[FINAL] MUX Protocol STIP Addendum

Information about the MUX Protocol STIP

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

2. How much, in the previous STIP proposal, did you request in ARB?
MUX requested 6M $ARB in the previous STIP proposal

3. What date did you start the incentive program and what date did it end?
Nov 16th 2023 - March 6th, 2024

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

  • MUX moved all MUXLP protocol-owned liquidity (around $14.5M) to the MUXLP senior tranche and the DegenLP pool in April and May; the TVL shown on the OpenBlock dashboard currently doesn’t track the tranches and DegenLP pool liquidity, therefore the latest TVL shown is around $14.5M lower than the actual TVL.

Bi-Weekly STIP Performance Report

5. 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? 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
MUX STIP Metrics (Nov. 16th 2023 - Mar. 6th 2024)

  • Total volume directed to all integrated protocols: $18,819,598,409

  • Total revenue generated for all integrated protocols: $13,656,103

  • Total number of unique user addresses: 17,943

  • Total Arbitrum sequencer fees generated: 86.4 ETH

  • TVL growth by the end of the campaign: 37%

    • Mar. 6th 2024 TVL / Nov. 16th 2023 TVL
  • Link to the MUX STIP Dashbaord

Effective Anti-Sybil Mechanism

  • Based on the OpenBlock Labs STIP Efficacy + Sybil Analysis, MUX protocol had one of the lowest Sybil Ratio.

  • MUX contributors applied an effective and strict anti-wash-trading setup and closely monitored all trading activities during the campaign.

    • The anti-wash-trading & anti-sybil-attack rules will remain unrevealed. Otherwise, the rules can be abused with planned strategies.

6. [Optional] Any lessons learned from the previous STIP round?
As MUX onboarded more traders and witnessed more active trader & LP activities during the STIP, we gathered valuable user feedback that led to major protocol improvements:

  • Aside from offering deep liquidity and competitive trading costs, market diversity and trendy marketing listing efficiency are crucial to onboarding and retaining traders.
  • LPs have diverse risk-exposure preferences, and there are no one-for-all solutions to attract and retain LPs.

Building on the insights gained from the STIP, MUX has launched new major feature updates with a clear focus on our shared goal: onboarding more users to the ecosystem and ensuring their retention.

New major protocol feature launched based on STIP learnings

MUX Degen Protocol

  • The lack of market diversity and low listing time efficiency has been a long-standing bottleneck for on-chain perps protocol. Although MUX was able to offer 140+ markets as an aggregator (thanks to all the integrated protocols), it still couldn’t offer trendy markets with higher efficiency like CEXes. During the bull markets, faster listing speed is critical to onboarding & retaining traders.
  • As MUX onboarded more users during the previous STIP, MUX received more users’ requests for trendy markets listings, and this motivated MUX to design and launch the MUX Degen Protocol that can launch trendy long-tail asset markets timely. The MUX Degen Protocol is exclusively available on Arbitrum.
    • Upon launch, the MUX Degen Protocol has been integrated into the MUX Aggregator.
    • The MUX Degen Protocol has listed 8 markets since launch: $BOME, $ETHFI, $ENA, $W, $TNSR, $SAGA, $TAO, $REZ.
    • Since the MUX Degen Protocol is exclusively available on Arbitrum, MUX aims to use the Degen Protocol to continuously onboard more organic traders to the ecosystem.

MUXLP Tranches

  • The MUXLP pool is a multi-asset pool that serves as traders’ counterparty. LPs will earn a portion of the protocol fees and additional MUX token rewards but also bear positions holding related risks.
  • MUXLP yield greatly benefited from the increased trading volume during STIP, and more LPs were onboarded. MUX contributors learned from LP feedback that offering pools tailored for LPs with different risk-exposure preferences can help to onboard and retain more LPs. To meet the demands of LPs with different risk-exposure preferences, MUX has released a risk-free senior tranche and leveraged mining junior tranche on top of the MUXLP pool.
  • Senior Tranche
    • The senior tranche is a delta-neutral USDC-only pool that will lend liquidity to the junior tranche. The senior tranche’s yield will derive from a portion of the junior tranche’s income. LP’s principals in the senior tranche won’t be affected by market volatility; the junior tranche strategies & liquidation setup will ensure the principals supplied from the senior tranche won’t bear any losses.
  • Junior Tranche
    • The junior tranche, a MUXLP leveraged mining pool, offers the potential for exciting leveraged MUXLP yield. Its strategies will use up to 2.5x leverage, amplifying LP’s potential returns. However, junior tranche LPs will also face default and auto-deleveraging risks, and there are liquidation risks associated with using the junior tranche. Junior tranche LP’s principals will be affected when liquidation happens.
  • MUXLP tranches users earn #RealYield in the form of $USDC tokens weekly from MUXLP income. By offering additional $ARB token incentives for LPs, the pool size can potentially increase to support more trading demand and initiate a flywheel effect with the trading incentives.

Incentivization Strategy Takeaways

During the previous STIP, MUX rebated up to 100% open & close fees for all integrated protocols on the MUX aggregator with the goal of aggressively onboarding more traders to Aribtrum. MUX witnessed notable volume and DAU growth during the campaign; however, based on the aggregator data from 30-day-before, 30-day-after and during the STIP program, although the incentives can stimulate more trading activities during drastic market movements, natural market volatility is still the main factor to drive trading volume, and the incentives serve as an additional boost.


Since volatility is the core volume driver, incentives should serve as an additional stimulus for cost-sensitive traders to generate more volume when they prefer to trade. The rebate rate can be lowered as long as traders’ overall trading cost is similar to or lower than that of CEXes.

The new proposed max open & close fees rebate rate for STIP bridge is lowered from 100% to 75%. The estimated open & close fees rebate range will be 25% - 75%, and the rebate rate cap will be 75%. MUX can potentially adjust the rebate rate based on trading demand, market conditions, and incentive burn rate to ensure effectiveness.

New Plans for STIP Bridge

7. How much are you requesting for this STIP Bridge proposal?
1,900,000 $ARB

  • While we could technically request up to 3,000,000 $ARB as per the current rules, we want to have a responsible approach toward the DAO, and this is why we lowered by 36% our request for this round.

8. Do you plan to use the incentives in the same ways as highlighted in Section 3 of the STIP proposal? [Y/N]
No.

9. [Only if answered “no” to the previous question] How will the incentive distribution change in term of mechanisms and products?
Incentive Distribution Changes
The overarching rationale and goal for the incentive distribution remain unchanged: to attract more organic users to the Arbitrum ecosystem, retain existing users, and drive up user engagement, trading volume, TVL, and transactions. The incentives are still proposed to be distributed between traders and LPs, but the ratio and incentivization approaches will be refined based on STIP learnings and the latest MUX feature updates.

Tentatively, 55% of the grant will be utilized to reduce trading fees for GMX V1, GMX V2, Gains, MUX Native Pool and MUX Degen Protocol positions opened through the MUX aggregator.

  • The Rebate Program will kick off rebating up to 75% of the fees covered by the scope for all integrated protocols. Since the expected duration of STIP is 3 months, the rebate rate can be potentially adjusted along the way based on the grant spending speed.
    • Compared with the previous STIP, the max rebate rate has been updated from 100% to 75%.
  • If the rebate rates need to be adjusted according to grant spending speed and market conditions, MUX will notify the community before making any changes.
    • The estimated open & close fees rebate range will be 25% - 75%. The rebate rate cap will be 75%.
    • MUX will adjust the rebate rate based on trading demand, market conditions, and incentives burn rate to ensure effectiveness.
  • The final rebate rate will be based on the users’ actual fees spent. If the integrated protocols offer additional rebates/rewards separately, MUX will ensure the final total rebates won’t exceed the fees paid.
  • No wash trading or Sybil-attack-related activities are allowed. MUX contributors will apply the same anti-wash-trading from the previous STIP to closely monitor related activities from this campaign; Addresses involving wash trading or Sybil-attack-related activities will be published and excluded from receiving the rebates.
    • In the previous STIP, MUX protocol had one of the lowest sybil rates of 0.270%
    • MUX contributors reserve the right to identify any Sybil-attack-related addresses and exclude them from the incentive program.
    • The anti-wash-trading & anti-sybil-attack rules will remain unrevealed. Otherwise, the rules can be abused with planned strategies.

Tentatively, 45% of the grant will be utilized to increase yield for the MUXLP tranches on Arbitrum.

  • 100% of the MUXLP tranches liquidity is on Arbitrum
  • MUXLP tranches are built based on the MUXLP pool while meeting more diverse risk-exposure preferences from LPs. The goal is to onboard more LPs and increase LP retention.
    • As more high-yield farming opportunities appear during the bull market to win LPs, the leveraged-mining Junior Tranche is designed to attract more LPs with higher yield based on MUXLP income.
    • The delta-neutral Senior Tranche is tailored for LPs needing risk-free farming opportunities without worrying about principal drawdown.
  • MUX aims to effectively incentivize the tranches to increase LP adoption and retention for the ecosystem.
    • Tentatively, in the case of allocating incentives or MUXLP tranches, 100% of the incentives will be used to incentivize junior tranche growth.
    • Since the junior tranche executes MUXLP leveraged mining strategies and borrows assets from the senior tranche, incentivizing the junior tranche can benefit both tranches and the MUXLP pool itself.
  • Since the MUX tranches are still in their early stages, potential mechanism upgrades based on users’ feedback can occur in the coming months. In case of tranche service interruptions during the STIP bridge period, the liquidity incentives will be directed to the original MUXLP pool to stimulate LP growth & retention.

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?
Addresses involved in the STIP Bridge initiative

  • Funding Address: 0x4Fa610DD115e790B8768A482Fc366803534e9Adc
  • Funding Address Characteristics: 2/3 multisig
  • Contract Address: 0xe21d366d5042F713C0C872591e610fB6a74C775b
  • No changes compared to the previous STIP proposal

11. 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?
The incentive programs significantly boost protocol adoption and accelerate protocol PMF testing and improvements. The protocol submission, review, and individual voting process could’ve caused hassles for participants, delegates, advisors, and PMs, but for something that only happens a few times a year, the more decentralized process is reasonable.

We propose an enhancement to the grant cap tier system, which will be based on relative protocol and sector metrics. This system will define the stage of the applicant protocol, offering more open opportunities while using a pre-determined guideline. The key benefit of this system is its potential to streamline the process, making it more efficient and effective for all participants.

  • Lower cap tier for relatively new kickstarter protocols that have innovative offerings but has limited track record, TVL, DAU, volume, etc.
  • Mid cap tier for protocols with proven pmf, innovative offerings growing metrics, and a convincing reason for why the grant can help to accelerate adoption
  • Higher cap tier for protocols with prominent TVL, volume, revenue and community to help with further adoption and more exposure for the ecosystem

Establishing a more dedicated Arbitrum incentive programs channel and Twitter page is also crucial. The dedicated channel can be a central hub for sharing all incentive programs’ existence and core progress. Currently, we have multiple separate Telegram channels for different programs, but they might not be effective enough to keep all intended applicants informed. A dedicated platform will ensure better communication and increased awareness, benefiting all participants involved in the process.

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Hello @jeanm,

Thank you for your application! Your advisor will be @JoJo.

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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We’ve made several updates to our STIP addendum based on the feedback from our advisor @JoJo. Thank you to @Matt_StableLab and @JoJo for feedback and assistance.