[Fluidity] LTIPP Application - FINAL

DAO Grant Programs Long Term Incentives Pilot Program
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SECTION 1: APPLICANT INFORMATION

1.1 Applicant Name: Shahmeer Chaudhry

1.2 Project Name: Fluidity Money

1.3 Project Description:

Fluidity Money is a DeFi protocol that introduces a new primitive, the Fluid Asset, a wrapped stablecoin which generates yield for users on any on-chain activity, such as swaps, NFT purchases or payments. Our novel distribution mechanism enhances liquidity and transaction volume, fostering increased stickiness and user engagement through a unique spend-to-earn model, where transaction rewards are split between sender and receiver, redefining DeFi incentives, making financial rewards more accessible through active participation rather than passive holding.

1.4 Team Members and Roles:

1.5 Project Links:

1.6 Contact Information

Point of Contact:

  • Shahmeer Chaudhry

Point of Contact’s TG handle:

  • TG: @shahmeerch

  • Twitter: @shahmeerx

Email:

  • shahmeer@fluidity.money

Do you acknowledge that your team will be subject to a KYC requirement?:

  • Yes

SECTION 2a: Team and Product Information

Fluidity’s Team is composed of various industry veterans, all of which have been active in the space for multiple cycles. This creates an atmosphere of creative discussion around narratives, tactical timing and promising new innovations. Our team has skill sets that stem from varying industries, including data science at SwissPower Renewables, German space agency and Infosys, to entrepreneurship ventures from developing games that have received millions of downloads, to working at AI startups and other blockchain based companies involved in ZK-SNARK infrastructure, staking and Chainlink oracle operations.

We have already managed to do an initial deployment on 3 chains, with our launch on Arbitrum having taken place on the 23rd of March 2023. On Arbitrum we have managed to partner with all leading protocols within the ecosystem. Since then, we have enacted successful initiatives to bolster utility where Fluid Assets are available.

We are expanding the Utility narrative together with the foundation, using tools such as Orbit chains, Arbitrum Stylus and creating efficiencies around the arbitrum ecosystem.

2a.1 What novelty or innovation does your product bring to Arbitrum?

Fluidity innovates on the yield distribution design space by building a primitive that rewards activity with yield. This unlocks a new yield opportunity by making utility driven use cases like trading, payments, and actions yield bearing. We do this through a primitive called Fluid Asset, which is a wrapped token that is minted by depositing the underlying in the protocol. (1 USDC → 1 fUSDC). We deposit the USDC into a money market (Aave), where we earn yield on the underlying. What makes Fluidity novel is that when the user uses the minted fUSDC, for example to make a payment or swap to another asset, they earn yield on the transaction. The yield is distributed in a form of an airdrop, so the experience is frictionless.

This is different to all other yield protocols that only distribute yield on staked or tokens that are held.

Fluid Assets have been designed with composability in mind, they are regular erc-20 tokens and are composable and yield paying in any Arbitrum protocol without special integrations.

The novelty of Fluidity lies in how it distributes yield, and the built in sybil prevention. The distribution model we have built over the past years allows for the very first time for yield to be distributed for activity and utility. This creates incentive mechanisms for the first time for using Arbitrum and exploring the ecosystem in a general purpose manner. Not only can general yield from money markets be redistributed to people using Fluid Assets.

This mechanism allows protocols to create their own campaigns to bootstrap users. Any type of token can be rewarded alongside the base Fluid yield, such as the distribution of NFTs, governance tokens and points.

Fluid Assets also pay the counter party of a transaction yield. This applies to both users and protocols being counter parties. For example if a user swaps, $10 fUSDC to ETH, they can earn yield on that transaction, the yield is distributed in a probabilistic manner, so the user will get anywhere from a couple of cents to thousands of dollars. Let’s suppose they get lucky, and win $100 on that transaction, 80% of the yield goes to send and 20% of that yield is rewarded to the counter party, so in the case of the AMM, it can go to the LPs or developers based on the configuration.This feature creates powerful positive feedback loops and unlocking new yield sources for developers and incentives for counter parties to continue participating in the ecosystem.

2a.2 Is your project composable with other projects on Arbitrum? If so, please explain:

Yes, Fluidity’s Fluid Assets, such as fUSDC, are fully composable, as they are regular (erc-20) tokens.

Our integration extends to several prominent Arbitrum protocols, including Camelot, TraderJoe, Taho, Kyber, Wombat, Li.Fi, Ramses, and BetSwirl. Notably, our Loot Bottle Airdrop campaign has significantly increased the exposure and usage of Fluid Assets across these platforms.

While considering the smaller TVL such as Camelot’s 148k fUSDC pools, it is important to note that note that while TVL provides insight, Fluidity prioritises metrics such as order flow, volume, and asset velocity to gauge success.

  • Example of Volume driven through protocol:

  • Jumper Exchange LiFi Router: 406MM+ Volume over 157k Txs

  • APR Generated on pools example:

  • Camelot: fUSDC-USDC pool:150% APR (beginning w/o LM campaign)

  • Ramses: fUSDC-USDC pool: 96.6%

Fluid Assets are permissionless and with a simple listing or protocol integration we are able to steer order flow and promote on chain uses-cases that may be novel, unique and may need some initial form of utility based bootstrapping to highlight their strong points.

2a.3 Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?

There exists no direct similar protocol such as Fluidity, that rewards yield in a general purpose way through utility. There are other attempts at yield being aggregated and distributed such as Pool Together, however those protocols are designed to reward locked capital, whereas Fluidity pays yield when you use cryptocurrencies.

2a.4 How do you measure and think about retention internally? (metrics, target KPIs)

While TVL is an important metric of success and facilitates liquidity for trading different assets, Internally, we measure retention through:

  • Unique and active wallets

  • Total Value Locked (TVL)

  • Daily and Monthly Active Users (DAU/MAU)

  • Productive Transaction Volume over protocols.

  • User Growth Rate

  • Reward Distribution Effectiveness

We have been using a dune dashboard to track these metrics:

Additionally, retention is deeply intertwined with how users perceive and utilize Fluid Assets, together with protocol adoption. Our goal is to embed a utility-driven narrative into the user experience, encouraging active engagement with our assets. By partnering with various protocols and enabling transactions with Fluid Assets, we create a symbiotic ecosystem where users benefit from enhanced efficiency and rewards leading to improved retention. Furthermore, as both parties are rewarded, protocols can leverage Fluid Asset interactions to introduce a secondary revenue stream, which can then be utilized to further reward their communities, reduce transaction fees, or contribute back to the protocol’s DAO treasury. This reinforces value accrual mechanisms that reward user interactions, enhancing the protocol’s appeal and utility. As users increasingly utilise Fluid assets within these protocols, both parties—the users and the protocols—benefit from a virtuous cycle of engagement and rewards, driving up user actions and fostering a more vibrant, interactive ecosystem.

The effectiveness of Fluid Assets is not just in their transactional utility but also in how they educate users about the broader DeFi landscape. By encouraging users to explore and interact with different protocols, we foster a more informed and engaged community. This educational aspect, combined with the tangible benefits of using Fluid Assets, forms a solid foundation for long-term user retention.

Through continuous monitoring and analysis of these metrics, we aim to refine our strategies, ensuring Fluidity Money remains a leading, user-centric platform in the DeFi space.

2a.5 Relevant usage metrics - Please refer to the OBL relevant metrics chart 6. For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section:

Firstly, It is important to understand that $fUSDC and hence Fluidity’s volume has drastically accelerated over the course of the last 2 months, with a large portion of the above stats being observed over the course of 37 - 45 days, showcasing an interest in the narrative Fluidity is promoting, as well as a success in Fluidity’s recent campaigns and partnerships, driving utility, volume and fees across the Arbitrum ecosystem.

Some of the data includes:

  • Total Unique Users: 8,250

  • Past 30 Day Volume: $335,991,768

  • Average Daily Volume over past 30 days: $15,539,254

  • Past 30 Day Average # daily transactions: 3,388

  • fUSDC Collateralization: 1.16

  • Arbitrum Protocol & User interaction:

  • fUSDC User-Protocol Interactions: 349,198

  • fUSDC User-to-User Interactions: 447,143

You may find further on-chain protocol performance data on section 2b.8 of this application, as well as the complete relevant usage metrics as denoted by the OBL’s general section and CDP/Stable coin section in the following Dune dashboards:

General Metrics Tracked:

  • Daily Active Users
  • Daily User Growth
  • Daily Transaction Count
  • Daily ARB Expenditure and User Claims
  • Incentivized User List

CDP / Stables Metrics Tracked:

  • TVL / Borrowed Amount / Total Circulating Debt Asset
  • Trading Volume
  • Daily Borrowing Volume
  • List of Depositors / List of Borrowers
  • Usage Breakdown
  • Stablecoin Peg Integrity

2a.6 Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan:

  • Yes

2a.7 Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest (Note: this does NOT disqualify an applicant):

  • No

SECTION 2b: PROTOCOL DETAILS

Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.

2b.1 Is the protocol native to Arbitrum?: [Yes/No, and provide explanation]

While it’s not exclusive to Arbitrum, we have been natively focusing on developing and prioritising the Arbitrum ecosystem, which is why the majority of our endeavors (Utility mining, partnerships, airdrop, integrations, Stylus support, etc.) have been Arbitrum focused.

2b.2 On what other networks is the protocol deployed?:

Yes, Solana, Ethereum (past), Sui (soon)

2b.3 What date did you deploy on Arbitrum mainnet?:

fUSDC was first deployed on Arbitrum on the 7th of Feb 2023,

2b.4 Do you have a native token?:

We have a planned token release for our $FLY governance token (previously referred to in our docs as $FLUID)

You may read more about our tokenomics here: (https://whitepapers.fluidity.money/fluidity-economics-wp-v1.0.pdf) and have a deeper understanding about Fluidity Wars.

2b.5 Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?

Fluidity Money has run multiple ‘Utility Mining’ incentive programmes which involved creating incentives to transact in multiple partnered protocols while using fUSDC. We have also partnered with multiplier protocols such as Camelot, Trader Joe, Ramses and others to promote liquidity mining campaigns and increase Fluid Asset liquidity in their pools.

Here is a relevant Dune dashboard that tracked some relevant metrics: (https://dune.com/neogeo/fluidity-airdrop-v2)

2b.6 Current Incentivization: How are you currently incentivizing your protocol?

We recently ran a Loot Bootle campaign and are using portions of the remaining Arbitrum Grant. We plan on reintroducing the next epoch of the loot bottle campaign post TGE.

2b.7 Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?

Yes, Fluidity Money has received a grant from Arbitrum Foundation in November 2023.

  • The Total grant awarded: 60,000 $ARB

  • Received to date (02/24): 45,000 $ARB

We have created a specific dune dashboard to track Fluidity’s on-chain stats during the application of the Arbitrum grant: https://dune.com/neogeo/fluidity-arb-grant-campaign.

While running utility mining, lootbottle reward campaigns and making use of the grant, we have been able to successfully accomplish the three major milestones:

Milestone 1: Implement Utility Mining Programs to drive volume and Fluid Asset use.

  • Actual Performanc far exceeded expectations with a total transaction volume of $1.752 billion and a productive volume (fee paying) of $934.6 million directed to Arbitrum DEXs and DeFi protocols. This substantial volume demonstrates the success of the utility mining programs in generating significant activity within the Arbitrum ecosystem.

Milestone 2: Increase User Acquisition and Market Efficiency.

  • A total of 4,857 unique wallet addresses engaged with the protocol during the active grant period through the various Utility Mining programs. This indicates a robust growth in user acquisition and enhanced market efficiency facilitated by the implemented strategies.

Milestone 3: Support Emerging Protocols and Enhance Protocol Exploration.

  • Successfully met the target by integrating the following protocols:

  • Trader Joe, Taho, Gains, Dopex, LiFi, Jone DAO, Jumper Exchange, Ramses, BetSwirl, Odos, Paraswap.

  • With further interactions spanning 38 protocols within the Arbitrum ecosystem, demonstrating Fluidity Money’s commitment to supporting emerging protocols and enhancing protocol exploration among users.

Additional Insights:

  • Total Rewards Given Out: Distributed $ARB 12,062.65 and $fUSDC 6,272.9 through utility mining, showcasing the effectiveness of Fluidity Money’s reward mechanisms in incentivizing participation.

  • Notable Protocol Interactions: Highlighted by the Jumper Exchange LiFi Router with $406 million in volume over 157k transactions and significant APRs generated in pools from the likes of Camelot and Ramses, emphasizing the impact and integration of Fluidity Money within the DeFi space.

2b.8 Protocol Performance: [Detail the past performance of the protocol and relevance, including any key metrics or achievements, dashboards, etc.]

Fluidity On-Chain Stats (as of 13/03/24): [https://dune.com/neogeo/fluidity-arbitrum]

  • TVL: $282,452.73

  • Past 30 Day Volume: $335,991,768

  • Average Daily Volume over past 30 days: $15,539,254

  • Past 30 Day Average # daily transactions: 3,388

  • Unique wallet addresses: 8,250 Wallets

  • Total Transactions: 532,677

  • Total Rewards Given out:

  • $ARB: 12,180.00

  • $fUSDC: 6,398.8

  • Total Transaction volume: $USD 1.757 Billion

  • Productive Volume on protocols: $USD 937.1 MM

  • https://dune.com/neogeo/productive-volume

  • Projected Productive Volume Revenue: $USD 937,086 (assuming 10 basis points)

  • Arbitrum Protocol interactions vs Transactions:

  • Number of Protocols: 38

  • Interaction distribution: https://dune.com/queries/2227754/3653080/

  • Example of Volume driven through protocol:

  • Jumper Exchange LiFi Router: 406MM+ Volume over 157k Txs

  • APR Generated on pools example:

  • Camelot: fUSDC-USDC pool: 150% APR (beginning w/o LM campaign)

  • Ramses: fUSDC-USDC pool: 96.6%

2b.9 Protocol Roadmap: [Describe relevant roadmap details for your protocol or relevant products to your grant application. Include tangible milestones over the next 12 months.]

Q1 - Q2 2024

  • $FLY Token TGE (Fluidity’s Governance Token) - Phase 2 of Loot Bootles

  • Utility Gauges and Utility Vaults released.

  • Allowing for user and DAO controlled orderflow bidding and stirring, creating a new form of incentive structure and continuing the large amounts of volume protocol exploration.

Q2 - Q3 2024

  • Fluidity Loot Bottle Airdrop campaign Epoch 3

  • Governance and protocol/user participation

  • Fluidity AMM

  • Fluidity Loot Bottle Airdrop campaign Epoch 4

Q3 - Q4 2024

  • Universal first class support for new Arbitrum protocols on day 1

  • Supporting Orbit chain interactions with Superposition

  • Web2 - Web3 and retail: Bridging adoption through payment cards.

Aside from the above we have also been hard at work on furthering the ‘Incentive Layer’ and Utility driven narratives of Fluidity through the exploration of Orbit chains and Stylus based apps (Superposition) and developing new narratives around steering orderflow and transacting as well as exploring around the Arbitrum ecosystem and its various protocols.

2b.10 Audit History & Security Vendors:

Fluidity’s audit history:

Fluidity has conducted a variety of audits with the help of:

  • Verilog Systems

  • Bramah Systems

  • Hashlock Audits

Bug Bounty:

Fluidity ran a [successful bounty program with Immunefi]. The program is currently not running, but the prize pool was $100,000, and medium vulnerabilities were disclosed that protected the protocol.

The program is not currently running, though it’s planned to restart in the future.

Security Incidents:

We have had no security incidents. We maintain an emergency DAO and contract failsafes to block unusual fund movements. We use reporting to track movements like a security incident. This proactive approach lets us handle issues when they do occur, and acts as a last line of defense in a hack.

SECTION 3: GRANT INFORMATION

Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.

3.1 Requested Grant Size:

  • 500,000 ARB

3.2 Grant Breakdown:

  • Total Requested: 500,000 ARB, subdivided as follows:

  • User Rewards and Growth: 300,000 ARB

  • Liquidity Support: 200,000 ARB

3.2.1 User Rewards and Growth: Utility Mining and User Rewards (300,000 ARB):

  • Value Aim: $2.5B - $3B Volume

  • Objective: Sustain and enhance transaction volume and active user engagement, encouraging protocol exploration, drive significant user acquisition and improve market efficiency in the Arbitrum ecosystem.

3.2.2 User Rewards and Growth: Protocol Exploration Support :

  • Value Aim: Up to 10 new Protocols Supported

  • Objective: Support emerging protocols in the Arbitrum ecosystem and enhance protocol exploration among users through utility mining, and marketing events in order to encourage protocol exploration, and support these protocols.

  • Reasoning: To support $ARB reward payouts, the team has to examine the mechanics behind fee collection mechanism of the contract the rewards will be supported for, to account for cost of sybil. While all accounts and contracts earn yield, it is extremely restricted to prevent sybils, however for applications that charge fees, we can increase rewards accounting for more expensive cost to sybil. This amount will be used to payout to supported protocol’s and their users.

3.2.3 Liquidity Support ( 200,000 ARB):

  • Value Aim: > $5MM TVL

  • Objective: Increase liquidity to support higher transaction volumes. Although Fluid Assets are extremely high velocity and don’t require as much liquidity to generate volume, having deep liquidity will make transacting using Fluid Assets have less friction. These liquidity incentives will be promoted on major Arbitrum AMMs/DEXEs and protocols to support Fluid Assets liquidity. We expect the liquidity incentives to help the volume and access to Fluid Assets.

3.3 Justification for the size of the grant:

This allocation is designed to reflect Fluidity Money’s significant recent achievements and supports continued growth at or above current levels. The revised allocation is based on our historical data, specifically the impact of past incentives on transaction volume and protocol engagement. Our goal is to enhance the user experience, maintain market competitiveness, and make a significant contribution to the Arbitrum ecosystem.

3.3.1 Liquidity Estimations:

We are targeting upwards to $5M in moving average liquidity for the twelve weeks. We approximate this will require 200,000 in ARB incentives for 12 weeks or 16.6K ARB tokens a week to maintain. We are projecting this volume by looking at the current stable APR on Camelot for USDC-USDT which is 35%. Given the same APY expectations by the market, we can project that $5M in volume will need $33.5K in yield per week or roughly 16.6K ARB based on current pricing. There are other considerations that need to be made for example the higher yield expectations for Fluid Assets (fUSDC). We will be adding rewards $FLY rewards (upwards of 2% of the $FLY supply) for additional yield to achieve sufficient yield to subsidize higher risk associated, as we observe that the APY expectation on our Stablecoin Nitro Pools are higher to maintain liquidity roughly 1.5x the APY of USDC/USDT pools.

3.3.2 Volume Estimations:

We base our estimations on the estimated values driven from our previous Arbitrum Foundation Grant and the simultaneous Loot Bootle Campaign for the $FLY token, as the FLY token is not live yet, there is no pricing data, we will price them at $0.035 a token, based on our ICO price. During our S2 campaign, we allocated and distributed 2% of the FLY token supply. During the Season 2 of our loot bottle campaign we generated a total volume of $1.752 billion over approximately 45 days, we can calculate the average daily volume and then estimate the potential volume with the increased TVL.

  • Previous Average Daily Volume: $38,954,179 per day

  • Projected Volume based upon an increased amount of incentives:

While we plan on having an overall higher volume as the end goal of the LTIP grant, we aim to have a sustained average increase by the end of the 12 weeks. This will also be more sustainable due to deeper and wider forms of liquidity, allowing for users to experience using Fluid Assets more efficiently in a wider variety of platforms.

  • Targeting USD$2.5B - 3B Volume over the course of the grant period would imply an average of $29,761,904 to $35,714,285 in daily volume.

  • Productive Volume: Given in our previous performance, about 50% of the total volume was productive volume (meaning it generated fees as the transaction was performed in a protocol)

  • Hence by assuming a similar productive volume ratio we can expect between $14,880,952 - $17,857,142 in productive volume per day.

3.3.3 Network Impact:

  • Transaction Data: Based on previous averages, we estimate around 7,128 transactions per day, with varying fees for swaps and sends.

  • Previous average daily transactions: 320,761 / 45 ≈ 7,128 , as 50% of these are swaps, assuming an average swap fee of $USD 0.5 - 0.7 per transaction and the other 50% are regular send transactions with a fee of $USD 0.15 - 0.2, we would hence expect the following daily network revenue:

  • $USD 2,138 Per day in Swap Tx Fees

  • $USD 623 Per day in Send Fees

  • Protocol Fees Generated: If we were to consider the 10 basis points that protocols usually charge, this would mean that daily fees that protocols would be generating would be approximately $14,881 - $17,857 per day.

This results in an estimated total daily revenue for protocols and the Arbitrum network of approximately $19,130.

3.3.4 Distribution Fairness:

We have designed our Token distribution method to be one of the fairest in the ecosystem, specifically aiming to prevent whale accumulation. By directly rewarding user actions and transactions, we ensure a more equitable distribution, encouraging broader participation and engagement within the Arbitrum ecosystem.

Fluidity has advanced sybil protection where the protocol looks at input costs as a function of the rewards a user receives, we also apply randomness to the reward payouts to prevent any planning on a sybil’s part to calculate extraction of rewards from spamming transaction. Essentially over time Fluidity acts a general purpose subsidy of input costs for genuine transactions, this makes Fluidity sustainable and let’s users receive a higher expected value for their transactions but on average not more than their costs. We details the methodology and math behind this in our white paper.

An example:

The TRF looks at the input costs of a transaction before calculating the output prize. It considers the gas fees paid, the protocol fees (swap fees) paid and the current state of Fluidity (how many people are using it, what the TVL is etc). It uses this to create a tiered reward system and then uses a probabilistic mechanism to pay out a prize. This adds an element of gamification as you do not know how much you will win (prizes can range from cents to thousands of dollars), and secondly it prevents anyone from modeling a sybil attack. Therefore over time, the average expected outcome of using a Fluid Asset will be a subsect of gas fees and transaction costs, and hence it will not be profitable to spam transactions over a longer period of time. However, there maybe certain periods where a user can be lucky and win more than their input costs, the TRF also in a sense acts like a difficulty function, like Bitcoin mining, if a lot of people win by doing transactions, it gets harder to win a prize, and if people are not winning, it makes it easier to win to promote more transactions. We’ve been actively monitoring attempts at sybiling the system over the past two years, and have calculated that sybils were not able to extract more than input costs.

During a transaction every address or smart contract that interacts with fUSDC can qualify for base rewards, as every transaction has an input cost of gas fees. We can enhance rewards by also considering other sybil resistance mechanism such as trading fees or platform fees. During an integration, the Fluidity team looks at the fee structure of a protocol, understanding who collects the fees and the level of sybil resistance, we update our TRF model to support that protocol with enhanced rewards as it can be harder to sybil. For example using 1 fUSDC will yield more rewards on a support AMM than just sending it to another wallet, as it’s more expensive to sybil attack an AMM as you have to pay LP fees.

3.4 Grant Matching:

  • We will match with a minimum 3% of the $FLY token supply over the same time period, which at the $0.035 ICO price would be equivalent to USD$1,050,000 .

Funding Address: 0xb590e67516e77f74Bb1aeC0c32dF2Fa4602cfe42

Funding Address Characteristics: Multisig

Treasury Address: 0xb590e67516e77f74Bb1aeC0c32dF2Fa4602cfe42 - ⅔ Multsig

Worker: 0x59277a3c6a483b49b101271263c226d1167f62bc

Utility Distribution Address: 0x77f56d00fB78a701Af3A09c79f2B11cfa38f9Ff2

SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES

Clearly outline the primary objectives of the program and the Key Performance Indicators (KPIs), execution strategy, and milestones used to measure success. This helps reviewers understand what the program aims to achieve and how progress will be assessed.

4.1 Objectives:

The primary objectives of this grant aim to amplify Fluidity Money’s role in the Arbitrum ecosystem, enhancing user engagement, innovation, and operational metrics. We focus on revolutionizing DeFi incentives through utility mining, broadening our user base, improving market dynamics, and nurturing a collaborative space that uplifts emerging protocols and incentivizes active on-chain transactions.

4.1.1 Objectives and Expected Outcomes Summary:

  1. Utility Mining Program Implementation and Promotion:

  • Objective: Transform incentive mechanisms in DeFi to favor active asset utilization over passive holding by developing and marketing utility mining programs.

  • Expected Outcomes: Engage with over 10,000 users, heightening the utility mining concept’s adoption and altering how assets are actively utilized, aiming for a $2.5B - $3B in transaction volume over the 12 week grant period.

  1. User Acquisition and Market Efficiency Enhancement:

  • Objective: Grow Fluidity Money’s user base and enhance Arbitrum’s market efficiency, promoting widespread adoption of Fluid USDC ($fUSDC) and Fluidity governance token ($FLY) tokens.

  • Expected Outcomes: Attract 10,000 unique addresses, achieve a 25% boost in Fluid USDC transactions, and enhance $FLY token utilisation, achieving over $5MM in TVL.

  1. Emerging Protocol Support and Protocol Exploration Enhancement:

  • Objective: Foster the Arbitrum ecosystem’s growth by integrating and promoting up to 10 new protocols.

  • Expected Outcomes: Successful integration and user engagement with these protocols, enhancing the diversity and activity within Arbitrum, with success evaluated by integration count and user transactions. Expected to direct $100M in volume towards these entities and uplift the ecosystem’s diversity.

  1. Educational Initiatives Development and Expansion:

  • Objective: Elevate community understanding of Fluidity Money and the Arbitrum network through targeted educational content and events.

  • Expected Outcomes: Produce 10+ educational materials and host 5+ community events, with success gauged by attendance, participation rates, and positive community feedback.

4.2 Proposed $ARB allocations

We plan to distribute the majority of the grant to Utility Mining and User Rewards (60% = 300,000 ARB). This essentially includes distributing $ARB on the usage and growing the productive adoption of Fluid Assets. This will be split between 250,000 ARB for utility rewards, and 50,000 ARB for growth use cases for integration in supporting higher rewards for protocols that have fees.

The $ARB may be rewarded in a mix manner of real time and in biweekly retrospective loot bootle or other gamified manner. This will make it easier to reduce sybil and also increase the impact.

Furthermore we plan on investing the rest of the ARB (40% = 200,000) on improving total liquidity, supporting the depth of liquidity of fUSDC and fluid asset support in other protocols.

4.3 Execution Strategy:

4.3.1 Total Liquidity Support: (200,000 ARB):

The purpose of the liquidity portion is the grow the liquidity of Fluid Assets to reduce friction in adoption, we want to explore a two route approach where we target deep liquidity on select leaders to allow for depth to be built, allow popularly traded assets to be available to trade against with minimal slippage, and wide liquidity to allow diversity and various pairs such as longtail assets to be supported.

We will distribute the LP incentives over Trader Joe, Camelot, Ramses, and Sperax Demeter 2.0 pools. The protocols have agreed to co-incentivise the pools as well.

The distribution will be as follows:

Protocol Pool Allocation [ARB]
Trader Joe fUSDC/USDC 35000
fUSDC/ARB 35000
Camelot V3 fUSDC/USDC 35000
fUSDC/ARB 35000
Ramses Exchange fUSDC/USDC 30000
Sperax Demeter 2.0 fUSDC/USDs 30000

For calculating the targeted TVL using these allocations we can use a previous V3 fUSDC-USDC Camelot pool as reference. It has attracted around $150,000 TVL with 1600 ARB distributed over 14 days.

Extrapolating this to 12 weeks and 35,000 ARB gives us on the fUSDC/USDC Trader Joe pool gives us roughly 2920 ARB per week, which would attract around $550,000 in TVL assuming the previous metrics and would give 27% APR on average.

Due to Impermanent Loss risks we can assume a 20% TVL dropoff on the volatile fUSDC/ARB pools. This would lead to the following TVL assumptions:

Protocol Pool Projected TVL [USD]
Trader Joe fUSDC/USDC 550000
fUSDC/ARB 440000
Camelot V3 fUSDC/USDC 550000
fUSDC/ARB 440000
Ramses Exchange fUSDC/USDC 470000
Sperax Demeter 2.0 fUSDC/USDs 470000

In total, we are hoping to attract roughly $3M with our incentives alone. As our partnered protocols are expected to add incentives, we can assume a total moving average TVL of $4-6M over the course of the incentivised period. We are targeting $5M. The values in the table will be used as liquidity success metrics.ts and newer protocols that may benefit from deeper Fluid Asset liquidity and flywheels.

4.3.2 Utility incentives: 300,000 ARB over 12 weeks

We are planning to distribute 300,000 ARB in Utility Mining incentives over 12 weeks on the aforementioned partner protocols. Previously, we have distributed 12,000 ARB, which together with our Airdrop season resulted in 1.7B in volume, 50% of which has been “productive”, going through our partners on DEXs. We can assume an 80% dropoff from our Airdrop Volume, which would lead to $170 million per 12,000 ARB, or $14000 per ARB.

As utility mining rewards work as a function of real time demand and a part of the sybil mechanism is adaptive to how this changes, we cannot practically allocate tokens to specific pairs or protocols like liquidity mining. Therefore we haven’t specified exactly which protocols will be getting how much but rather there will be

Extrapolating this to 300,000 ARB would lead to a target volume of $3.5B+ over the 12 weeks distribution period. This will be used as our Utility success metric, which is split up into weekly milestones. We are planning to achieve $200-300M in volume per week as we distribute the incentives in a constant manner.

For a single user, as mentioned above we can assume that for every dollar in volume spent a user will receive 0.00007 ARB in return, meaning that a 1000 fUSDC transaction on average would lead to a cashback incentive of 0.07 ARB.

100,000 ARB - General usage and Activity:

This is to incentivise the usage of fUSDC and any other potential new fluid Asset on any use case. This will not require any special integration and fUSDC will pay out ARB on every on chain transaction. This will allow any protocol to benefit from the acceptance and adoption of fUSDC and other Fluid Assets. General usage also considers any cost of making these payouts, this will be reduced from the yield won by the user, we have an optimal batch transfer function that runs on an interval basis to make payouts. All 100,00

110,000 ARB - High Velocity Use Cases (DEXEs)

These use cases will receive supplementary ARB token distribution when a user uses fUSDC with them. In these cases the general expectation is the user will use it with higher velocity. This will also require the Fluidity team to understand how they handle fees and add sybil protection mechanisms to support higher ARB rewards on every transaction.

40,000 ARB - Low Velocity Use Cases

These use cases will also receive supplementary ARB token distribution on top of general usage, and can include things such as purchasing NFTs or games or other activities that are generally not as high velocity as trading but can benefit from being incentivised. The team has or will understand the structure of their fee system and account for higher sybil costs to enable larger. These activities happen less frequently but can have significant impact, for example governance voting, bridging or adding liquidity through the usage of Fluid Assets. This also includes activities such as community growth and or events that may be promoted through third-parties such as Galaxe.

Growth Use Cases: 50,000 ARB

This pool of ARB tokens is aimed at incentivising growth use cases and new protocols in the Arbitrum ecosystem. We define this as a protocols that have a novel or experimental use case/system or have launched in the Arbitrum ecosystem within the last 6 months. The team will initially understand the protocol’s structure and account for the fee system contract structure and who is collecting the fees. Once we account for the fee structures and higher sybil costs, we can introduce larger rewards to users of selected protocols. We outlined more in section 3.3.4 Distribution Fairness on how this integration may work and improves fairness and rewards for genuine users.

The goal is to include a minimum of 5 new protocols and support their custom fee structures to promote higher rewards. This also encompasses marketing activities and awareness campaigns with us and the protocol, such as Discord calls and Twitter spaces. Special emphasis will be given to novel protocols that can create powerful feedback loops and new protocols to Arbitrum as a way to promote them to prioritize the Arbitrum ecosystem. We aim to integrate at least 5 new protocols aiming to integrate 10 protocols by the end of the grant period. All 50,000 ARB will be used to distribute to the users of these protocols. .

4.4 What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric?

To incentivise “stickiness” among users and liquidity, we plan to implement several mechanisms within the Fluidity Money incentive design:

1. Tiered Rewards System: We will introduce a tiered rewards system for users based on their activity levels and tenure on the platform. This system will encourage users to maintain higher levels of activity over longer periods to access better rewards. The tiers could be structured around the volume of transactions, length of time assets are held, or participation in community events, thereby promoting sustained engagement.

2. Long-term Liquidity Incentives: For liquidity providers, we plan to implement vaults and potential time-locked incentives that increase in value the longer the liquidity is provided. This mechanism is designed to deter short-term liquidity provision and promote long-term stability within our ecosystem. By using vested rewards, we encourage liquidity providers to commit their capital for extended periods.

3. Utility Mining Expansion + more Loot Bottle Campaigns: Utility Mining rewards users for performing transactions with Fluid Assets. We plan to expand this program by introducing additional utilities and rewards for different types of interactions. This expansion aims to diversify user engagement, encouraging users to explore various aspects of the platform and the broader DeFi space. Furthermore, we will continue to hold the Loot Bottle campaigns, introducing additional changes to further reward short and mid-term participation utilizing the LTIP to guarantee sustained rewards to users actively participating in these campaigns and utilizing $fUSDC in a variety of platforms.

4. Personalized Challenges and Missions: Implementing personalised challenges and missions based on user behavior and preferences can significantly increase user engagement and stickiness. By rewarding users for completing specific tasks tailored to their interaction patterns, we encourage them to explore new functionalities and deepen their involvement with the platform and other participating protocols within the Arbitrum ecosystem.

5. Referral and Social Sharing Programs: We will incentivise users to bring new participants into the ecosystem through a referral program during the different campaigns we conduct. By rewarding both the referrer and the referred, we aim to grow our user base organically while increasing the stickiness of both new and existing users.

4.5 Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy.

4.5.1 * Total Fluid Asset transaction volume of 2.5B - 3B through Arbitrum and protocols

  • This KPI measures the direct impact of Fluidity Money on the Arbitrum ecosystem’s activity levels. A high transaction volume indicates successful integration and utilization of Fluidity within the ecosystem, reflecting user adoption and the effectiveness of our utility mining programs.

4.5.2 Productive volume ratio of 30% - 50%

  • This KPI assesses the quality and utility of transactions, ensuring that the volume driven by Fluidity Money contributes positively to the ecosystem rather than resulting in empty volume without real economic activity and value accrual to different protocols. Productive volume is considered any volume that pays fees excluding gas fees, this could be LP fee or platform fees such as swap fees. This activity is revenue generating and hence a very valuable measurement of success of the protocol.

  • Productive volume also implies that the $ARB being distributed and causing protocols to gain revenue through order flow, making ARB a very attractive ecosystem to be active in as a user and a developer in.

4.5.3 Fluidity’s Arbitrum TVL in lending pools (5m) + total Arbitrum TVL (5m) a (moving average).

  • Having deep liquidity will be a useful metric as it will allow us to reduce friction of Fluid Asset.

  • Deeper liquidity will make using Fluid Assets more attractive but also providing liquidity more attractive as Fluid Assets have a reflexive loop with liquidity impacting volume.

  • Integrating upwards 10 new protocols and promoting ($100m) volume towards them.

  • Supporting deeper volume for new protocols by boosting rewards as users use them.

  • High velocity will make using Fluid Assets more attractive on the new protocol and promote the Arbitrum ecosystem effect.

  • This supports newcomers to Fluidity and Arbitrum ecosystem by giving them an audience of active users.

4.6 Grant Timeline and Milestones:

Weeks 1-4 (May):

  • Launch and Initial Engagement: Implement the utility mining programs. Aim for an initial transaction volume boost to $250M to demonstrate immediate impact of utility mining and distribution.

  • TVL Growth: Increase TVL in Fluidity’s Arbitrum lending pools to reach $2M, establishing a solid foundation for liquidity.

  • Community and Educational Initiatives: Start community engagement and educational campaigns to increase awareness and understanding of Fluidity Money and its benefits within the Arbitrum ecosystem.

  • Users: *Have 1250 users use Fluid Assets and receive a part of the Arbitrum token allocation.

  • Integrations * Have 2 new protocols integrated into Fluidity’s reward system.

Weeks 5-8 (June):

  • Volume and TVL Expansion: Increase the total transaction volume to $1B, demonstrating sustained growth and engagement. Elevate TVL in lending pools to $3.5M, underlining improved market confidence.

  • Productive Volume Optimization: Achieve and maintain a productive volume ratio of at least 30% - 50%, emphasizing the quality and economic significance of transactions.

  • Protocol Integration and Support: Intensify efforts to contribute volume to new or novel protocols, aiming for a cumulative contribution of $50MM to signify strong ecosystem collaboration.

  • Users: *Have 3000 users use Fluid Assets and receive a part of the Arbitrum token allocation.

  • Integrations * Have 5 new protocols integrated into Fluidity’s reward system.

Weeks 9-12 (July):

  • Milestone Achievements: Reach the final transaction volume target of $2.5B, confirming the effectiveness of Fluid Assets and utility mining programs and the grant’s impact. Attain or exceed the TVL goal in lending pools of $5M.

  • Sustainable Productive Volume: Increase the productive volume ratio to sustain as close to or over 50% as possible, reinforcing the protocol’s value to the Arbitrum ecosystem.

  • Comprehensive Ecosystem Contribution: Meet or exceed the $100MM volume contribution to newly supported protocols.

  • Users: *Have 7500 users use Fluid Assets and receive a part of the Arbitrum token allocation.

  • Integrations * Have 10 new protocols integrated into Fluidity’s reward system.

How we project the distribution and growth after receiving the LTIP

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How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?

As previously mentioned Fluidity is poised to redefine the Arbitrum ecosystem by shifting the focus towards utility- driven incentives. Through our innovative Utility Mining program. We aim to create a more equitable environment where the incentives of users, protocols, and other participants are aligned, fostering cross-protocol collaboration and activity. Our approach provides a unique platform for emerging protocols to gain recognition and growth. By leveraging utility incentives, these protocols can experience fair bootstrapping, increased order flow and enriched diversity in user experiences and protocol exploration.

This strategy also enables Arbitrum protocols to have a competitive edge in attracting and retaining users. Fluidity also promises to enhance user experience with a gamified approach that significantly influences liquidity and user movement across the crypto space. With fluid assets potentially becoming a preferred payment method, users will be incentivised to transact more, thereby driving the overall value in the Arbitrum ecosystem. In essence,

Fluidity contributes to a more vibrant, inclusive. and utility-driven Arbitrum ecosystem.

We previously have been able to test this concept in real time through our utility loot bottle campaign, where users would use protocols for loot bottles. This drove significant volume over $1.5B+ in the course of a month, and over $750M of this to AMMs etc. as revenue generating. We can see that when enabling incentives, we can have an extreme impact on orderflow and promote activity in the Arbitrum Ecosystem.

In the Dashboard below it is very visually evident where incentives were enabled and the impact they have had.

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These rewards in the past were speculative on the lootbootle side and limited on the ARB token side, yet had a significant impact on volume, the goal of the significant $ARB grant is to have more tangible yet impactful rewards that will continue promoting the volume.

Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream? [Yes/No]

  • Yes

SECTION 5: Data and Reporting

OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL 9. Along with this list, please answer the following:

Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?

  • Yes, no special requests/considerations.

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard? [Please describe your strategy and capabilities for data/reporting]

  • Yes

First Offense: *In the event that a project does not provide a bi-weekly update, they will be reminded by an involved party (council, advisor, or program manager). Upon this reminder, the project is given 72 hours to complete the requirement or their funding will be halted.

Second Offense: Discussion with an involved party (advisor, pm, council member) that will lead to understanding if funds should keep flowing or not.

Third Offense: Funding is halted permanently

Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.)

  • Yes

Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?:

  • Yes
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Hello @shahmeer ,

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 @shahmeer

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Fluidity have been a proactive and professional outfit to work with at Trader Joe, going the extra mile to drive network effect for Arbitrum growth. Fluidity offer a well built product to users and have executed their growth with precision, the success is on show in this application.

Great platform, team and unique offering for Arbitrum users.

Looking forward to their continued success and partnership.

Blue - Trader Joe.

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@cliffton.eth and @raam please could you update our proposal to final.

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Hey there I’ve amended the title post to reflect that this proposal is FINAL. All the best!

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