SECTION 1: APPLICANT INFORMATION
Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name: Devin Goodkin (DeFi Devin)
Project Name: GammaSwap Protocol
Project Description: GammaSwap allows users to borrow liquidity from AMMs. Borrowers short Impermanent Loss to profit off Impermanent Gain in the form of a Long, Short or Straddle. This could be used to speculate with leverage or to hedge volatility. The returns replicate those of a perpetual option. GammaSwap is oracle free and can support any ERC-20 token. GammaSwap is also pioneering the first feeless swap DEX, DeltaSwap.
Daniel, the inventor, began researching how to build GammaSwap in 2021 and open sourced his finding on AMMs with multiple articles on Medium, the first being UniSwap: An Options Market.
GammaSwap raised a 1.7M seed led by Skycatcher in early 2023 with a couple DeFi native funds following on: RenGen, Modular Capital, Manifold Trading. We also received backing from angels that have Arbitrum Native projects - Coinflipcanada (core contributor at GMX), quattro (prev. Core contributor at GMX) and Dan (core contributor at Rysk).
Team Members and Roles:
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Devin Goodkin - Co-Founder & Growth, Prev: Growth at Figment
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Daniel Alcarraz - Co-Founder & CEO, Prev: Quant at UBS
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Roberto Martinez - Co-Founder & Eng, Prev: Eng at Meta
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Luke Teuma - Senior FE Engineer, Prev: Eng at ThorSwap
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Tails the Fox - Senior FE Engineer, Prev: Permutable.ai
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0xMerp - Growth Lead, Prev: Growth at Aevo
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Simon Mall - Senior Smart Contract Engineer, Prev: Eng at Tokemak
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Bee926 - Community Manager, Prev: Yearn, Dopex
Project Links:
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Website: https://gammaswap.com/
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Twitter: https://twitter.com/gammaswaplabs
Contact Information
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Point of Contact: DeFi Devin
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Point of Contact’s TG handle:@defidevin
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Twitter: @0xDevinG
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Email: dgoodkin@gammaswap.com
Do you acknowledge that your team will be subject to a KYC requirement?: Yes, already completed on behalf of the Arbitrum Foundation grant program.
SECTION 2a: Team and Product Information
Provide details on your team’s past and current experience. Any details relating to past projects, recent achievements and any past experience utilizing incentives. Additionally, please provide further details on the state of your product, audience segments, and how you expect incentives to impact the product’s long-term growth and sustainability.
State of the product: The product has been on Arbitrum Mainnet since end of September with a relaunch at the end of Jan. The protocol has been live for almost half a year.
Audience segment: The audience segment for GammaSwap is multi-faceted.
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Borrowing: Sophisticated traders who are looking for leverage without price risk on any asset or MMs looking to hedge their LP exposure.
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Liquidity Provisioning: Passive LPs looking for yield that scales directly with Impermanent Loss risk. GammaSwap yields are higher than other AMMs.
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Feeless Swaps: Retail users who trade in small enough size where fees are more important than slippage. Right now given how high utilization is there isn’t enough liquidity to facilitate signifcant spot volume yet.
Impact of Incentives: Incentives will help us drive more TVL to the GammaSwap platform and Arbitrum. Right now, loan volume and trades are relatively frequent but traders are hindered from opening in size due to how fast utilization of the pool increases. More liquidity will enable us to underwrite more loans.
Team Experience:
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Daniel Alcarraz (Co-Founder, Inventor, CEO) - Formerly a software engineer at Goldman Sachs, trader at Oppenheimer and Quant at UBS. He’s been involved in crypto since 2013 as a market maker on centralized exchanges and derivatives trader. In 2016, he left UBS to pursue trading crypto full time. He provided liquidity into many farms during DeFi summer and realized current AMM implementations were inefficient. He began working on GammaSwap in mid 2021.
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Devin Goodkin (Co-Founder, Growth) - Formerly worked in B2B tech and went full time into crypto in 2021. He was formerly a part of Figment, the first billion dollar crypto unicorn in Canada. Figment runs validator infrastructure for the top PoS chains and has invested in EigenLayer, Celestia and Wormhole. Devin was responsible for attracting developers to the platform and forming institutional partnerships.
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Roberto Martinez (Co-Founder, Eng) - Roberto was formerly a full stack software engineering intern at Meta and an engineering intern at Liberty Mutual. He dropped out of university to committ to GammaSwap full time.
Team experience (Any relevant experience that may be useful in evaluating ability to ship, or execution with grant incentives. Please provide references knowledgeable about past work, where relevant. If you wish to do so privately, indicate that. [Optional, but recommended]): References available upon request.
What novelty or innovation does your product bring to Arbitrum?: GammaSwap is the first protocol enabling users to get leverage on any asset without price based liquidation risk. Borrowers turn impermanent loss into impermanent gain. DeltaSwap is the first protocol enabling feeless swaps.
Is your project composable with other projects on Arbitrum?: Yes, all of our LP tokens are ERC-20 tokens and since we are oracle free we can work with virtually any asset. We are already exploring ways to rehypothecate tokens with Pendle YT, GMX GM tokens and Dolomite GSLP tokens as collateral.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?: No
How do you measure and think about retention internally? (metrics, target KPIs):
We think about retention in two ways:
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Time Weighted Liquidity Provision. Is liquidity sticky or do users withdraw liquidity after incentives run out? This is particularly important for incentive programs to make them effective in the long run.
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Borrowing. What’s our churn like for traders? Are they getting blown out with excessive leverage or able to retain and grow their portfolios?
Relevant usage metrics - Please refer to the OBL relevant metrics chart 5. For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section:
- TVL
- Trading Volume (Daily Loan Volume)
- Outstanding Loans (Loan TVL)
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
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.
Is the protocol native to Arbitrum?: Yes
On what other networks is the protocol deployed?: None
What date did you deploy on Arbitrum mainnet?: Sept 19, 2023
Do you have a native token?: No but it is planned to be released soon. Tokenomics available here.
Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?: No liquidity mining programs have been utilized yet.
Current Incentivization: How are you currently incentivizing your protocol?: No incentive besides points. The point program is outlined here but to summarize: Daily snapshot for each wallet where users can earn points for each loan and LP position, for any pool. Borrowers earn 2x points and LPs earn 1x for the USD normalized value of the position.
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?: We have received a grant from the Arbitrum Foundation. It is milestone based relative to growth of the protocol.
Arbitrum Foundation Grant Distribution:
- Total grant size: $50,000
- Upfront: $10,000 (already received)
- Upon accomplishing milestone 1: $20,000
- Milestone 1: Audit feeless swap AMM, launch, reach 3M in TVL
- Upon accomplishing milestone 2: $20,000
- Milestone 2: Launch referral program smart contract, reach 5m in TVL
Protocol Performance: Available on our Dune Dashboard here
Key Metrics:
- TVL
- Loan Volume
- Total Loan Volume
- Total Deposits
Protocol Roadmap:
- Reducing slippage for borrowers using external liquidity sources (live in 1-2 weeks)
- Reducing spread on interest rate (live in 1-2 weeks)
- Integrate YT tokens into GS pools (live in 2-4 weeks)
- Deploying on Ethereum (live in 2-4 weeks)
- GammaSwap V2, a new type of concentrated liquidity without ticks and composable LP tokens (Q1 2025)
Audit History & Security Vendors:
Audits: Audits - GammaSwap Docs
Bug Bounty Program: GammaSwap Bug Bounties | Immunefi
Security Incidents: The protocol has never been exploited. The contracts were paused and redeployed after a bug bounty report submission. Full analysis and how we handled it here.
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.
Requested Grant Size: 300,000 ARB. We will be emitting all ARB in the form of esARB, similar to esGMX. It will require users to reserve their LP tokens for 365 days to full vest their ARB so it is a much more sticky and effective program than the typical liquidity mining program. It will also lead to a much more healthy release of ARB into the market as all the rewards cannot be sold immediately.
Justification for the size of the grant: The goal is to increase TVL to underwrite more loans. Loan volume is steadily increasing but is currently hindered by liquidity. Therefore, we will be focusing incentives on liquidity provisioning only.
GammaSwap has created farm contracts similar to the escrowed GMX token model but upgraded to be extensible to AMM pools, not just GLP.
We plan on using these contracts to provide incentives in escrowed ARB (esARB). For liquidity providers to redeem, they must deposit the GammaSwap LP tokens for the associated farm into the vault along with the esARB for 365 days. They can withdraw their funds at any time and unlike voted escrowed (ve) token models they have no principal risk. However, if they remove the LP tokens from the vault, the vesting ends and they cannot collect additional ARB rewards.
This model is better than a traditional liquidity mining campaign because for the user to redeem 100% of the ARB from the incentive program they must hold their LP position in the GammaSwap protocol for at least a year. It disincentivizes mercenary capital and has a higher ROI for the LTIPP funds.
The plan is to release esARB in three tranches consisting of 4 weeks of esARB incentives, 12 weeks in total.
The justification for the size of 300k ARB is to provide a high enough APR to scale TVL up to 8M to be able to underwrite more loans in a healthy way using escrowed token incentives. We are assuming a higher APR given the risk premium of 12 month vesting, however this will lead to stickier liquidity and less mercenary farming.
GammaSwap has been on Arbitrum for 6 months with an ATH TVL of 2.2M and is composable with other Arbitrum projects. We also placed an emphasis on LRT liquidity in the LTIPP applications since passive low risk ETH yields is historically where most of the TVL has accrued (Lido) and now with even higher yields available for EigenLayer / LRTs this is most likely going to be the next big category of DeFi that sees TVL growth, as already evidenced by EigenLayer (number 2 DeFi TVL leader) and EtherFi. Attracting LRT liquidity on Arbitrum with novel DeFi protocols providing additional yield and means to speculate on those yields has already seen explosive growth in TVL for arbitrum already. Pendle started with 100M in TVL on Arbitrum this year and the protocol is now at 500m. We hope to also drive more TVL growth and liquidity for Arbitrum. The ARB incentives will help us attract more liquidity and accelerate partnerships with LRT protocols.
Also, although GammaSwap has not seen explosive growth yet, complex DeFi protocols unfortunately can take longer to adopt - Pendle interest rate swaps great example here. We are optimistic that in time and with the support from the Arbitrum DAO we can offer a primitive that provides a differentiated use case for the Arbitrum ecosystem, not just a fork of an already successful primitive (DEX, money market, etc).
Grant Breakdown: GammaSwap has created farm contracts similar to the escrowed GMX token model but upgraded to be extensible to AMM pools, not just GLP.
We plan on using these contracts to provide incentives in escrowed ARB (esARB). Escrowed ARB can be redeemed 1:1 for ARB over a 365 day period. For liquidity providers to redeem, they must deposit the GammaSwap LP tokens for the associated farm into the vault along with the esARB. They can withdraw their funds at any time and unlike voted escrowed (ve) token models they have no principal risk.
This model is better than a traditional liquidity mining campaign because for the user to redeem 100% of the ARB from the incentive program they must hold their LP position in the GammaSwap protocol for at least a year. It disincentivizes mercenary capital and has a higher ROI for the LTIPP funds.
Here is the planned weights for the first tranche and the associated incentive APRs (not including supply fees). We are assuming the price of ARB is $2.
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WETH/USDC - 50% - ATH TVL is 1.77M, Current 1.1M, Goal TVL 4M | APR: 30%
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eETH/USDC - 20% - Current TVL is N/A, Goal TVL 2M | APR: 24%
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uniETH/WBTC - 10% - Current TVL is N/A, Goal TVL 1M | APR: 24%
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ARB/WETH - 10% - Current TVL is 72k, Goal TVL 750k | APR 32%
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GMX/USDC - 5% - Current TVL is 10.58k, Goal TVL 400k | APR 30%
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PENDLE/USDC - 5% - Current TVL is 100k, Goal TVL 500k | APR 24%
With 300k ARB, we can achieve around a ~24-32% APR at ~8-8.5M TVL which is in line with APRs we have seen protocols from the STIP achieve: GMX, Umami Finance, Timeswap, etc. It is attractive enough that even with 12 months of vesting we can get to 8M+ in TVL. With supply fees, the APRs will be closer to 42-100% in total. We’re pricing in a risk premium given the novelty of our protocol architecture and the 12 month vesting. eETH/USDC and uniETH/WBTC we are assuming will have a higher TVL with a lower APR given the native LRT yield and eigen points speculation. We chose to support EtherFi and Bedrock since we are in the early stages of point integration discussions with them. They need to partner with us to track the points offchain, which is important as many users want to speculate on Eigen points.
We want to get more exposure to the LRT category, Pendle has seen explosive growth from it and it is a strong use case for GammaSwap since all of those yield tokens are liquid. Arbitrum will benefit from having more LRT tokens on the network since Eigenlayer is now the #2 TVL protocol.
Grant Matching: Our token will likely be live by the time of the start of the LTIPP so we will incentivize the same pools with escrowed GS 1:1 or higher (more esGS than esARB).
Funding Address: 0x34b5870c0431158e11c68b770127fbd2ce953f7a
Funding Address Characteristics: 3 out of 4 Gnosis Multisig
Treasury Address:
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Mainnet: 0x73c510b2A44B51a01A13A3539c38EB330FB9713D
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Arbitrum: 0x34b5870c0431158e11c68b770127fbd2ce953f7a
Contract Address: N/A yet. We have the esARB contract fully developed and unit tested. We just need to prepare a deployment script. Contract is available on github here: GitHub - gammaswap/v1-staking
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.
Objectives: The primary objective is to scale liquidity for the long run in both GammaSwap and Arbitrum. Why is GammaSwap liquidity beneficial to arbitrum? Well, currently there is no way to full hedge an LP position. You can use a short to hedge a volatile stable pool like ETH/USDC but it will require frequent rebalancing and you are not delta hedged when ETH increases. If the quote token is also volatile or if the token is new, it becomes impossible to hedge with perps. Offering options for DEX market makers and projects to hedge their liquidity provisioning is like offering insurance and will dramatically increase liquidity on Arbitrum in the long run. From a more speculative perspective, GammaSwap also allows traders to get leverage on any token with returns that replicate a perpetual option on any DEX token even if there is no oracle support or CEX listing.
Execution Strategy: We will constantly monitor effectiveness of rewards each tranche and adjust to optimize how much liquidity the esARB emissions can bring.
What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric?: See above regarding escrowed ARB (esARB) in the “Grant Breakdown” section. The liquidity is locked in for at least a year instead of a traditional liquidity mining program where rewards can be immediately dumped and the liquidity will only persist as long as the emissions do. Utilizing an escrowed token model creates stickier liquidity (LP tokens must be deposited in contract for 1 year to fully vest) and a healthier, more linear release of ARB into the market.
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.
- Achieve 8M in TVL
- 5M in loan TVL at end of LTIPP
- 20M+ Total Loans
Loan TVL is unique to GammaSwap. Unlike other lending markets, all of the collateral borrowed remains in the GammaSwap contract as part of the GammaPool. This makes the protocol significantly more robust than current lending markets as the risk of bad debt is maximum 0.3% of all loan TVL and it can be written down to LPs. This is only the case if liquidators do not want to liquidate the loan (gas cost too high, dont want to hold the pool tokens). Right now, the loan TVL is 1.03M while total TVL is ~1.4M. All time high TVL is 2.2M and all time high loan TVL is 1.9M. Available here on DeFi Llama.
Grant Timeline and Milestones: Depending on when the grant application is accepted, we can start the program. Once the contracts are deployed we will share the verified addresses on Arbiscan in the forum post. The DAO will remit the first tranche of funds and the GammaSwap team will initialize liquidity mining incentives for the first 4 week campaign.
| Pool | Week 4 TVL Target | Week 8 TVL Target | Week 12 TVL Target |
|---|---|---|---|
| WETH & USDC | 2M | 3M | 4M |
| eETH & USDC | 660k | 1.2M | 2M |
| uniETH & WBTC | 330k | 660k | 1M |
| ARB & WETH | 250k | 500k | 750k |
| GMX & USDC | 133k | 266k | 400k |
| Pendle & USDC | 166k | 333k | 500k |
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?: Since the launch of DeltaSwap (the feeless DEX), we’ve seen total liquidity borrowed steadily increasing and in the WETH/USDC always hovering around 60-80% utilization - with recent volatility utilization has been hanging around 90%. We have dynamic fees that increase exponentially to prevent overleveraging of the pool close to 100% utilization. This enables LPs to withdraw liquidity and spot swaps transactions to execute, which is necessary for pricing the tokens in the pool.
Loan volume has been steadily increasing as it allows borrowers to get perpetual leverage on ETH without price risk, with most of the positions being a straddle. Straddles have no slippage and profit if the price moves in either direction. Since GammaSwap is the only protocol offering perpetual straddles, we’ve seen strong interest from traders.
Total liquidity borrowed is increasing but limited by the amount of liquidity in GammaSwap. If there was more liquidity in the GammaPools, trade volume and total borrowed liquidity would increase in tandem. Incentives will provide us more liquidity to underwrite loans.
The reason increasing liquidity in GammaSwap will help grow the arbitrum ecosystem is that GammaSwap offers significantly higher returns to LPs than other AMMs. Historical APY especially in the more liquid pools like WETH/USDC has a 30 average APY of over 30% without token incentives, significantly higher than other full range AMM positions.
Offering high returns with relatively low risk (full range IL risk) can help grow bridged TVL, liquidity, etc that is also usable by other DeFi protocols since LP tokens are fully composable, as a way for traders to get leverage and also to facilitate spot swaps. There are multiple functions in GammaSwap that will make Arbitrum as an ecosystem more attractive and the liquidity the ARB incentives from LTIPP adds will be useful for multiple types of user behavior.
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
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 5. 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
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard?: Yes, we will use a combination of Dune and the Graph.
Dune Dashboard: https://dune.com/0xpibs/gammaswap
Arbitrum Subgraph: https://thegraph.com/hosted-service/subgraph/gammaswap/gammaswap-v11-arbitrum
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: 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