Firstly, thank you for your proposal and for considering the Arbitrum ecosystem as a platform for growth.
Introduction and Rationale
KyberSwap has proposed to bootstrap and optimize liquidity for popular pairs on Arbitrum, thereby enhancing trading volume and expanding the ecosystem. They are requesting a grant of 2M ARB, which is 4% of the 50M ARB available for such initiatives. As a well-regarded, multi-chain DEX aggregator, KyberSwap already plays a significant role in the DeFi space with low fees and high liquidity. The proposal anticipates increasing KyberSwap’s Arbitrum TVL from $17.7 million to $40 million within three months. We see the proposal as having a substantial positive impact on the Arbitrum ecosystem by increasing liquidity and attracting new partnerships.
Major Concerns
Grant Size and Budget Constraints
The grant requested is substantial at 2M ARB.
This represents 4% of the total 50M ARB available for all projects.
Our recommendation for change: Reconsider the grant size to better align with current budgetary limitations.
Minor Concerns
KyberSwap is not native to Arbitrum, which could raise questions about long-term commitment.
Concerns about “mercenary capital” among LPs who may be attracted by high incentives.
Our recommendation for change: Provide a long-term strategy for sustaining liquidity and partnerships on Arbitrum to mitigate these concerns.
Summary
Castle Capital appreciates the robust proposal from KyberSwap and the benefits it can bring to Arbitrum’s DeFi landscape. We’re in favor of the proposal but recommend a reduced grant size to better align with current budget constraints. The effort to match a portion of the grant with 200K KNC tokens is a positive gesture that adds credibility to your initiative.
Our recommendations can be summarized as:
Reconsider the grant size for budgetary alignment.
Outline a long-term strategy to maintain liquidity and partnerships.
We hope our feedback is constructive and helps refine the proposal for the betterment of the Arbitrum ecosystem as a whole. Thank you again for your thoughtful contribution.
Blockworks Research is inclined to support this proposal on the condition that the requested amount comes down to 1M ARB based on, among other things, the anticipated sustainable impact on, and goodwill to, the ecosystem, metrics such as TVL / volume / fees on Arbitrum and overall, a comparative analysis of all submitted STIP proposals, the distribution of incentives across verticals, as well as, to a certain extent, the recommendations made by the Arbitrum Working Group through the four grant categories.
@BlockworksResearch Thanks for your comment. Instead of reducing by half from 2M to 1M ARB, I’m much more open to reducing to 1.5M ARB and instead seeing if there are any changes you would like us to implement.
I’ve looked through Blockworks counter-proposals on other DEXs STIP drafts, and you have proposed a significantly less ask amount to ours compared to most other DEXs you reviewed even though we are one of the most sustainable DEXs in terms of liquidity.
TraderJoe: 1.83M to 1.51M
Camelot: 3.09M to 2.5M
KyberSwap: 2M to 1M
Ramses: 1.6M
Balancer: 1.6M to 1.25M
Take LP fees for example, the biggest measurement of sustainability of a protocol, since LP fees are organic APR vs farm APR which is incentives: In the past 24h:
KyberSwap on Arbitrum has generated $10.32K in fees for LPs with $17.8M in liquidity
Camelot has generated about $10.5K in fees for LPs with $56M in liquidity.
And in KyberSwap’s case, a significant portion (over 50%) of the LP fees generated were on ARB-paired pools, incentivizing more LPs to hold and supply ARB, which is not the case on Camelot LP fees.
Please consider 1.5M ARB and let us know. Thank you.
I want to address a recurring theme of comments I’m seeing on several proposals, which is that people use Arbitrum-native vs Arbitrum non-native as a measurement of “loyalty” and “commitment”. One of the main goals of the short term incentives program (STIP) is to accelerate ecosystem growth, and prioritizing a protocol because they are native vs non-native is unwelcoming to ecosystem growth.
Non-native: Non-native protocols come to spend time and resources building on Arbitrum to grow the ecosystem. Scalability is not a zero sum game either. A protocol can be on multiple ecosystems and still devote more resources to each chain than a protocol which is only on one chain.
Native: Native protocols are not necessarily going to only stay exclusively on Arbitrum just because they started on Arbitrum. Some examples that come to mind are Trader Joe, Pangolin, Quickswap and Pancakeswap. All of these were considered native protocols to their ecosystems and expanded out to serve more markets.
I would be much more concerned with the sustainability and lifespan of protocols rather than with their origin.
Kyber is not only committed to Arbitrum as one of its most important ecosystems, but committed to the entire space, building since 2017 and contributing many different innovations to all of DeFi.
Hi @Matt_StableLab, thank you for the reminder. We are still addressing some comments, so I will not let you know about the readiness until it’s closer to the deadline.
Hi guys, thanks again for your comments. Based on yours and other comments, I’ve updated the proposal to request 1.5M ARB instead.
I’ve also explained more about our liquidity strategy which is focused on sustainability in the section titled “Approach to sustainable liquidity growth”.
As the ITU Blockchain Delegation Team, we believe that it might be beneficial to reconsider the incentive amount that KyberSwap could receive compared to other incentivized AMMs. However, we still think that using the incentive for sustainable liquidity development will be progressive for the ecosystem, even if a major change is not anticipated. We would like to express our ‘For’ stance and extend our thanks for their contributions.
@Matt_StableLab and Lindsey from Hedgey informed us that STIP ARB would be distributed in the form of ERC-721, which turned out to be incompatible with the multisig we initially intended to receive the STIP grant.
Therefore, we have created a Gnosis Safe multisig: 0x5785DB8178619EAAa9429ea5e7651Fef526eEbf2 on Arbitrum to receive the STIP grant.
STIP grant recipients were recently given a distribution schedule as follows:
The disbursements will be claimable today (Nov 10th), Nov 17th, Dec 1st, Dec 15th, Dec 29th, Jan 12th, and Jan 26th
KyberSwap’s 1.5M allocation unlock schedule is as follows.
Nov 10th: 214,285
Nov 17th: 214,285
Dec 1st: 214,285
Dec 15th: 214,285
Dec 29th: 214,285
Jan 12th: 214,285
Jan 26th: 214,285
We have recently claimed the first two at a total of 428,570 ARB, and have started an initial set of farms:
Due to the restrictions regarding unlocking schedule via 7 disbursements, we are adapting our initially proposed 3 x 1-month phases as closely as possible, and will announce the full schedule soon.
Hi sasha Mai. Thanks for the update.
Would love to let you notice that there is a section for weekly STIP updates here: Biweekly Updates (STIP) - Arbitrum.
