UPDATE (23 OCTOBER 2023)
In order to separate the DAO’s Treasury from the Arbitrum STIP distribution, the following address arb1:0xfA62A3A0722a0aF7739c23a361E2285F5B75ecE7 will be used to receive and distribute the ARB incentives, set as a 3/4 multisig.
The Lodestar team’s KYC process is ongoing and we look forward to seeing this grant program unfold.
SECTION 1: APPLICANT INFORMATION
Applicant Name: Lodestar Finance DAO (“the DAO”)
Project Name: Lodestar Finance (“the Protocol”)
Project Description: A native Arbitrum-centric money market
Team Members and Qualifications: Appo (Smart-contracts), Quanta (Operations), Coopes (Back-end), Waffle (Growth)
Project Links: lodestarfinance | Link3.to
Contact Information
TG: @waffleapeven
Twitter: https://twitter.com/WaffleApe
Email: dev@lodestarfinance.io (cc: waffle@lodestarfinance.io)
Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?: Yes
SECTION 2: GRANT INFORMATION
Requested Grant Size: We are requesting 750,000 $ARB tokens from the Short-Term Incentive Program.
Grant Matching: These incentives will be overlaid on our regular incentive schedule, 300 000 LODE tokens being emitted to the markets every month (200,000 starting december).
Please refer to LODE - Docs for additional information.
Grant Breakdown:
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95% of the grant (712 500 ARB) will be distributed among all market participants (the term “market participants” refers to depositors and borrowers in the Lodestar markets and does not include LODE liquidity providers or stakers). Each market participant is entitled to proportional ARB rewards based on the ETH value of their deposits and borrows relative to the ETH value of all deposits and borrows. See “Execution Strategy” in Section 3 for additional information.
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5% of the grant (37 500 ARB) will be distributed among all emission gauge participants, proportionally to their voting participation.
In the interest of the protocol’s security, we will distribute ARB incentives weekly as an airdrop as the protocol does not have an innate ability to emit tokens other than LODE.
We are dedicating 100% of this grant to incentives as we have also applied to an Arbitrum Foundation grant to support our operational and security expenses.
UPDATED FUNDING ADDRESS: arb1:0xfA62A3A0722a0aF7739c23a361E2285F5B75ecE7 (separate address from the DAO Treasury)
Previous Funding Address: 0xed093F9720B2507C9B54FC117ecB2618910734dd (CANCELED)
Contract Address: N/A
SECTION 3: GRANT OBJECTIVES AND EXECUTION
Objectives: We aim to use the funds from the grant to incentivize depositing and borrowing activity in the Lodestar Markets and the participation to our emission gauge to shape the protocol.
By providing depositors with more attractive yields and borrowers with cheaper borrow interest rates, we expect these incentives to improve the general available liquidity in the lending markets. This will allow users to deploy their assets more efficiently, but also support Protocols that are facilitating leveraged yield-bearing strategies such as looping with wstETH or plvGLP in an even more effective way.
Key Performance Indicators (KPIs):
We believe that the main KPIs to measure the success of the grant are:
Total Value Locked (“TVL”):
- Growth in the total deposits on the Protocol
- Growth in the total deposits of yield-bearing assets
User Count:
- Total number of weekly users
- Total amount of staked $LODE and vote participation
We also believe that there is value in tracking the utilization rate of Lodestar Finance. Growth in the utilization rate would imply competitive interest rates, trust in the Protocol and desirable assets.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:
By offering an alternative destination for tokenholders to deploy their native application tokens, we will be able to support applications in:
- Allowing native yield-bearing assets to be even more competitive with assets in other ecosystems by virtue of the leveraged looping of these assets;
- Retaining a larger user base and tokenholder population; and
- Reducing supply-side pressure on their token which supports their Protocol’s growth and adoption.
We also believe that these incentives will introduce users to our unique emission gauge system that empowers users and DAOs to shape the money market.
By lending or borrowing on Lodestar, users receive LODE tokens that they can stake to earn ETH from the protocol’s revenues.
Additionally, every week, those who lock their LODE can vote and direct the next week’s emissions to the market of their choice, on either the borrow or supply side. Since its launch 4 weeks ago, we have witnessed LODE lockers shaping the protocol, enhancing their yield strategies by incentivising either the borrow side to lower the cost of their leveraged strategies or increasing the interest gained on the supply side to increase the yield they are generating.
With the increased liquidity from these incentives and the composability of our markets, we look forward to seeing other developers build on top of the Lodestar markets and participate in the above mechanics to shape the liquidity to their needs.
Justification for the size of the grant:
As per the Forum post, the Arbitrum Working Group has created four grant categories with advisory caps implemented on them. Lodestar Finance currently falls into the Siren Grants category having launched in Apr-2023 (5 months ago) with c.$14m in deposits. We believe we lie at the higher end of this category by virtue of almost being on the threshold for the next categorisation, the Lighthouse Grant. Moreover, we have also spent long periods of time above the TVL threshold to fall into the next category.
We also note that we have reached this scale without having been a recipient of the ArbitrumDAO airdrop demonstrating our ability to compete with other protocols for liquidity.
Execution Strategy:
Lodestar plans to distribute the granted funds through the following process:
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Market and gauge participants will be compensated directly with $ARB tokens for their participation in the protocol.
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Eligible rewards are proposed to be calculated in the following manner:
- The amount of $ARB tokens distributed weekly will be the total amount of $ARB granted divided by the number of weeks until the incentive program stops in January 2024.
- Two snapshots will be taken each week, one during the first half and one during the second half. The timings of the snapshots will not be publicly disclosed to prevent users from gaming the rewards system.
- For each protocol user, weekly $ARB distribution is calculated by taking the sum of their total supply and borrow balances (in $ETH) and dividing by the Protocol’s total supply and borrowed balances (in $ETH).
- The user’s final weekly eligible rewards will be the average of eligible rewards between snapshots.
- A third snapshot will be taken at the end of the epoch to calculate the users’ voting power and participation
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The user’s calculated eligible rewards will be airdropped directly to their wallet.
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The Lodestar team will monitor the distributions each week and create ways to report useful metrics to the public.
Grant Timeline:
We plan to deploy the incentives over a period of 16 epochs until the end of the campaign in January 2024 (4 months):
Week 1 - October 22nd: 46,875 $ARB airdrop
Week 2 - October 29th: 46,875 $ARB airdrop
Week 3 - November 5th: 46,875 $ARB airdrop
Week 4 - November 12th: 46,875 $ARB airdrop
Week 5 - November 19th: 46,875 $ARB airdrop
Week 6 - November 26th: 46,875 $ARB airdrop
Week 7 - December 3rd: 46,875 $ARB airdrop
Week 8 - December 10th: 46,875 $ARB airdrop
Week 9 - December 17th: 46,875 $ARB airdrop
Week 10 - December 25th: 46,875 $ARB airdrop
Week 11 - December 31st: 46,875 $ARB airdrop
Week 12 - january 7th: 46,875 $ARB airdrop
Week 13 - January 14th: 46,875 $ARB airdrop
Week 14 - January 21st: 46,875 $ARB airdrop
Week 15 - January 28th: 46,875 $ARB airdrop
Week 16 - February 4th: 46,875 $ARB airdrop
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 4: 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?: Lodestar Finance is native to Arbitrum and has not expressed any interest in deploying on any other blockchain.
On what other networks is the protocol deployed?: n/a - Lodestar Finance does not have any deployments on any other blockchains
What date did you deploy on Arbitrum?: Lodestar Finance launched on Arbitrum in April 2023.
Protocol Performance:
Lodestar Finance is a money market deployed natively on Arbitrum. The money market aims to provide first-class infrastructure to native Arbitrum assets such as MAGIC and GMX, as well as blue-chip assets in the Ethereum ecosystem. It has also found a niche by facilitating money markets for yield-bearing assets including those native to Arbitrum such as plvGLP and wstETH.
It is governed by the Lodestar DAO and is 100% community owned and funded. With c.$14m in deposits today, Lodestar Finance is still the largest native money market on Arbitrum. At its peak, Lodestar Finance had over $50m in deposits, showcasing the desire for our product within the ecosystem.
Furthermore, the $LODE token has demonstrated positive value accrual with the Protocol earning c.$90k fees since launch. After the launch of the staking module, the Protocol commenced distribution of a portion of market revenue, with approximately 40% of the circulating supply staked, earning an average 35% APR paid in ETH.
The Lodestar Protocol also became one of the first money markets to implement an emissions gauge to direct incentives to deposit and borrow pools, enabling user-driven dynamic market emissions. To date, the emissions gauge is currently in its fifth weekly epoch.
It is also worth noting that the Lodestar DAO was not a recipient of the ArbitrumDAO airdrop as the protocol was offline from December 2022 to April 2023. This meant that the Protocol was competing with other incentivised protocols for liquidity and still maintained positive growth in less than favorable market conditions.
Dune Analytics Dashboard: https://dune.com/shogun/lodestar-finance
Defillama Dashboard: https://defillama.com/protocol/lodestar-finance
Protocol Roadmap:
The introduction of the weekly gauge system to our staking module empowers stakers in shaping the money market. We envision protocols, DAOs and users building vaults and individual strategies on top of Lodestar Finance, stockpiling their $LODE emissions earned to give them more control over the destination of future emissions.
Staking $LODE tokens presents a two-fold advantage for third parties using the protocol. First, they have the potential to earn a real yield from the application’s revenue, denominated in WETH. Second, and equally significant, is their ability to direct emissions. This mechanism has been envisioned to produce a reinforcing cycle: as stakers reap the benefits of yields and have a say in emission directions, it logically follows that they could accumulate a larger quantity of $LODE tokens.
Currently, discussions are underway with several protocols that are leveraging the Lodestar markets and infrastructure to build new and interesting products such as automated strategies or utilizing our yield-bearing assets in novel ways. These protocols can also take part in the emissions voting system to enhance the yields for their own products.
Additionally, development efforts at Lodestar have been focused on building a module and interface for a protocol bribing system. This system aims to provide benefits for all participants in the Lodestar staking and emissions voting systems. LODE stakers will be able to earn a yield on their available voting power and bribers can channel increased amounts of emissions voting power to their preferred strategies.
Audit History :
Lodestar V0 was audited by SourceHat (formerly known Solidity.Finance) and crowd audited in partnership with Hats Finance before our launch in April:
The Lodestar V1 Protocol has been audited in its entirety by Halborn:
SECTION 5: Data and Reporting
Provide details on how your team is equipped to provide data and reporting on grant distribution.
Is your team prepared to create Dune Dashboards for your incentive program?:
We are able to keep track of the data and results of this grant with our Dune Dashboard, we can create a reporting interface in our front end, and store the relevant information in our database and access it via our API.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?
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
Great work