[FINAL] Vertex STIP Addendum

Vertex Addendum for STIP Bridge

Information about STIP / STIP Backfund

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?

  • 3,000,000

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

  • Nov 8 2023 - March 31, 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?

Token Terminal data tells the story of Vertex growth over the past 6 months across the following KPIs:

  • Monthly Trading Volume
  • Monthly Active Users
  • On-Chain Activity
  • TVL

Monthly Trading Volumes: Aggregate monthly trading volumes on Vertex have risen approximately 50% from November 2023 → April 2024.

Monthly Active Users: User adoption on Vertex since the start of the original STIP has seen an almost 4X increase from ~3,300 monthly active users in November 2023 to approximately 12,400 monthly active users by May 2024.

Source: Vertex Monthly Trading Volume – Token Terminal

On-Chain Activity: Vertex consistently ranks amongst the Top 5 gas-spending entities on Arbitrum, according to Nansen’s Arbitrum Gas Tracker dashboard. This indicates a net-positive increase on blockspace demand and on-chain activity, specifically detailed in the following areas:

  • High User Engagement and Transaction Volume: Being one of the top gas consumers typically indicates that Vertex accounts for a high volume of transactions. This can be a sign of high user engagement or that Vertex is facilitating a significant amount of on-chain activity on Arbitrum. For example, the Vertex sequencer consumes a lot of gas due to frequent state updates and the need to settle trades consistently on-chain to Arbitrum.

  • Positive Impact on Network Utility: The presence of Vertex as a high gas-spending entity generally implies that Vertex is being actively used by traders on Arbitrum, illustrating the STIP incentives’ impact on attracting more users and on-chain activity to the Arbitrum ecosystem at large.

  • Economic Impact on the Layer Two Network: Entities that spend and consume a lot of gas on Arbitrum contribute to the economic ecosystem of the layer two network. They help in driving more protocol revenue for Arbitrum via providing a net-positive impact on a competitive blockspace fee market.

Source – https://pro.nansen.ai/multichain/arbitrum/gas-tracker

Vertex TVL: The TVL on Vertex has increased approximately 8X since the start of the original STIP program, with users depositing roughly $100 million worth of assets into Vertex over the past 6 months.

Source: Vertex Total Value Locked – Token Terminal

Date 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
Gas Consumed (in ETH) 0.46 3.43 6.15 2.04 1.86 3.96 1.92
Gas Consumed % change 0% +645% +79% -66% -8% +112% -51%

According to OpenBlock’s analysis of the original STIP round, Vertex also ranked:

  • Amongst the most sybil-resistant of all STIP participants.

  • Maintained amongst the highest efficacy of incentives vs. volumes and TVL growth overall.

Source – OpenBlock Labs STIP Efficacy + Sybil Analysis (2/24)

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

Our first round of incentives were directed to two areas:

1. Trading Rewards
2. Elixir LP Pools

Let’s break down both segments.

1. Trading Rewards – Incentivizes Trading Volume

Vertex has become a top DEX venue for trading volume in the DeFi derivatives sector.

As displayed in the data sourced from Token Terminal below, Vertex has consistently maintained a Top 5 position in weekly trading volume for derivatives across DeFi so far in 2024.

Additionally, Vertex ranks 2nd in aggregate derivatives trading volume for DEXs over the past 6 months, sitting only behind dydx per Token Terminal.

Source – Token Terminal | Fundamentals for crypto

Outperformance in trading volume can partly be attributed to $ARB trading incentives from the original STIP round over the relevant period.

Alongside from VRTX emissions, the Arbitrum STIP proceeds helped amplify Vertex’s brand awareness and illustrate the DEXs utility to the broader Arbitrum ecosystem as a liquid exchange venue for spot, perpetuals, and integrated money markets with unified cross-margin, cheap trading fees, and low-latency performance.

More specifically, Vertex has almost doubled its market share of trading volume amongst the Top 5 DEX projects by trading volume over the past 6 months.

Vertex accounted for approximately 22% of derivatives trading volume for DEXs in October 2023 per Token Terminal. Currently, Vertex sits at a dominant 42% of market share within the top 5 derivatives DEXs, illustrated in the Token Terminal derivatives sector dashboard below.

The growth in market share of Vertex over the relevant period was accelerated by the $ARB incentives from the STIP program.

Vertex consistently maintained higher trading volumes post-STIP than the DEX’s trading volume pre-STIP, indicating that $ARB incentives from the original STIP helped attract long-term users while maintaining a consistent baseline of liquidity without the $ARB incentives once the STIP concluded.

Source – https://dune.com/frijoles/vertex

2. Elixir Liquidity Provider Pools

Elixir is among the industry’s first decentralized, algorithmic market-making protocols.

Through Elixir’s integration with Vertex, anyone can passively supply liquidity to orderbook perpetual pairs on Vertex, earning a combination of maker rewards and subsidized APYs from existing liquidity incentive programs on Vertex.

During the first STIP round, Elixir’s inclusion in the Vertex proposal was a huge success, enabling users to earn $ARB rewards on top of the existing maker rewards and subsidized APYs on Vertex.

Elixir powers Vertex’s “Fusion Pools” product, where users supply USDC collateral into vaults that help improve market depth for perpetual pairs on the Vertex orderbook.

Specific to Elixir’s performance during the STIP’s $ARB incentives, the TVL increases attributed to Elixir are notable.

For example, Elixir’s Fusion Pools accounted for approximately $8.6M in average weekly balance during the STIP distribution period, and traded more than $1.1B in aggregate trading volume.

More broadly, Vertex’s TVL increased from $16M to just under $90M over the STIP period of November 8th to March 31st – hitting a peak of $101M in TVL in April 2024.

Source – Open Block STIP Insights

Even more notable is the growth of Vertex’s TVL as a percentage of the total TVL compared to the Top 10 derivatives DEXs in DeFi.

Vertex accounted for roughly 1% of the TVL share in October 2023 and as of April 2024, maintains a 7.5% TVL share amongst the Top 10 derivatives DEXs – marking a 7X increase in market share in only 6 months.

Overall, the $ARB proceeds from the original STIP have played a material role in enabling Vertex’s outperformance over the relevant period.

The renewed support of the Arbitrum Foundation is requested to help drive and continue this outperformance by further amplifying the scope of Vertex’s net positive impact on the Arbitrum ecosystem in the key areas of:

  • Increased on-chain activity.
  • Deeper on-chain liquidity.
  • More TVL inflows to Arbitrum.
  • More active on-chain users.

Beyond the empirical trends in fundamental metrics for a DEX, the increased adoption of Vertex over the relevant STIP period helped Vertex to secure several trading firms as active users. Their onboarding helped amplify and drive consistently more maker flow on Vertex – providing a positive impact on market depth, volumes, and protocol revenue.

Users that provided maker flow on the platform into the present time reflect the overall power of the STIP in bringing usage and TVL to Arbitrum, particularly demonstrating that the $ARB incentives have remained sticky vs. purely mercenary capital.

We believe that given the empirical trends in growth across multiple KPIs illustrated above, alongside the future product features and utilities that Vertex is actively introducing, the stage is set for Vertex to capture even more market share from the competition and further increase its net-positive impact on the Arbitrum ecosystem.

An extension of the original Vertex STIP incentives detailed below will help Vertex bring more users, liquidity, and on-chain activity to Arbitrum – further solidifying its position as the leading Ethereum L2 network.

New Plans for STIP Bridge

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

  • 1,500,000 ARB

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

  • No

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

We propose to keep the same broad mechanism for the following incentive distributions from the original Vertex STIP proposal:

  • Trading Rewards

  • Elixir LP Pools

However, the updated proposal also introduces the inclusion of SkateFi (formerly known as Range Protocol) alongside Elixir LP pool incentives.

Vertex and SkateFi recently partnered to introduce SkateFi’s LP vaults on top of major perpetual markets listed on Vertex. The initial results from 2 months of testing across major pairs have been compelling.

For example, with a capital pool of merely ~$140K, the Vertex liquidity vault for SkateFi achieved over $250 million in trading volume settled on Vertex’s orderbook in only 2 months.

Source – SkateFi

Per the SkateFi team:

“The vault bootstraps orderbook liquidity with both maker and taker side flows, keeping delta neutral exposure. The yields for LPs are further compounded by funding rate arbitrage opportunities using our revolutionary RFQ based spot leg infrastructure.”

SkateFi’s Vertex Vaults have been audited by Veridise and undergone rigorous back-testing with TokkaLabs. With the Beta phase of SkateFi’s vaults on the horizon, and set to go live amid the relevant STIP Bridge extension period, the inclusion of SkateFi into the updated proposal will help facilitate even more trading volume and TVL to Vertex – similar to Elixir’s success in the original STIP period.

If we pro-rata on the basis of trading volume facilitated, it will help drive incentives and TVL to the protocol with the most efficient liquidity provision.

4. 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?

Funding Address: 0x66993CA98A1ecf4F746FCDbDEdfC69E95529fB0E

This is 3 / 5 multisig with securely-stored private keys distributed across the Vertex core team.

Contract Address(es):

  • Vertex Router: 0xbbee07b3e8121227afcfe1e2b82772246226128e

5. 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?

The primary point of feedback regarding the original STIP program would be to improve the clarity and around KPIs that indicate success of a participating protocol over the relevant period, especially within the context of a wide variety of DeFi protocols participating that often have slightly different KPIs to gauge their success.

We believe that Vertex was amongst the most successful protocols in the original STIP round, helping drive growth and bring more on-chain activity to the Arbitrum ecosystem at large.

That being said, it’d be easier to shape and judge the success of incentive programs if the metrics defining core KPIs across various types of DeFi protocols were more clear, rendering more explicit target KPIs to build towards.

Hello @Vertex_Protocol ,

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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