Proposal answers 20.02.2025
Thank you everyone for your comments and engagement so far. Moving forward, we will be answering questions twice weekly—on Tuesdays and Fridays. This schedule will allow discussions to develop naturally and help streamline the feedback process as we refine the proposal based on your feedback.
Several questions have been raised, so I will address them collectively below instead of responding to each comment individually:
Safety of funds
The security of funds is the highest priority of the MAGA campaign. There will be 2 types of funds involved in this program:
- Funds provided by users to participating protocols
- ARB tokens that are distributed to the users as incentives
Security of user funds
Our DeFi protocol participation guidelines clearly specify which protocols can participate. To be eligible, protocols must meet several criteria: pass at least one security audit by a reputable firm (as detailed in the proposal’s change log), maintain a minimum TVL of $5M, and be integrated with DeFi Llama. Additionally, protocols must sign an agreement with the MAGA campaign pledging not to engage in—directly or indirectly—sybil farming, metric spoofing (TVL, user counts, etc.), or any other activities that abuse or contradict the program’s purposes.
Additionally, Merkl is a non-custodial solution. This means that user funds are never touched by Merkl contracts, ensuring that earning rewards does not expose users to additional smart contract risks.
Security of ARB tokens
The ARB tokens will touch 3 different contracts:
- The program multi-sig
- This multi-sig will be controlled by Jumper, Merkl, and the MAGA success committee
- Merkl Distribution creator: https://arbiscan.io/address/0x8BB4C975Ff3c250e0ceEA271728547f3802B36Fd
- contract used to create the campaigns. The ARB never sits on this contract, it just flows through it when the campaign is created
- Merkl Distributor: https://arbiscan.io/address/0x3Ef3D8bA38EBe18DB133cEc108f4D14CE00Dd9Ae
- Contract where the tokens sit until they are claimed by users. Merkl regularly uploads a merkle root to update rewards and generates the proofs so that users can claim. The only way to steal the tokens is to compromise the root. A dispute system prevents malicious roots from being live, more information here: Technical Overview | Merkl Docs
- As users will regularly claim the tokens from this distributor, our two-week iteration cycle ensures that only the current epoch’s budget is ever at risk.
All Merkl contracts have been audited here: Code4rena | Keeping high severity bugs out of production
The main risk for the funds is to have the multi-sig compromised, Radiant taught us this the hard way.
To prevent this, we can setup an onchain gauge system (documented here: Deploy your campaign from a DAO | Merkl Docs)
In this setup:
- The ARB tokens will sit on a very simple immutable contract that can only be called by a multi-sig controlled by Arbitrum DAO to give an allowance to the gauge contract
- An immutable gauge contract that can only be called by the program multi-sig to:
- pre-configure campaigns
- notify rewards (in turn, this triggers campaign creation)
- The gauge contract will only be able to transfer ARB tokens to the Merkl distributor
- To create campaigns, the program multi-sig will call notifyRewards with the correct dates and amounts.
In this setup, even if the multi-sig is compromised it can only trigger transfers to Merkl contracts (where funds can be recovered) and only send up to the approval given by the Arbitrum DAO. This greatly reduces the impact of a multi-sig attack.
Incident response
Incident response procedures are now outlined in the proposal (see change log). If an incident occurs with any participating protocol in the MAGA campaign, Jumper and Merkl will first pause all reward flows to that protocol and work with that team to assess the situation.
Based on this assessment, the protocol may be removed from the program—either permanently or temporarily until the incident is resolved. The MAGA success committee must approve all investigation findings and participation decisions. While we cannot recover incentives that have already been distributed due to the immutable nature of the Merkl distribution contracts, we can act quickly to freeze rewards that have not yet been pushed onchain. This has been done recently on Mode following the Ionic incident. All Ionic campaign rewards were frozen less than 2 hours after the hack and no rewards were pushed to the hacker. The unused funds were later recovered by Mode to be re-used on other protocols.
MAGA success committee structure
The MAGA success committee structure will remain as outlined in the original proposal, with delegates from Offchain Labs, Blockworks, Gauntlet, Arbitrum Foundation, and Entropy advisers internally nominating suitable representatives to oversee the MAGA campaign. Each organisation will provide an overview of their nominated person and their qualifications to oversee a campaign of this magnitude and complexity. Following the internal nomination of committee members, the Arbitrum DAO will have the ability to veto the committee’s composition and call for an election of new members.
Given the extensive responsibilities outlined in the MAGA success committee section of the proposal, nominated individuals must have relevant expertise to review data, evaluate protocols for inclusion or removal, and handle other complex tasks essential to the campaign’s management. For this reason, Jumper and Merkl believe that the nominated entities are best suited to nominate qualified persons to fulfill the roles required on the MAGA success committee.
Loyalty system
“While the loyalty system concept is promising, we need concrete mechanics rather than vague assurances about maintaining liquidity.”
To reward user loyalty we will distribute boosted rewards to loyal MAGA campaign users. Starting 1-3 months after program launch (as approved by the MAGA success committee), wallets can earn boosted rewards compared to others based on the below criteria:
Maintaining Arbitrum balance over the campaign
- Each wallet’s deposited amount will be tracked weekly, with boosted rewards given to addresses that maintain at least 50% of their maximum deposit and have a current total deposit of more than $10,000 in the program.
- The deposit balance would be extracted from Merkl API and would cover all the list of incentivised pools historically.
For example:
- An Arbitrum wallet with a current balance of $10,000 in incentivised pools and a historical max balance of $18,000 deposited in incentivised pools on Arbitrum would receive an ARB boost on their deposits.
- An Arbitrum wallet with a current balance of $10,000 in incentivised pools and a historical max balance of $30,000 deposited in incentivised pools on Arbitrum would not receive an ARB boost on their deposits.
Continuous program participation for more than 1 month
- Boosted rewards will be given to MAGA campaign participants who have deposited their liquidity for 4 consecutive weeks without removing liquidity
Continuous program participation for more than 3 months
- Boosted rewards will be given to MAGA campaign participants who have deposited their liquidity for 12 consecutive weeks without removing liquidity
Like the liquidity incentives, the loyalty system will evolve throughout the MAGA campaign seasons since we cannot determine the most effective strategy before launch. We will communicate all details of the MAGA loyalty program through campaign marketing channels before implementation, and provide updates to the DAO in the campaign reports at the end of each season.
Gameable metrics
“What prevents the user to bridge the funds out from Arbitrum and then bridge it back using your program? Is there any interest to prevent this type of situation?”
Bridging funds to and from Arbitrum will not be an incentivised action. The 2-step bridge and deposit flow is especially powerful here, as it uses time-weighted linear distribution contracts to reward liquidity in an incentivised pool and can filter depositors based on their bridging actions. This means that even if an address bridges funds out of Arbitrum and back in again, they won’t earn any incentives until they deposit into an incentivised pool. Additionally, Merkl contracts allow for blacklisting certain wallets—if we notice blatant extractive behaviour throughout the program, Jumper and Merkl will seek the MAGA success committee’s approval to blacklist those addresses. Blacklisting of wallets is not foolproof but is an option at our disposal in extreme cases.
The main approach of defending against users trying to game the campaign is via rewarding loyalty first and foremost. By rewarding loyalty as outlined above, Arbitrum users who are the most aligned with the goals of the campaign will receive additional yield boosts and perks throughout the program. This will drive alignment, value add behaviour and make TVL sticky to Arbitrum and the MAGA program.
“Will the users that are already LPing on those pools not be rewarded?”
Campaigns will be structured in a way where a each pool will be incentivised in two ways.
- A base level of ARB incentives will be distributed to all LPs within the incentivized pool, regardless of whether they bridged their liquidity during the campaign period or before it started. This ensures current LPs are rewarded without forcing them to unwind positions, bridge off Arbitrum and back, then re-deposit to earn incentives.
- An additional incentive allocation will go to depositors who fulfill the 2-step bridge and deposit criteria. For existing LPs to earn this additional yield boost, they must bridge new TVL into Arbitrum and deposit it into the pool. New LPs who bridge liquidity into Arbitrum and deposit into the pool will receive both the base incentives and the bridge + deposit incentives. Jumper and Merkl will calculate the ratio between base incentives and 2-step bridge + deposit incentives each bi-weekly epoch, with the MAGA success committee approving these during campaign creation.
Dedicated Multi-sig
The MAGA campaign will follow the MSS service outlined here: [RFC] Arbitrum Multi-sig Support Service (MSS)
This has been updated in the proposal (see change log).
Fee structure and KPI bonuses
The MAGA campaign fee structure consists of three components:
- A fixed fee of $400,000 to paid upon completion of season 1
- This fixed fee will be split between Jumper and Merkl and covers all aspects outlined in the responsibilities and pricing section of the proposal. However, this fee does not cover the entire campaign costs for both parties, as the remaining labor costs depend on successful completion of the campaign KPIs. This structure ensures minimal financial risk for the Arbitrum DAO while maximizing Jumper and Merkl’s stake in the campaign’s success.
- Resources covered under this fee: Lead Developer, Front-End Developer, UX Designer, Data Engineer, Project Manager, Marketing Lead, Customer Success, Backend Engineer, Integration Engineer
- Merkl’s 1.15% fee that is taken from all incentives paid through the Merkl smart contracts
- This fee accounts for all the offchain infrastructure needed to monitor user activity on Arbitrum and the maintenance associated. The 1.15% fee represents a 62% discount on Merkl’s normal 3% fee.
- This fee can be paid in monthly instalments by the Arbitrum DAO or taken directly by the Merkl contracts on campaign creation (taken from the Incentive amount)
- KPI bonuses as outlined in the proposal
Maximum cost for the MAGA campaign assuming all 3 seasons
| Title | Type | Overall Budget | Per Season Budget |
|---|---|---|---|
| Incentive amount | Expense | 60,000,000 ARB | 20,000,000 ARB |
| Marketing budget | Expense | $350,000 | $116,666 |
| MAGA success committee fee | Fee | 144,000 ARB | 48,000 ARB |
| Fixed fee | Fee | $400,000 | N/A |
| Merkl 1.15% fee | Fee | 690,000 ARB | 230,000 ARB |
| KPI bonuses | Fee | 1,140,000 ARB | 380,000 ARB |
Please note: The figures above represent the maximum possible cost for the MAGA campaign, assuming all KPIs are met, all incentives are distributed through Merkl smart contracts, and all budgets are fully utilised.
DeFi protocol participation
An initial list of DeFi protocols has been provided as a recommendation to the DAO for the first batch of MAGA campaign participants. While this list is not exhaustive, clear guidelines for participation are available in the proposal. Protocols can apply for inclusion throughout the program’s duration. Jumper and Merkl will review new applications on a rolling basis and may recommend applicants to the MAGA success committee at the end of each month. The committee will have final authority to approve or reject these applications.
Due to the KPI-driven nature of the program, it is crucial that protocols remain in the program primarily based on their performance rather than diversity of tech stack. Underperforming protocols may have their incentive budgets reduced or be removed entirely. All decisions regarding protocol incentive allocations will be purely data-driven, with the program’s overarching goals serving as the north star.
Change log of proposal updates 21/02/2025
- TLDR of campaign oversight
- Safety of funds section added to the proposal
- Multi-sig requirements changed to follow the MSS service structure
- Addition to the DeFi protocol guidelines
- Incident response section added
- Fix typos