[HOP Protocol] LTIPP Application - FINAL

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: Bob Rossi, Francom and 0xLev1

Project Name: Hop Protocol

Project Description: Hop is a scalable rollup-to-rollup general token bridge. It allows users to send tokens from one rollup or sidechain to another almost immediately without having to wait for the network’s challenge period.

Team Members and Roles:

  • Bob Rossi: DAO Contributor
  • Francom: DAO Contributor
  • 0xLev1: DAO Contributor

Project Links:

Contact Information

  • Point of Contact: Bob Rossi
  • Point of Contact’s TG handle: @BobRossiETH
  • Twitter: @BobRossieETH, @francom619
  • Email: bobrossieth@gmail.com

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

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.

Team experience: The core team behind Hop Protocol is Authereum Labs, which includes Chris Whinfrey, Shane Fontaine, and Miguel Mota. The Authereum labs team has extensive crypto experience, originally working for the auditing firm Level K in 2018 which audited projects like Decentraland, OpenZeppelin, dydx, and Augur. In 2019 the team decided to build a non-custodial wallet called Authereum, but after seeing gas prices surge during DeFi summer they pivoted towards building a modular blockchain infrastructure project eventually known to become Hop Protocol.

What novelty or innovation does your product bring to Arbitrum?: Arbitrum and other L2 roll ups are important to the long term scalability of Ethereum, however this comes at the cost of fractionalizing the user base. Users who wish to move between rollups have to navigate waiting periods and high fees. Hop bridge allows for quick, easy, and low-cost transfers between rollups which reduces the fractionalization of the Ethereum network and provides for a better end user experience.

Is your project composable with other projects on Arbitrum? If so, please explain: Bridges serve an important role in onboarding users to Arbitrum which ultimately affects how all other projects grow. Hop is one of the few bridges that supports bridging between both NOVA and Arbitrum One.

Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?: Bridges that support Arbitrum include Hop, Portal (Wormhole), ChainPort, cBridge, Stargate, Across V2, Synapse, Connext, and Orbiter. Of those listed, only Hop and Orbiter support Arbitrum Nova bridging. A listing of l2 bridges across all platforms can be found here.

How do you measure and think about retention internally?: Hop provides a comprehensive stats dashboard on its site which can be found here. The most important KPIs for Hop Protocol are bridging volume and daily active users, as they are the driving indicator of how much value Hop is providing to the L2 ecosystem. Attracting new users is always a goal, but more importantly is making sure those same users keep using Arbitrum and Hop bridge in the future.

Retaining users comes down to cost and the overall bridging experience. Hop focuses on a simple and straightforward bridging experience for all types of users regardless of technical background.

Retaining liquidity providers is vital to keeping bridging costs low. Hop has historically provided HOP tokens as liquidity incentives for all our bridge pairs in order to remain competitive with other bridging projects and the larger DeFi economy.

Relevant usage metrics - Please refer to the OBL relevant metrics chart 11. For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section: Hop is a bridge and relevant metrics from the chart include TVL, Bridging Volume and a listing of liquidity providers. Our site provides tons of metrics for the DAO to monitor and we have created a Dune dashboard specifically for the LTIPP to better track relevant metrics.

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 - Hop Protocol supports Arbitrum as well as 7 other L2 networks.

On what other networks is the protocol deployed?: Yes - Base, Ethereum, Gnosis, Linea, Optimism, Polygon, Polygon zkEVM

What date did you deploy on Arbitrum mainnet?: September 3, 2021 - Transaction ID: Arbitrum Transaction Hash (Txhash) Details | Arbiscan

Do you have a native token?: Yes - HOP Token. Our token distribution info can be found here: Token Distribution | User Docs | Hop Docs

Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?: Hop has had a liquidity mining incentive program on Arbitrum with separate liquidity pools for ETH, USDC, USDT, DAI, rETH, and Magic (Arbitrum One and Nova) and a TVL of roughly $13.1M (source). Hop has distributed 9.6 million Hop, 514 rETH and 48,000 Magic to liquidity providers on the Arbitrum blockchain.

Current Incentivization: How are you currently incentivizing your protocol?: Hop plans to continue its liquidity mining incentive programs on Arbitrum with separate liquidity pools for ETH, USDC, USDT, DAI, rETH, and Magic (Arbitrum One and Nova).

Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?: No

Protocol Performance: Compared to other bridges, Hop Protocol has helped onboard a large amount of users to Arbitrum and was the winner of the 2022 Arbitrum Odyssey bridging challenge (results can be found here). 643,900 unique wallets have used the Hop Arbitrum bridge, which represents 26.27% of Hop’s lifetime transfers (source). Of Hops nearly $5 Billion cumulative volume since inception, $1.325B of it was for the Arbitrum network (26.5%) - (source).

Protocol Roadmap: Roadmap | User Docs | Hop Docs

Audit History & Security Vendors: Hop has undergone multiple audits which can be found here — contracts/audits at master · hop-protocol/contracts · GitHub

Security Incidents: No

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: 500,000 ARB

Justification for the size of the grant 20: [Enter explanation. More details are better, including how you arrived at the required funding for individual categories of expenses covered by your grant plan]:

Hop is an early Arbitrum partner and was live on day one of Arbitrum’s launch (2021). Our project has continued to be a vital project to Arbitrum as it was the most widely used bridge during the Arbitrum odyssey program.

Hop was also an innovator during its airdrop by being one of the first projects to do a deep dive into collecting data to identify sybil attackers. Arbitrum then used Hop’s data for the ARB airdrop, resulting in the Arbitrum DAO potentially saving over $1 million in ARB that didn’t get disbursed to sybils.

Hop continues to support Arbitrum as it grows by being one of the only bridges between Nova and Arbitrum One. Our project has a strong focus on decentralization and this grant can help Hop continue onboarding users to Arbitrum.

Our team has put together a detailed formula based on historical data to justify the size of our grant request. There are three categories to base our grant request on, as follows:

AMM Pool Incentives

  • Reasoning: Increasing our liquidity mining incentives can attract liquidity providers to the platform. In turn, helping to reduce slippage on bridging transactions. The allocation will be variable and weighted towards the pools based on TVL.
  • Target Goal: A 125% increase to the current TVL of our liquidity pools can be achieved by providing a 125% boost to the current APRs of each pool.
  • Funding Determination: The 30 Day average TVL and APR data was taken from Defi Lama. The APR for each token was converted to a quarterly return and then given a 125% boost. The incentive - in $USD - was calculated by the weighted TVL of each pool, converted into an ARB token amount and totaled.

Gas Fee Subsidy

  • Reasoning: Subsidizing gas fees by 80% will reduce end-user costs to bridge funds to Arbitrum. An 80% fee subsidy is to prevent sybil attacks that may otherwise occur if there was a 100% gas fee subsidy. Gas fees will only be subsidized to users who are onboarding to the Arbitrum chains (from any other network), and users exiting Arbitrum One or Nova will not get subsidized.
  • Target Goal: A 125% increase in users who bridge to the Arbitrum network. As such, we expect a 125% increase in gas fees as well.
  • Funding Determination: A Dune Query was ran to determine the average daily gas fees between 9/1/2021 to 2/29/2024. The average daily gas fee, reduced by 80%, was multiplied by 84 days (12 weeks) to get the expected $USD gas cost of transactions over the LTIPP period. This amount was then boosted 125% to anticipate the increase in users during the LTIPP period.

Bonder Fee Subsidy

  • Reasoning: Bonders run local nodes to verify if the state transitions on the source chain are accurate and decide to “bond” the transfer by locking up 110% of the TransferSum amount as collateral to be unlocked after a 24 hour challenge period. This bonder fee will be subsidized to reduce end-user costs to bridge.
  • Target Goal: A 125% increase in volume being bridged to the Arbitrum networks. As such, we expect a 125% increase in bonder fees.
  • Funding Determination: A Dune Query was ran to determine the average daily bonder fees between 9/1/2021 to 2/29/2024. The average daily bonder fee was multiplied by 84 days (12 weeks) to get the expected $USD value over the LTIPP period. This amount was then boosted 125% to anticipate the increase in volume during the LTIPP period.

Data Assumptions: To assist the council in comparing our request across all other applicants, we have used the following token price amounts. These amounts are based on perceived standard price assumptions across the majority of other applicants.

  • ETH: $3,800
  • ARB: $2.00
  • HOP: $0.06

Grant Matching: Currently Hop has liquidity incentive programs for all its pairings. Hop may request DAO for additional matching.

Grant Breakdown:

  • 31.22% of ARB tokens allocated to increasing our liquidity mining incentives in order to attract liquidity providers to the platform
  • 35.23% of ARB tokens allocated to subsidizing gas fees by 80% for users who are onboarding to the Arbitrum chains (from any other network). Users exiting Arbitrum One or Nova will not get subsidized
  • 33.56% of ARB tokens allocated to subsidizing bonder fees in order to reduce end-user costs to bridge.
  • The Hop team agrees to return to the Arbitrum DAO any unused ARB funds once the 12 week LTIPP program is concluded.

Funding Address: Arbitrum Comm Multisig: GnosisSafeProxy | Address 0x31aFFc42EE3Bf28E8E452A77677e8c592F8D5C3d | Arbiscan

Funding Address Characteristics: The funding address is a 3 out of 5 Gnosis Safe Multisig. The 5 members are elected by the DAO and the address can interact with ERC-721 tokens.

Treasury Address:

HOP DAO on L1: TimelockController | Address 0xeeA8422a08258e73c139Fc32a25e10410c14bd7a | Etherscan

Hop Comm Multisig on L1:GnosisSafeProxy | Address 0x60224984338DeDe521C56DEE7a09e446A5a163f4 | Etherscan

Hop DAO Alias on Arbitrum:Address 0xffb9422a08258e73c139fc32a25e10410c14ce8b | Arbiscan

Optimism Comm Multisig: https://optimistic.etherscan.io/address/0xC988107688b750dee6237B85A3ca49ba0a65DaB0

Contract Address: MerkleRewards | Address 0xcd1d7aefa8055e020db0d0e98bbf3fed1a16aad6 | Arbiscan

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 increase the rates at which users are onboarding to Arbitrum through Hop. Our targeted goal is a 125% increase in the average amount of users bridging to Arbitrum using Hop Protocol. When met, the trickle-down effects of a growing user-base will strengthen Arbitrum’s competitive advantage within the L2 ecosystem. A related goal is to see an 125% increase to TVL within Arbitrum pools on the Hop Protocol. This will be vital to support the increased demand to bridge to Arbitrum’s network.

Execution Strategy:

When a user bridges funds to Arbitrum using Hop there are three fees (bundled into one fee) that are paid by the user: AMM fees, gas fees, and bonder fees. Subsidizing these combined items should significantly reduce the net cost for users to send funds to Arbitrum while simultaneously giving them a stake in the Arbitrum network since rebates / subsidies are paid in ARB tokens.

  • $ARB will be used to enhance the liquidity mining program incentives currently in place. Only the liquidity pools for ETH, USDC, USDT, DAI, rETH and Magic (Arbitrum One and Arbitrum Nova) will be subsidized. The allocation will be variable and weighted towards the pools with greater TVL. For example, if the ETH pool has 70% of the total TVL then 70% of the incentives will be allocated towards the ETH pool.
  • Every user that onboards to Arbitrum using HOP Protocol will have 80% of their total onboarding fees refunded in $ARB. Solely subsidizing users bridging funds to Arbitrum, whether it be from Ethereum mainnet or another L2.
  • Bonder fees will be subsidized by $ARB in order to reduce end-user costs to bridge. The bonder fee is the cost to bond at the destination chain (around $0.85) and also includes a volume fee (5 basis points for ETH therefore a $1 million transfer costs $500 in volume fees).

What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric? [Provide relevant design and implementation details]:

Our goal is to bring new and unique long-term users to the Arbitrum network while simultaneously avoiding sybil accounts that look to take short-term advantage of the incentive program.

One way we are preventing this is the 80% gas fee rebate that will only be for users onboarding to the Arbitrum network. Only rebating onboarding fees should dissuade users from leaving due to a higher off-boarding fee. Also, the reason we are funding 80% of the total onboarding fees (instead of 100%) is to prevent sybil accounts from spamming the network. By paying the rebates / subsidies in ARB we can simultaneously give new users a stake in the Arbitrum, which should create an attachment to the Arbitrum network.

KPIs are important to assessing stickiness. We created our Dune Dashboard so that there is public data post-LTIPP that can point to the effectiveness of incentives & subsidies provided. TVL bridged, fees spent and unique user counts can be a good retention metric to determine real users vs sybil accounts.

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. [Please also justify why these specific KPIs will indicate that the grant has met its objective. Distribution of the grant itself should not be one of the KPIs.]:

A Dune Dashboard has been created to monitor specific KPIs related to the LTIPP. The dashboard includes metrics related to all three of the incentivization categories:

  • For AMM Pool Incentives: TVL, AMM Fees & AMM LP Addresses
  • For Gas Fee Subsidies: Gas Spends by Users
  • For Bonder Fee Subsidies: Bonder Fees

In addition to those targeted metrics, we have added a few other data points to help quantify the success on the whole. This includes Daily Transactions, Daily Active Users, Bridge Volume and Unique User counts

All the categories noted above can be run for specific date ranges, which will help us with bi-weekly reporting as well as any post-LTIPP reporting and research.

In addition, our site provides tons of metrics for the DAO to monitor and for post-LTIPP research.

Grant Timeline and Milestones: [Describe the timeline for the grant, including ideal milestones with respective KPIs. Include at least one milestone that shows progress en route to a final outcome. Please justify the feasibility of these milestones.]:

Our 12 week LTIPP goal is to see a 125% increase in the avg amount of user bridging to Arbitrum and a 125% increase to TVL in Arbitrum pools using Hop Protocol. During the duration of the program we will monitor the KPIs noted above in order to determine the effectiveness of the grant, with the goal being an increase across all KPIs. We will provide bi-weekly updates to the DAO that include reporting on the changes to the KPIs, as well as how much funding has been used so far. Our milestones are:

  • 4 Weeks: 50% increase in relevant KPI metrics
  • 8 Weeks: 100% increase in relevant KPI metrics
  • 12 Weeks: 125% increase in relevant KPI metrics, meeting our desired goal of the LTIPP

Hop Protocol has seen success with a similar grant program through OP (here) and are envisioning a similar outcome for Arbitrum.

Any unused ARB funds at the end of the program will be returned to Arbitrum DAO.

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem? [Clearly explain how the inputs of your program justify the expected benefits to the DAO. Be very clear and tangible, and you must back up your claims with data]:

Arbitrum’s dapp ecosystem relies on a robust and active user base to support it. However, with the fractionalization of the L2 space users can be overwhelmed and may resort to users sticking to one single chain. Especially factoring in waiting periods. Hop provides an easy, fast and low cost way to onboard users to Arbitrum. This in turn alleviates the fractionalization issue and benefits all projects on the network.

The grant will help us further incentivize users onboarding to Arbitrum through Hop. This will be vital during the LTIPP as fees may deter users from trying out the other projects that are running incentive campaigns. With the ability for a user to move funds from Ethereum or another L2 to Arbitrum within minutes, this will really help Arbitrum native dapps become more accessible to the masses.

Hop is also the only bridge that has applied for a grant that will give incentives to users looking to access Arbitrum NOVA. The Hop team wants to ensure the entire Arbitrum network succeeds and has been a longtime supporter of NOVA bridging as well.

Finally, with our newly created Dune Dashboard and our previously referenced statistics page from our website, Hop provides two great public resources for future researching purposes. Our hope is that the data can be used by the DAO to determine the effectiveness of bridge subsidies long-term.

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 16. 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?: Yes

Are there any special requests/considerations that should be considered?: No

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]:

Our team will provide bi-weekly updates as noted on the Bridge category of the OBL dashboard. This will include TVL, Bridging Volume and a listing of liquidity providers.

We have created a Dune Dashboard to monitor specific KPIs related to the LTIPP. This includes Daily Transactions, Daily Active Users, Gas Spends by Users, Bridge Volume, AMM Fees, TVL, Bonder Fees, AMM LP Addresses, Unique User counts - all of which can be run for specific date ranges.

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

1 Like

Hello @Bob-Rossi ,

Thank you for your application! Your advisor will be @JoJo.

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.

@cliffton.eth — We have completed our revisions and HOP Protocol’s application can be marked as ‘Final’. I am unable to edit the title.

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

1 Like

Thank you for the help!

Gm everyone

The Trader Joe Council believe that there is limited evidence that suggest incentivizing bridging activity works in retaining users over the long-term (stickiness). Demonstrated in the STIP and STIP backfund, bridges were given incentives but limited - if any - data points suggest this generated value worth supporting again in the LTIP or other incentive program.

From a practical standpoint, most major centralized exchanges (CEXs) now facilitate direct withdrawals to the Arbitrum network, offering users a streamlined entry into the Arbitrum ecosystem. Additionally, users already active within DeFi will see fit to bridge to Arbitrum if incentives are live and being distributed by the DeFi dApps, this action will be taken regardless of incentives being added to a bridge.

The Trader Joe Council have therefore decided to vote against all approved proposals linked to Bridges, for clarity these are Hop, Across and deBridge.

Before we begin, as ITU Blockchain, we would like to thank Hop Protocol for their meticulously prepared proposals. Speaking about the protocol, both the team members and TVL and usage data indicate that it is a proven project. Milestones and the utilization strategy for the grant are clearly stated. While bridge rebates are not typically seen as the best way to evaluate grants, they do support the flow of funds within the network. However, we found the requested grant amount to be excessively high, and we believe it may not have a sufficient impact on the development of the Arbitrum network. As ITU Blockchain, our vote is Abstain

Camelot will vote against bridging proposals in LTIPP.

Following the results seen during the STIP grants, we believe there is insufficient evidence to support further incentivising bridging activity to Arbitrum. Whilst we see value in fast and low-cost bridging options, we believe that there are many options already available and that using incentives will bring little to marginal gain from the existing choices for users.
Bridges are an important piece of infrastructure. However, Arbitrum DAO should focus on creating as much value in the ecosystem itself, which will naturally incentivise users to enter the ecosystem and, therefore, explore bridges organically. A bridge alone doesn’t inherently translate to people wanting to come and generate activity in the ecosystem.

Thank you @EdgeDegen @ITUblockchain @Camelot for the feedback. I acknowledge and appreciate that there were a lot of LTIP’s to vote / comment on.

It seems a common concern among yourselves and other voters is about how effective bridging activity is for Arbitrum growth., In response to that, I will double down on monitoring this as a point of emphasis for my team with our bi-weekly & post-LTIP results reporting. If there are any suggested metrics to track that you feel can show success / stickiness please let me know - here is what we are tracking so far Hop Arbitrum (dune.com).

Ultimately how effective HOP’s specific attempt at this remains to be seen, however I hope we can bring more evidence to the table during this trial period, so outcomes are clearer in future grant rounds.