share a special thanks to Castle and GMX for reminding us of our eligibility to apply for this STIP allocation.Any community and delegate feedback is welcome. We are willing to make changes.

1 Like
2

Hello @Maxax ,

Thank you for your application! Your advisor will be SeedLatam Gov @SEEDGov

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.

3

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

While the KyberSwap team has clearly made significant contributions to the Arbitrum ecosystem as a leading DEX aggregator with over $1.3B in 2024 volume, the unfortunate exploit of their KyberSwap Elastic pools in November 2023 makes it difficult to assess the impact of their initial 1.5M ARB STIP grant. With the program cut short and no reported KPIs, there is limited data to evaluate the efficacy of those incentives.

We commend KyberSwap for their responsible handling of the situation, including returning nearly 359K of the unused ARB to the Arbitrum DAO. The decision to pause all liquidity protocol related activities and shift focus to the aggregator and limit order products for the 450K ARB bridge request is sensible given the circumstances.

However, absent concrete results from the first STIP, it’s hard to justify allocating such a sizable amount of additional funding. The proposed initiatives like trading rewards, limit order farming, and referral bonuses could certainly drive adoption, but the 50% volume growth, 20% user/transaction increase, and 15% market share targets feel somewhat arbitrary without more context on what was achieved previously.

Therefore, as stewards of the community’s resources, we feel it would be prudent to take a more conservative approach at this stage. We would recommend KyberSwap come back with a smaller, more targeted proposal once they have had time to fully regroup from the exploit. Demonstrating some initial traction with the aggregator and limit order incentives would make a stronger case for larger-scale support.

We appreciate KyberSwap’s transparency and commitment to the Arbitrum ecosystem, but given the lack of measurable past results, we believe pausing the STIP engagement is the responsible choice for now.

4

Thanks for your detailed reply.

Just to set the record straight, KyberSwap returned 1,430,129 out of 1,500,000 ARB (95%) it was allocated because the exploit occurred 3 days into our STIP incentive program.

This number was made up of ARB we did not continue to withdraw + ARB we withdrew but did not use yet + ARB we recovered.

5

Savvy DAO has voted FOR KyberSwap STIP Addendum.

1 Like
6

gm team,

thanks for applying - I appreciate you guys didn’t manage to fully execute on your STIP plan after the exploit, and you returned almost all funds in a timely manner.

However, I don’t think this Bridge proposal has met the requirements, so I will be voting AGAINST it on Snapshot.

  • As @mcfly mentioned, there is no rationale for the target KPIs and no justification for the amount requested.

  • I feel some of the actions could be easily gamed. For example, market makers could set up limit orders very far from current prices and earn risk-free rewards while providing no benefits to Kyber and Arbitrum.

I would welcome and more detailed proposal after the pilot program.

7

I’ve voted FOR KyberSwap STIP Addendum.

8

We vote to approve funding the protocol.

Reasoning: As the most of the allocation has been returned after the unfortunate incident, we believe it makes sense to fund the protocol to assess the results without any disturbance.

1 Like
9

The Princeton Blockchain Club is voting FOR KyberSwap’s STIP Bridge grant.

Definitely unfortunate to see Elastic get exploited early on in the STIP process. Despite that, the team has been resilient and their aggregator product has had pretty good market share on Arbitrum. Slightly concerned that the trading incentives program might be easily gamed (seconding @maxlomu), but we want to give KyberSwap a second chance with Arbitrum DAO grants.

1 Like
10

We voted yes on funding this due to KyberSwap’s proven ability to drive substantial trading volume and their robust plans for incentivizing on-chain activity. Despite the setback from the liquidity protocol exploit, KyberSwap has demonstrated resilience and a commitment to user protection by recovering and returning funds. Their strategies for trading incentives, referral programs, and limit-order farming are designed to boost engagement and done a great job at doing so, we are in favor.

1 Like
11

Thank you to all voters for this STIP!
KyberSwap successfully passed the quorum :+1:

We heard the feedback of the community & delegates, we will make sure to offer anti sybil mechanisms before the trading program goes live.

12

DAOplomats voted to Approve funding.

There wasn’t much to review regarding KPis due to the exploit but we are confident to support them on their current ask after a good look at their plan of action for this current iteration of STIP.

13

First things first, thank you for your transparency. When we consider the unfortunate situation that happened to the protocol, we believe that recovering from here will be tough. Moreover, when there are no performance metrics for evaluation, it is challenging for us to think of a new round of grants for the protocol. With these rationales, we will vote ‘’Abstain’’ at this proposal and wait for the community feedback.

14

Last time the project was hacked during the grant period.
Accordingly, there are no results for the past 1,500,000 ARB.
Project just lost it at all.

In their application they did not write a word about the fact that they fixed the code error or conducted any new audit of adjustments to their code

15

The UADP elected to Abstain on this automatic challenge Snapshot since the protocol submitted their application late–this is simply a matter of following proper procedure and does not take into consideration the contents of the STIP Bridge Challenge itself

16

For tracking purposes, I’m copying the reasoning given on my snapshot vote:

Reason: While the order-book exchange it is a nice feature, the largest amount is going to the aggregator, which not create new TVL.