[FINAL] Trader Joe STIP Addendum

Information about STIP/STIP Backfund

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

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

  • 1,510,000 ARB

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

  • 4th November - 29th March

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

  1. Trader Joe Bi-Weekly STIP / Wrap Up Analysis: LINK
  2. Trader Joe STIP KPI Flipside: LINK

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

As per the above linked reports and in addition the OpenBlocks Efficacy Report Trader Joe successfully utilised the STIP grant with high efficiency, with evident growth + impact in volume and fee generation as well as sequencer revenue for Arbitrum.





Layer3 - Quest

  • 20k ARB was allocated towards Layer3, this was not outlined in the proposal but as the STIP and ecosystem progressed, Layer3 was utilised to help drive growth. This was in collaboration with USDV Money who kindly also contributed 10k USDV rewards to boost the pool further.

Stats / Results

  • The Quest generated over 6k unique wallets - approx $8 CPA
  • In total the liquidity provided was ~$450k to the USDV-USDC LP
  • LP user retention was ~30 days

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

While the main focus of the grant was to provide incentives for long-tail assets (builders) within the Arbitrum ecosystem, it turned into a cat-and-mouse game across the ecosystem as yield competition was fierce and liquidity was high in demand.

Trader Joe had an aim to concentrate large incentives in markets for shorter periods of time and then halt incentives, with the outcome expected to be strong liquidity accrual that can go on to self-sustain with fees post incentives, thus demonstrating a sustainable approach to liquidity mining, as opposed to an always on approach. However, the intense competition within the ecosystem made this more difficult to carry through.

The lesson learned here is that instead of spreading efforts across a wide range of protocols and focusing on a rotating program that keeps rewards concentrated and over short periods, Trader Joe will instead double down on TJ exclusive partnerships to collaborate more with the wider ecosystem and to avoid yield competition against competing DEXs.

New Plans for STIP Bridge

How much are you requesting for this STIP Bridge proposal?

  • 50% of the STIP - 755,000 ARB

High level plan as below:

Please note that NO ARB will be allocated towards JOE LPs or USDC.e LPs

KPIs for the STIP bridge will align closely to the STIP grant which focused on TVL growth and sustainability, including Arbitrum specific growth via new builders/protocol launches.

KPI Success Outcome Measurement
TVL for Incentivized LPs Achieve a 25% increase to TVL Flipside Reporting (TJ Built)
New Builders/Protocols Onboarded to Arbitrum Target is at least 4 Bi-weekly Reports

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

YES and NO (some small adjustments/changes - but nothing major)

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

Ultimately the same core mechanisms of incentivization (MM program and Auto-Pool Farms) remain the same but with some adjustments to the overarching plan based on learnings from the STIP. Specifically, there will be optimizations at market level (as expected) and aligned to that the overall incentivization approach will be adjusted, as mentioned based on the learning points above.

Key Areas

  • Less diversity in market selection (Long tail assets alone Trader Joe supported ~21 LPs) and less short-period incentivization (typically long tail were supported for 4 weeks out of the 5 months).
  • Trader Joe will primarily focus on larger core pairs and blue chip tokens which are ideal for Liquidity Book and its unique take on manual market making.
  • Trader Joe may also make use of Merkl to accommodate partners that prefer to host incentivization via that platform - this will depend on integration which is not yet finalized/agreed.

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?

  • MS: 0x0A56ba03cC70582EA512f44B86d19aCDd631f475
  • Same contracts, no changes to any

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?

Marketing and growth is the biggest pain point holding back greater success, there is currently DAO discussions and proposals being put forward to address these areas which @BlueClarity is directly involved in. Discovery is an area that can and should be tackled to help all incentive programs moving forward.

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Hello @traderjoe ,

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 @traderjoe we are waiting for you in the discord!

hey! @BlueClarity is leading this and he is representing us in the LTIPP Discord

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Updating Addendum taking onboard feedback from @SEEDGov

  • Providing high level incentivization plans
  • Including use of 20k ARB on Layer3 (+ Results) from the STIP
  • Confirming no allocation of ARB in the STIP bridge on JOE pairs or USDC.e pairs

@cliffton.eth @raam

Confirming this addendum as final

cc @SEEDGov

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Following feedback on the proposal to establish the STIP Bridge, it was agreed to involve the LTIPP Advisors in this process with the mission to “help applicants gain insights into their proposals. This not only guides applicants through the process but also ensures that the DAO will review better proposals.”

Despite the inclusion of Advisors, this process does not involve the Council, leading us to believe that this addendum places a significant burden on the delegates who must review all the proposals. One of the reasons for the LTIPP was precisely to avoid this excessive burden. Moreover, the optimistic model adopted in this phase could raise concerns about the real control the DAO will have over these proposals, as reviewing six months of data for each applicant is time-consuming.

For this reason, we decided to accompany each application we reviewed with a brief report. We ask the delegates not to take this as an in-depth or definitive basis for deciding your vote, but rather as a high level overview that can potentially raise questions for your own analysis.

Regarding Trader Joe, with STIP incentives their objectives were:

  • To grow and support the liquidity of native Arbitrum builders

  • To grow and support the liquidity of multi-chain builders that are Arbitrum-aligned

  • Onboard new builders to the Arbitrum ecosystem

  • Increase user discovery of Arbitrum protocols

For measuring success of the STIP, they set KPIs:

According to the metrics reported by OBL, the numbers are very encouraging:

They have met their targets in terms of TVL and have significantly increased their DAU, both metrics maintaining levels substantially higher than those before receiving incentives. On the other hand, in terms of volume and fees generated, they also saw great results during the incentive distribution period. However, these values have since returned to the levels prior to the STIP.

One thing we noticed when analyzing the bi-weekly reports is that many more pools were incentivized than were included in the final report (Trader Joe STIP Wrap-Up Analysis) and that there were significant deviations in execution compared to the initial proposal and the actual distribution of incentives.

The explanations given were that the reports only included pools that had incentives for more than four weeks in order to have conclusive data on the effectiveness of the incentives. The deviations were attributed to detecting inefficiencies in the distribution of incentives, changes in STIP conditions during the program’s execution, and fluctuating market conditions. For more details on the response and other questions, you can check the Trader Joe’s channel in the LTIPP / B.STIP Discord.

Something to point out is that the JOE/ETH pool had allocated 5.29% of the received grant (80K ARB). They committed to not incentivize this pool during the bridge.

We agree that applications for incentive distribution should not have fixed and strict emissions, as changing market conditions may require flexibility. What we advised the applicant, and what was subsequently followed, was to determine objective criteria for deciding which pools would receive the incentives. This way, in the biweekly reports, the reasons and criteria adopted for redirecting incentives from one pool to another can be explained.

What we appreciate about the addendum is that the applicant has learned from the use of STIP incentives and has decided:

  • Less diversity in market selection and less short-period incentivization.
  • Focus on larger core pairs and blue chip tokens which are ideal for Liquidity Book and its unique take on manual market making.

Finally, they set two KPIs with which the DAO can evaluate the success of the incentives, and whose progress will be monitored through bi-weekly reports:

  • TVL for incentivized LPs: Achieve a 25% growth in TVL.
  • Onboarding at least 4 new protocols/builders to Arbitrum.

Conclusions

The results shown during the incentive distribution are positive, with the applicant having achieved the objectives set for the STIP. We believe they have correctly identified shortcomings and challenges in the allocation of incentives to establish a more flexible scheme focused on their core pairs and blue chip tokens.

We noticed in all the applications we reviewed that there is a significant drop in TVL during the last month. We believe there are multiple reasons for this, and there isn’t enough time to conduct a thorough and conclusive analysis of the long-term effectiveness of the STIP.

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