Kwenta x Perennial: Arbitrum Onboarding Incentives (UPDATED)

April 11 (Thursday) at 8pm UTC (4pm EST)

Arbitrum, Kwenta, and Perennial will be teaming up to do a twitter spaces.

Set a reminder here: https://twitter.com/i/spaces/1OyJAWdOObMKb/peek

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I would love to answer this question, though keep in mind the broader alignment of Kwenta may be a bit beyond the scope of this proposal. I’m still happy to provide some context so the Arbitrum community can understand our roadmap, and how Arbitrum fits.

First, I believe that simply bringing existing OP users is a bit of an understatement of our value. Kwenta’s multichain expansion has already begun, and we’ll be continuing to onboard users from Base through our Synthetix partnership. During this process, we’re well incentivized to surface our Perennial integration and future Arbitrum products to any newly onboarded users, as well as lobby other partners to launch products on Arbitrum and migrate trading activity there. Here are a few reasons why these incentives are so strong:

  1. Our partnership with Perennial is more favorable for the KwentaDAO than any other partnership, and the Perennial team has demonstrated themselves to be incredibly capable, and uniquely committed to working with us to deliver a product which meets the needs of our traders. The economic incentive to direct volume to Perennial is 75% higher for Kwenta, which is a significant reason to feature Arbitrum prominently in our communications and our own native token incentives. While I don’t wish to represent our incentive cynically here, I believe a purely objective answer to be the strongest reason. Spinning up, scaling, and maintaining a new perps product is an expensive, laborious task, and the best possible outcome for Kwenta is to see sustainable returns from these efforts from a sticky user base. There is no way to achieve a sticky user base for a sustainable product simply by acting as mercenaries jumping from chain to chain, so we necessarily need to make a serious effort to attract loyal users and respond to their needs by working with Perennial to improve the product.

  2. Beyond our Perennial integration, Kwenta’s immediate goal is to set the industry standard for perps aggregation. We believe Perennial is an incredible partner for our first Arbitrum integration and is likely to produce a highly competitive product, but a successful aggregation product requires that we deploy on a chain with a sufficiently rich perps ecosystem. While there have been other attempts at perps aggregation, we see a huge unmet need in the market for a platform which can provide a user friendly perps aggregation tool, including tools for arbitrage and other advanced cross-platform strategies. This current product focus should demonstrate why Arbitrum is clearly the best place for us. While Kwenta has worked closely with Optimism on past product launches, our previous decisions were based on our committment to support Synthetix as our only partner. Kwenta’s first foray in to forging an independent partnership is centered squarely on the Arbitrum ecosystem as our first choice for this product.

  3. Likewise, our Quanto Perps product is most likely to be successful when surfaced to users alongside existing popular perps markets, and ideally as part of our arbitrage product. While Arbitrum is not yet explicitly named in our development proposal for this product, a strong showing of support from the Arbitrum community would create an excellent case for us to push this product to Arbitrum. Once this initial deployment is finalized, Kwenta would need to move ahead with establishing a pool of sticky liquidity to back the product and further cement our committment to ongoing support and contribution to the Arbitrum ecosystem.

I believe these 3 points not only give insight in to our own thought process and why we’re huge fans of the Arbitrum ecosystem, but also why the decision to develop our most ambitious products on Arbitrum is a logical decision, and highly unlikely to change based on any shortsighted opportunities to become protocol level airdrop farmers or mercenaries. Our ability to make this commitment only improves if the Arbitrum ecosystem continues to support a healthy DeFi ecosystem, and extends this support to Kwenta.

Hopefully my answer can provide some detailed context for how Arbitrum and Kwenta might move forward together. While I’m advocating for an expansion to Arbitrum in any case, I believe support from the DAO would allow is to prioritize this work and maximize the impact of our launch in terms of user awareness and attention.

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Update: There will be a big update to this proposal (full LTIPP format + additional info requested by delegates) out very soon.

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Jumping in to say that, although I see a lot of value in frameworks and working groups, I’m supportive of proposals like this one that don’t fit into existing frameworks for some reason having the opportunity to propose directly to the DAO. Looking forward to seeing the updated proposal.

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Proposal was updated last week.

high level updates:

  • Full LITPP format
  • Ask of 1.9M ARB, down from 4.5M
  • Detailed onboarding incentives methodology & model: quest-style incentives, one targeting a broad base of users, one specifically scaling CAC to target the highest value users
  • Matt from Stable Lab & LTIPP multisig confirmed to handle accountability, in line with STIP.b requirements

Perennial & Kwenta will be hosting office hours to answer any delegate questions on Wednesday at 11am EST - Noon EST (and would be happy to schedule one-off calls with delegates).

Check this link please, it doesn’t work.

And I don’t have balance:

  1. Onboarding - 110k
  2. Weekly - 652k
  3. Fee - 816k
  4. LP - 812k
    Sum = 2 390k, not 1.900

We are in favor of the proposal and think as a whole this proposal stacks up very well and deserves an allocation. Many of our opinions on this end are already represented.

Our main and only true concerns is how should the DAO move forward with these one off LTIPP related proposals and project submissions that fall outside the normal time window. We can see something in the future that just makes it too hard and unscalable for this process to continue and should be segmented only into review by LTIPP reviewers or whatever project/program that was implemented.

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These comments and thoughts reflect my personal assessment, and do not necessarily represent the opinions of any protocol or entity that I might be part of, partner with or contribute in any form. Remember, I’m just a cow.

I am voting For on this proposal.

I am intrigued by the shared mechanism of two protocols, and I personally love incentive mechanism aimed to acquire/retain users in other chains. The quest for kwenta users in other chains is good (and i suggest the team to put a cutoff to wallets right before this mechanism was published). For the fee rebate, would suggest, if it was not done yet, to align to other perp protocol to have a 75% rebate and not an 80%. Seems like there is a general consensus on this number for this asset class; the leftover 5% of the 36% (so, 1.8% of the total or 34200 arb) can likely be allocated to quests or LP, or potentially be used as wildcard for other initiatives still allocated to users.
There is overall a net benefit for Kwenta to be here, and the fact that the proposal is outside the framework of stip, ltipp and others should not stop us from moving forward good initiatives, in the same way it happened with curve a couple of weeks ago.

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After thoroughly reviewing the proposal and the thoughtful discussion from delegates, I believe there are compelling arguments on both sides.

On one hand, onboarding a major player like Kwenta from Optimism to the Arbitrum ecosystem could bring significant net new users and volume. Kwenta has a proven track record and loyal user base that could benefit Arbitrum’s DeFi activity if successfully migrated over. The proposed incentive mechanisms seem well-designed to drive usage and retention.

Partnering with Perennial, an Arbitrum-native protocol, is also a positive sign of ecosystem alignment. Perennial’s capital efficiency and novel market offerings could create a strong foundation for Kwenta’s expansion on Arbitrum. The two teams appear to have a genuine integration plan beyond just incentives.

However, valid concerns have been raised around Kwenta’s long-time Optimism loyalty and whether this proposal truly demonstrates sufficient commitment to Arbitrum for the long haul. There is a risk of “incentive mercenary” behavior where Kwenta funnels the ARB incentives then shifts focus back to Optimism/Base once the rewards dry up.

While Kwenta has taken initial steps like exploring KWENTA token deployment on Arbitrum, delegates are right to want to see more evidence of “skin in the game” before committing such a large grant. The Synthetix factor also muddies the waters in terms of where Kwenta’s priorities will ultimately lie.

Kwenta’s argument that Arbitrum is the ideal home for their aggregation plans is compelling. But actions need to back up those words. A phased approach where Kwenta first proves out the integration and volume, then receives progressive incentives, may be more appropriate than a huge upfront grant.

In summary, while I’m excited by the potential user acquisition opportunity here, the concerns over long-term alignment are valid. Therefore, on behalf of the Arbitrum community members who delegated voting power to me, I lean towards voting AGAINST this proposal in its current form.

I would be open to reconsidering a modified proposal with stronger commitments from Kwenta, a more modest initial grant size, and clear milestones for earning additional incentives based on proven results. But at this stage, 1.9M ARB feels premature given the open questions around Kwenta’s ultimate loyalty to the Arbitrum ecosystem.

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Firstly, thank you for the proposal. Quest-based rewards and weekly incentives are effective methods for increasing user engagement. The proposed measures against Sybil attacks seem appropriate. For these reasons, as ITU Blockchain, we will vote in favor of this proposal.

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