[FINAL] Stargate Finance STIP Addendum

  1. Can you provide a link to your previous STIP proposal (round 1 or backfund)?
  1. How much, in the previous STIP proposal, did you request in ARB?

2,000,000 ARB

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

Due to operational issues around the KYC process the StargateDAO was unfortunately unable to receive its approved allocation. As a result, our incentive program did not begin.

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

Given that the StargateDAO ultimately did not receive its approved allocation there are no relevant performance reports linked to our proposed incentive program.

  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? 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

Despite having no incentive program live, you can see below that Stargate maintained an impactful role in the Arbitrum ecosystem throughout the STIP period.

Messages flowing into Arbitrum through Stargate (October 2023 - April 2024)

Unique wallets using Stargate to bridge into Arbitrum and USD value of transfers (monthly)

Month 10/23 11/23 12/23 01/24 02/24 03/24 04/24
Wallets 219,522 164,263 142,492 157,036 171,722 283,791 388,290
USD Volume $215,896,291 $205,135,445 $205,397,098 $228,657,379 $401,921,024 $659,038,672 $674,951,522
  1. [Optional] Any lessons learned from the previous STIP round?

Despite ultimately not being able to participate in the incentives program we did monitor the results of other proposals carefully to extract learnings that could be applicable for Stargate.

We aim to focus on encouraging activities which have unique value for Arbitrum and are designed in such a way to be net accretive and un-griefable. For example, deepening bridging liquidity in valuable pools, which will ultimately reduce fees for users, or increasing the quality of assets being bridged into Arbitrum.

With this in mind, a huge part of this proposal is focused on helping to facilitate the migration from USDC.e to native USDC on Arbitrum. This is a strategic process of high importance to the DAO and Stargate is well placed to support.

Furthermore, instead of fee rebates we believe gas rebates are a more appropriate incetivisation mechanism. This way the DAO doesn’t need to worry about giving funds directly to the Stargate DAO treasury prior to seeing sustained results. Therefore, we will be proposing for much of the requested ARB to cover gas fee rebates for users bridging into Arbitrum.

It’s also important to note that we no longer foresee operational hurdles in receiving funds…

New Plans for STIP Bridge

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

750,000 ARB (37.5% of initial STIP)

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

No, we plan to change the incentive mechanism. We aim to help the Arbitrum DAO achieve its strategic objectives through this proposal.

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

Previously, our proposal aimed to direct 100% of the grant allocation to subsidize bridging fees for users (by rebating 0.06% of volume, equivalent to the protocol fee on Stargate). This included all pooled assets on the core Stargate protocol: USDC, USDT and ETH. However, given the aforementioned learnings from the last STIP cycle we are now proposing a more unique incentive mechanism which should provide higher value to the ArbitrumDAO.

Our proposed incentive distribution breakdown is as follows:

50% (375,000) of the requested funds used to incentivise the growth of Stargate’s native USDC pool on Arbitrum.

  • Stargate is about to launch its V2 which, among many improvements, facilitates the bridging of native USDC alongside ETH and USDT (whereas V1 only supported USDC.e). The more native USDC liquidity available on Stargate, the easier it is for users to access this asset when bridging into the ecosystem.
  • Stargate’s pool is currently the 3rd largest holder of USDC.e on Arbitrum, and these incentives would help to essentially eliminate that, while significantly ramping up liquidity for native USDC.
  • It’s a substantial challenge to migrate from USDC.e to native USDC, and therefore it’s a significant value proposition for those who bridge through Stargate to onboard directly into native USDC, supporting Arbitrum’s migration efforts.
  • Whilst we are aware of previous feedback indicating a preference from some in the DAO to turn attention away from incentivising liquidity we are confident that incentivising liquidity for native USDC on Arbitrum is the lowest friction and most impactful way to grow native USDC on Arbitrum whilst also providing better costs for users and a resulting improved UX.
  • With the requested funds allocated we should be able to maintain an APY of 14% for the relevant period.

25% (187,500) of the requested funds used for gas rebates when bridging of OFTs (omnichain fungible tokens) into the Arbitrum ecosystem.

  • Stargate is uniquely positioned as the sole interface for most OFTs in the ecosystem. This includes some of the largest projects in DeFi, as well as many other STIP participants. For example: $RDNT, $USDe ($sUSDe and $ENA), $JOE, $rsETH. This also includes assets that have been permissionlessly expanded to Arbitrum as OFTs via several governance votes, such as $WBNB and $OP used in GMX markets.
  • Incentivising the bridging of these tokens is something we view as very valuable to the underlying protocols, and could drive greater trading volume on (Perps) DEXes, staking, and governance participation on the Arbitrum Network.

15% (112,500) of the requested funds used for gas rebates on native USDC bridging.

  • On top of incentivising the growth of Stargate’s native USDC pool we propose using 15% of the requested funds to rebate the fees incurred by users bridging USDC into Arbitrum over this STIP period.
  • Users will indirectly be incentivised to bridge native USDC into Arbitrum given the lower cost. This will again contribute to the growth of native USDC on Arbitrum.

10% (75,000) of the requested funds used for gas rebates on native ETH bridging.

  • Stargate is uniquely placed in offering deep liquidity when bridging ETH into Arbitrum. For example, at time of writing, you can bridge >1500ETH (~$4.5M) from Optimism to Arbitrum in a single transaction, in ~25 seconds.
  • By rebating gas fees Stargate will be supporting the flow of native ETH into Arbitrum.

With regards to the amounts, the average gas cost for bridging into Arbitrum over the past 30D has been $0.38 (or 0.00012ETH). This applies to both the native ETH/USDC.e and OFT bridging. Stargate has 488,000 transactions into Arbitrum in this period (30D). The proposed amount would therefore rebate roughly 30-days worth of transactions at current $ARB price ($1.01).

With the launch of Stargate V2, we’re expecting these costs to come down by 60-80%, and so could rebate roughly 3x more transactions, for a total of 1.2-1.4M. This also aligns with what our extrapolated 90D volume would be, at 1.46M transactions. We therefore expect that the proposed amount would be sufficient for native ETH/USDC bridging transactions.

OFT flow into Arbitrum sees more variation depending on initiatives run by the underlying projects themselves. We will be working with our partners to support any initiatives they have on Arbitrum over this period.

Given the newly proposed incentive mechanism outlined in this proposal we think the following KPIs will be relevant to track going forward:

  • Total Supply of OFT assets on Arbitrum.

    • Current state: USDe - 15.4M
      • Milestone 1: 17M
      • Milestone 2: 19M
      • Milestone 3: 21M
    • Target state: 23.1M
    • Current state: ENA - 3.9K
      • Milestone 1:6K
      • Milestone 2:10K
      • Milestone 3: 14K
    • Target state: 19.5K
    • Current state: JOE - 35.3M
      • Milestone 1: 37M
      • Milestone 2: 39M
      • Milestone 3: 41M
    • Target state: 44.125M
    • Current state: RDNT - 829M
      • Milestone 1: 831M
      • Milestone 2: 835M
      • Milestone 3: 837M
    • Target state: 840M
    • Current state: rsETH - 37.3K
      • Milestone 1: 39K
      • Milestone 2: 41K
      • Milestone 3: 43K
    • Target state: 45K
  • Native Ethereum volume flowing into Arbitrum.

    • Current State: $18M 7-day volume.
    • Target State: $50M 7-day volume on average over the 12-week period.
  • Native USDC volume flowing into Arbitrum.

    • Current State: $0 7-day volume
    • Target State: $50M 7-day volume on average over the 12-week period.
  • Native USDC liquidity.

    • Current State: $0
      • Milestone 1: $5M
      • Milestone 2: $10M
      • Milestone 3: $15M
    • Target State: $20M
    • Target APR: 14%
  • Reduction in USDC.e liquidity.

    • Current State: $15M
      • Milestone 1: $12M
      • Milestone 2: $10M
      • Milestone 3: $7M
    • Target State: <$5M

(To note: 1. Each milestone is a 3-week period. 2. rsETH currently has a Pendle offering boosting demand, this will go away during the incentive period thus the target for rsETH is slightly lower than others. 3. RDNT is native to Arb, so the target is also lower for this token.)

  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: StargateDAO Multisig: Stargate Finance: Multisig | Address 0x9cd50907aeb5d16f29bddf7e1abb10018ee8717d | Arbiscan
  • Contracts that will distribute the incentives:
    • StargateMultiRewarder used for distributing incentives to native USDC poolers
      • [not yet announced] - will be shared once Stargate V2 is publicly announced (mid/late May).
    • StargateIncentiveDistributor for OFT, USDC and ETH bridging incentives
      • [not yet deployed] - will be shared ASAP

The multisig used to receive the incentives will be the same, while the incentive distribution contract changed compared to STIP

  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?

While the overall experience was positive, we did find some difficulties in drafting the initial proposal and getting proper feedback. We also think that in general having a supporting structure during the program itself can help us clarify doubts and questions that might arise over time - having a dedicated advisor certainly helps here.

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Edits made on 14th May:
Following feedback from our governance advisor (@SEEDGov), we have slightly reduced the incentives proportion dedicated to native USDC liquidity. While we have noted the previous feedback on other bridge providers proposals that liquidity incentives aren’t enticing for the user, we believe this not to apply to Stargate in the same way. Our full reasoning is publicly available in the LTIPP Discord, but tldr; Stargate currently has $0 TVL native USDC and so this initiative is a real 0-to-1 that will have huge benefits for both the smaller retail user, but also just UX in general.

Following other discussion/feedback, we are migrating away from rebating protocol fees to rebating gas incentives. This seems aligned with feedback on many other proposals too. This entails rebates for both native ETH, native USDC bridging, as well as OFTs.

Finally, we worked to refine our KPIs, providing specific targets as well as milestones, which we will provide updates on through the period.

We’re very much looking forward to providing value to Arbitrum and the ecosystem.

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Hello @0xLamps ,

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.

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Hi @0xLamps we are waiting for you in the discord !

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

Stargate plays a critical role in the Arbitrum ecosystem by providing the largest bridge to transport assets and liquidity. Despite not receiving incentives in the first STIP round due to administrative issues, the protocol still facilitated impressive usage with 388K unique wallets bridging $675M in April 2024 alone.

The revised proposal thoughtfully incorporates learnings from the initial STIP phase, focusing the 750K ARB request on accretive activities. These include using 50% to incentivize native USDC liquidity, which will ease the important transition away from USDC.e, and providing gas rebates for bridging of OFT tokens, ETH and USDC to tie rewards directly to key results.

The inclusion of clear KPIs around metrics like OFT token supply on Arbitrum, native asset bridging volume, and USDC liquidity/migration shows strong alignment with the DAO’s objectives. The lower 750K ARB request also reflects an openness to feedback.

Given Stargate’s vital ecosystem role, the fact that they unfortunately missed out on the first STIP opportunity, and the high-impact initiatives proposed here, we believe this is a very worthwhile allocation to bolster Arbitrum’s cross-chain liquidity and adoption. The detailed, well-reasoned proposal gives us confidence the incentives will be put to effective use.

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Savvy DAO has voted FOR the Stargate STIP Bridge Addendum

See delegate thread for voting rationale.

I’ve voted for Stargate STIP Bridge Addendum.

Voted FOR, Stargate is a prominent bridge and the proposed use case to boost USDC liquidity is important.