Funding Proposal for LTIPP Protocol Cohort after Council Feedback

This opinion reflects the one of @SEEDGov as a participant in the DAO and should not be considered part of its role as an Advisor for the LTIPP. Additionally, for what it’s worth we were not Advisors for any of these applications during the feedback period.

Connext - Request 417,000 ARB (prev. 540, 000)

Context: The Council voted with 2 “yes” and 3 “no” responses.

Positive aspects highlighted by the Council:

  • Benefits of supporting LST/LRTs on Arbitrum.
  • Strong team with a solid background.
  • KPIs and Milestones are adequate for the grant required.

Negative aspects highlighted by Council members:

  • Grant size justification.
  • Distribution mechanism: It was recommended to incentivize end users (bridging costs) rather than LPs.

Interestingly, the 6 months lock-up was fine for a Council member, but not fine for another.

What Connext is proposing is to modify the distribution mechanism by focusing incentives on covering the gas costs for bridging, specifically targeting 100% of users coming from other networks to Arbitrum. Moreover, it estimates this cost based on user activity seven days before submitting the original proposal.

Here are some suggestions that we think could strengthen the proposal:

1- Include a dashboard showing the bridging costs to Arbitrum for the past 30 days to justify the volume and thus the estimated amount. The data from the seven days prior to the application provides a valid sample, but expanding this period could offer more comprehensive data.

2- Estimate the required amount in ARB not based on its USD value (which has proven to be very volatile), but rather on its value in ETH. Since the cost of bridging gas is in ETH, it would be more stable to estimate the ARB cost in ETH (over the last year, the cost of ARB has fluctuated between 0.034 and 0.038 ETH, which is much less volatile than its cost in USD).

3- Adjust your milestones in a separate publication to align with the newly requested amount in order to be possible for a delegate to move the proposal to Snapshot.

D2 Finance - Request 100,000 ARB (prev. 195,000)

Context: The Council voted with 2 “yes” and 3 “no” responses.

Positive aspects highlighted by the Council:

  • Clear in its KPIs, milestones, and goals.
  • Composability
  • Arbitrum alignment

Negative aspects highlighted by Council members:

  • Justification of the grant size
  • Grant size > TVL
  • Distribution mechanism
  • Uncertainty of the potential results considering the low history of the protocol
  • Considering what happened after GMX grant ended (activity drop), lack of users stickiness.

D2 Finance has provided explanations about the operations of their ETH++, RODEO++, and ARB++ vaults, stating that the decision to maintain a capped TVL is for security reasons, and proposes nearly a 50% reduction in size.

D2 Finance is a native protocol on Arbitrum, notable for its degree of composability with innovative trading and yield strategies that add value to Arbitrum.

Here are two comments that could strengthen the proposal:

  • Include new charts on the performance of the ++ vaults since they stopped receiving incentives (from the GMX grant) to date, to bolster the explanation in point 4.
  • Move the publication to a separate document and adjust the milestones according to the new requested amount.

Smilee Finance - Request 125,000 ARB (prev. 150,000)

Context: The Council voted with 1 “yes” and 3 “no” responses.

Positive aspects highlighted by the Council Members:

  • Innovation / uniqueness

Negative aspects highlighted by Council members:

  • Grant size / TVL + project lifetime

  • Lack of KPIs and sufficient data

  • Distribution mechanism

Echoing the Council’s feedback, Smilee Finance includes a dashboard with metrics showing a TVL of nearly $2M as of this post, although this amount is similar to that evaluated by the Council when considering the high ask. Additionally, they have decided to remove the section of the proposal dedicated to fee rebates and focus their request on APR incentives for liquidity providers (LPs):

I believe that with the explanations provided and the adjustment in the amount, it is possible to address some of the Council’s concerns, although others still remain:

1- Despite increasing the TVL cap to $3M on April 11th, the current TVL remains the same.

2- The traction of unique users is quite limited, raising doubts about the effectiveness of distributing incentives to a few users.

3- Given the young age of your protocol, it is likely that the liquidity of the pools you wish to incentivize is provided by your team. I would like to see a disclosure of this situation and a plan to prevent yourselves from farming the rewards.

4- I recommend publishing the proposal in an independent publication and setting new milestones according to the new amount requested.

5- Regarding point 4, I recommend setting an APR cap (15% is mentioned in the form) and fixing the distribution of incentives with conditions for milestone compliance.

Yearn - Request 300,000 ARB

Context: The Council voted with 2 “yes” and 3 “no” responses.

Positive aspects highlighted by the Council Members:

  • Strong team and great usage on other chains.
  • Clear milestones and execution plan.
  • Grant matching with the ARB airdrop they received.

Negative aspects highlighted by the Council Members::

  • Lack of users / TVL in Arbitrum
  • Distribution mechanism
  • Justification of the grant size
  • Concerns over what type of users they are attracting (Arbitrum already existing users rather than other chain ones).

Given Yearn’s reputation and its performance on other chains, there have been no questions regarding the amount requested, but there were concerns about execution given the limited activity they currently have on Arbitrum.

They provided valid responses about the new vaults and investment strategies that were recently launched, which offer attractive options for both Arbitrum users and users from other chains looking to move their liquidity to this network. I believe the explanations provided and the new milestones set address some of the Council’s concerns, although I leave my recommendations to strengthen the proposal should it advance to Snapshot:

1- Provide details (including the contract address) of the pools/vaults you wish to incentivize, and how much of the ARB you will allocate to each. If flexibility is needed due to market fluctuations, detail the objective parameters for their selection.

2- Considering your low TVL at this moment, commit to a cap on the APR percentage for each of those pools/vaults to ensure that ARB is not distributed excessively among a few users / TVL if milestones are not met. In this regard, commit to release more ARB conditioned to meeting the milestones.

3- Share in an independent publication the pools to be incentivized and the commitment on the APR percentage conditioned on meeting the milestones.

Final comments

I hope all comments serve as feedback to improve your applications. Of course, if you feel your applications are good as they are, there’s no need to do anything. This is an opinion, and adhering to it does not guarantee the support of the delegates.

I suggest all applicants to move their proposals to a unique and individual post to allow any delegate who supports it to move that proposal to Snapshot within the defined time frame. The explanation of how was provided by the Program Manager:

Finally, check the deadline:

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