Long Term Incentives Pilot Program

Abstract

This AIP establishes a Long-term Term Incentives Pilot Program for the DAO to test new incentive designs and answer the necessary questions to ensure we are ready to commit to the long-term program. This Pilot Program will distribute a maximum of 45M ARB to protocols building on Arbitrum that were not funded during STIP or the Backfund. The program will distribute ARB to protocols for 12 weeks.

Motivation

Testing Incentives Mechanisms For a Long-Term Framework

The Arbitrum DAO has spent the last few months experimenting with incentive programs to attract new users and liquidity to Arbitrum. There is a consensus the DAO will use what we learn from these short-term programs to establish a long-term framework. While STIP V1 brought tons of attention to Arbitrum and has resulted in upticks in protocol metrics, we have learned there were many flaws with the structure of STIP Round 1. This Pilot Program looks to implement new mechanisms to address the issues seen during STIP. The DAO will use this Pilot Program as a test run for a long-term framework before committing to a year-long program.

The Pilot Program will operate using a Council, have Advisors to ensure protocols receive adequate feedback and assistance, and allow protocols more freedom to create innovative ARB incentive plans. We believe these changes will help remedy many of the pain points seen in Round 1. Running the Pilot Program to test these new features will allow the DAO to compare different program methods before implementing a long-term framework beginning in Q2 2024. This will help ensure we have all the knowledge necessary to implement the most effective long-term incentives program for Arbitrum.

Why Protocols Need a Round 2

STIP was an experimental program to distribute ARB to protocols to use as incentives for their users. While it was initially intended to have two rounds, the program was substantially more popular than expected, and the entire 50M ARB budget was used in Round 1 and an additional 21.4M ARB was passed through STIP Backfund for teams that were “approved but not funded”.

This meant no funds remained for Round 2, leading to its cancellation. Many protocols either missed the Round 1 deadline, intentionally waited for Round 2 or simply did not know about STIP. This left several protocols with no alternative route to apply for ARB incentives.

Many STIP Round 1 grantees have seen upticks in their metrics. This Pilot Program would allow protocols that missed out on Round 1 the opportunity to apply to gain these benefits, which will help level the playing field for these protocols. The Pilot Program will replace a round 2 and will be funded with 45M ARB to accommodate the large expected protocol demand we have already seen. This will complete the incentivizing of Arbitrum-based teams to create a holistic competitive edge not against each other but against other chains.

Rationale

There is a DAO consensus that Arbitrum will need a long-term incentive program in 2024. However, many delegates feel the DAO is moving too quickly and spending too much money on backfund or V2 proposals without yet receiving any of the data on STIP’s effectiveness.

We have learned a lot from STIP and can use what went wrong in STIP and the Backfund to hypothesize what changes would create a better long-term framework. However, we have little evidence to prove these new ideas would be a better solution. DAO members currently don’t have the resources or funds to create a long-term program, nor do we understand what a good long-term program looks like.

This proposal focuses on obtaining this evidence using a committed working stream to guarantee we come away from this program ready to make informed decisions on a long-term framework. The pilot program also allows the DAO to test new aspects of an incentive program such as Advisors, Councils, and more flexible incentive distributions before committing long-term.

This will help save the DAO money and time in the long term by preventing the need for more short-term programs before we are ready to commit to the Long-Term Framework.

Specifications

Problem / Solutions:

The specifications of the Pilot Program were designed to remedy the 3 largest complaints regarding STIP. The Pilot Program hopes to be a test run for these additions for the DAO to determine if they should also be included in the long-term framework.

Problem #1: Too large a burden placed on delegates

In the original STIP, delegates voted on each incentive proposal individually, with almost 100 snapshot votes. This was extremely tiring for delegates and left many feeling they could not make informed decisions on every proposal.

Solution #1: Elected council

To remedy this problem, the Pilot Program will have a 5 person council elected by the DAO responsible for evaluating applications and selecting which protocols will advance to a snapshot vote to receive ARB. This will ensure all applications are thoughtfully evaluated with only the most deserving receiving incentives. Not only will this help to reduce the burden on delegates, but it will also help expedite the process and allow protocols to receive incentives quickly and efficiently.

Problem #2: Protocols did not receive adequate feedback on their proposals

A major gripe from protocols was they struggled to get feedback from delegates before the deadline. This left many feeling as though the better-connected protocols had an advantage as they were able to modify their proposals based on feedback to make them more competitive during the vote. Many protocols were willing to make changes to their applications to make them more appealing to the DAO but never received the proper feedback necessary to do so.

Solution #2: Advisors

The Pilot Program introduces Advisors to assist protocols throughout the pilot program. This will be impartial organizations tasked with providing each applicant with detailed feedback and guidance on how to improve their applications and eventually their incentive programs. This ensures each applicant can iterate on their proposal so they can put forward the best possible incentive plan for the council.

Problem #3: Strict Limitations on Incentives Mechanisms

STIP Round 1 had strict limitations on how the ARB could be used as incentives. This was done to protect the DAO and prevent misuse of funds. However, the strict rules resulted in the stifling of many innovative incentive designs. Many protocols had interesting designs that used the ARB in ways that increased alignment, improved cost efficiency, or helped to limit the dumping of ARB. However, these designs were not permitted in Round 1 leading to almost all protocols resulting in generic liquidity incentive models.

Solution #3

The Pilot Program provides more flexibility to protocols to create innovative incentive structures. With the addition of the Council and Advisors, the Pilot Program does not require the rules to be as stringent. Malicious or inefficient designs will be first filtered out by the Advisors and then rejected by the council. Allowing protocols to innovate on incentive distribution mechanisms will allow Arbitrum protocols and community members to get a better idea of which designs work and which don’t work. This will help everyone as we prepare for a longer-term incentives program.

Flow of Pilot Program

Application Period (2 week)

Protocols will have 2 weeks to apply using the Pilot Program application template. The application template will be created by the Council and the Advisors to ensure everyone has the same goals and make it easier for the council to process applications. Applications will be posted in the Pilot Program section of the Arbitrum forum. Protocols only need to post the initial draft of their application during this period. They will then have 2 additional weeks during the feedback period to edit their applications. No late submissions will be accepted.

Feedback Period (2 weeks)

During the feedback period, the Applications Advisors will provide feedback and guidance on all proposals. Protocols will be assigned an Application Advisor who will provide feedback and guidance on applications on a rolling basis. Protocols will then use this time to work with the Advisors to edit their proposals before applications lock at the end of the 2 weeks.

Protocols can continuously adjust their requested ARB amounts until the feedback period is finished. No changes can be to the requested ARB amount during the screening period.

StableLab will also read all submissions during this period and highlight any rule violations to allow applicants to edit their submissions to ensure they comply with all program rules.

Screening Period (1 week)

During this period, the council will use the pre-determined rubric to grade each protocol and decide which protocols will advance to the voting period to receive ARB. The Council will use the rubric to select which applications will progress to a snapshot vote. The protocols that the council selects to advance to a snapshot vote must have a total funding amount that is equal to or lower than the incentives budget. This will ensure the DAO does not overspend should all Snapshot votes pass. Any unused funds will be returned to the DAO.

The rubric will be created by the Council and Advisors during the Tally voting period and will be publicly available by the time protocols begin to apply. The council will be required to publish a brief reasoning for all of their decisions on the forum to create transparency and accountability.

The council must judge applications as they are and cannot accept protocols at lower amounts than their application states. For example, if an application asks for 200,000 ARB the council can not fund them with 100,000 ARB

EXAMPLE: This is a hypothetical example using a budget of 10 ARB with 50 applicants that each request 1 ARB

50 protocols apply requesting 1 Arb Each → Council grades all 50 applications using the rubric and narrows the selection down to the top 10 applicants to not exceed the budget → 10 snapshot votes are created to allow the DAO to confirm the council’s decisions → 9/10 Snapshot votes receive a majority of “fund” votes → 9 protocols are funded with 1 ARB each and 1 Arb is returned to the DAO

Voting Period (1 Week)

Upon completion of the preliminary applicant screening process by the council, the selected applications will be formally presented to the DAO for consideration. Each application will then be subject to a voting process via Snapshot, allowing Arbitrum delegates to vote on the allocation of funds.

Compliance Period (3 weeks)

All protocols that successfully pass the voting period will undergo a KYC period during these three weeks. Arbitrum Foundation members will reach out to coordinate these KYCs. All protocols will be required to complete the KYC during this period or they may be disqualified from receiving funds.

Once all KYCs are completed, there will be one vote to ratify the DAOs selection of screened and KYC’d protocols. In the event that the Snapshot vote is favorably concluded, protocols will commence receiving its funding through an Hedgey stream, facilitated by oSnap execution.

Incentives Period (12 weeks)

Selected protocols will receive their requested ARB using bi-weekly Hedgey streams for 12 weeks. During this time, protocols will be required to provide bi-weekly updates on the progress of their incentives using a template created by the Council and Advisors. Protocols will be required to finish their incentive distributions or return any unused funds two weeks after their final disbursement is available.

During this period Advisors will continue to work with the protocols to help them analyze and improve their distribution mechanisms. Protocols will be allowed to adjust their incentive plans as long as they do not violate any rules and provide their updated plans in their next bi-weekly update.

Roles & Responsibilities

The Council

The council will comprise 5 members. These members should be unbiased and knowledgeable builders, delegates, or organizations with experience in incentive programs, grants councils, or growing a protocol.

The council will decide which protocols will progress to a snapshot vote to be awarded the ARB incentives. The council does not need to spend the entire incentives budget should they feel there are not enough quality applications. Any unused funds will be returned to the DAO to be used in the Long Term Framework.

The council members will be responsible for creating a rubric that all protocols will be judged against. The council will design this rubric with input from the Advisors and will communicate what they are looking for with the Advisors to ensure the Advisors guide protocols in the right direction. The highest-scoring protocols will progress to Snapshot votes to allow the DAO to determine if they should receive ARB. The council will be responsible for publishing the graded rubrics as well as a brief explanation for all decisions.

The council will also be responsible for determining when to halt a protocol’s stream should they violate program rules or misuse funds. All reports of violations will be evaluated by the council. It will require 4 out of 5 council members to vote in favor of halting the stream for a stream to be stopped. Council members will coordinate with the multi-sig signers to halt a stream. Streams can also be halted via a DAO snapshot vote should the DAO disagree with the council’s judgment.

Council Not required to Use entire 45M ARB Budget

While 45 million was the DAO’s selected budget, the Council does not need to allocate the full amount. The council is responsible for screening applications and will only progress applications they view as worthy of moving to Snapshot. The total funding amount of applications moved to snapshot can be anywhere between 0 and 45M ARB. Any unused funds will be returned to the DAO treasury by the multisig.

Council Selecting Research Bounties

The council will create the RFPs for the research bounties.

Each RFP will include the research question that should be answered as well as the maximum budget for the bounty. While there is 200,000 ARB allocated for research bounties the council does not need to allocate the entire budget. Arbitrum delegates will then select who will complete each of these RFPs via a snapshot election.

Council Election

The 5 council members have been selected by DAO vote. The 5 Council Applicants with the most votes were elected to serve on the council for the Pilot Program.

Those who serve on the Pilot Program Council are not guaranteed to be included on a council in the full Long Term Incentives Program. There will be new elections to select council members when it comes time for the full long-term program.

Council Members

Council members have been elected via Snapshot vote and are listed below.

  • GFX Labs
  • 404 DAO
  • Wintermute
  • GMX
  • Karel Vuong

Council Conflict of Interest

Should a Council member have a conflict of interest with an applicant they may excuse themselves from grading said applicant. A conflict of interest can include an investment or close personal ties to an applying protocol. Should this happen the council member will have to disclose they are not grading and provide a reason.

Should there be a dispute over whether the circumstances qualify as a conflict of interest the other council members will vote on whether or not the situation warrants the council members abstaining from grading that applicant.

Removing Council Members

Should the DAO feel a member or members of the council are not fulfilling their duty they may remove them using a snapshot vote.

Anyone with sufficient voting power can initiate a Snapshot poll to remove council member(s). Should the poll receive a majority “remove” votes the council member(s) will be immediately removed.

Should this occur there will then be a week-long application process where replacement council members can apply via the forum. This will be followed by a Snapshot vote to elect replacement member(s)

Council Cost Breakdown

Each council seat will receive 25,000 ARB streamed biweekly throughout the program.

The council will be compensated at 83.33 ARB per hour. The amount is denominated in ARB to incentivize council members to try to maximize the Value of ARB. Additionally, offering compensation in ARB helps to attract contributors who believe in the future success of Arbitrum.

Below is a breakdown of the council’s responsibilities as well as the expected amount of time they will take to complete.

Council Responsibilities:

  • Design an application template and grading rubric with the help of Advisors
  • Grade all protocols against the rubric to determine who will progress to snapshot vote
  • Provide public reasoning for all funding decisions made
  • Decide whether a protocol’s funding should be halted if they violate the rules or fail to distribute ARB
  • Create research bounty RFPs
  • Pick retrofunding mechanisms and allocations for the DAO to vote on

Incentive Advisors

Overview

Three Advisors will help protocols design, implement, and iterate their incentive programs. Advisors are integral to the proposal process, serving as impartial entities with DeFi expertise. Their primary function is to provide detailed, unbiased feedback on applications, aiding protocols in refining and improving their submissions.

The Advisors will also work closely with the council to create the application template and grading rubric. This will ensure the council and advisors are on the same page so they can provide the best feedback to applicants and ensure the council understands the details of the incentive mechanisms the Advisors are helping protocols design.

As this is an experimental addition to the incentives framework, having expert advisors working with protocols will help protocols and the DAO understand what is most helpful from an advisor and allow the DAO to adjust the role for the longer-term framework. This will also help protocols design more innovative incentive distribution mechanisms that can be tested to see how effective they are going into a long-term incentives framework.

Responsibilities

Collaboration with Council and Program Manager: Work jointly to design the application template, KPIs, and a grading rubric, ensuring alignment with council expectations and clarity in the evaluation process.

Feedback and Recommendations: Offer detailed feedback on each eligible application assigned to your team during the review period.

Communication with Applicants: Engage actively with applicants to streamline the application process, aiding in proposal improvements and clarifications.

Hosting Office Hours: Schedule and conduct public office hours 3 times per week while the program is running for protocols to seek advice. This will focus on transparency and accessibility. All interactions during these sessions will be recorded and summarized for everyone. Order of speaking during office hours will be on a first come first serve basis.

Expectations

Impartiality: Advisors must remain unbiased, especially as they do not have the final say in proposal acceptance. While Advisors will work closely with the council members to create the Rubric, advisors should not interfere with the votes from the council nor guarantee any outcome to projects they speak with.

Continuous Engagement: Post-application feedback is crucial, as is ongoing involvement in the later stages of the process, subject to discussion and agreement with relevant parties. There may also be later involvement in the process when the program is running or over.

Timeline and Process

Pre-Application Phase: Advisors we assist the Council with the design of the application template and grading rubric. Advisors are required to hold open office hours, focusing on guiding applicants in preparing their proposals.

Application Review Phase: Each proposal receives at least one detailed feedback report addressing key criteria established by the DAO.

Post-Application Feedback: After the submission of proposals, advisors provide insights on the process and suggest improvements for future cycles.

Selection and Ratification

Those who serve as a Pilot Program Advisor are not guaranteed to be included onboarded in the full Long Term Incentives Program. There will be new elections to select Advisors when it comes time for the full long-term program.

The Advisors have been elected via Snapshot vote and are listed below.

  • JoJo
  • SEEDLatam Gov
  • Castle Capital

Advisor Budgets

Each Advisor will receive 35,000 ARB streamed biweekly throughout the program.

The council will be compensated at 83.33 ARB per hour. The amount is denominated in ARB to incentivize Advisors to try to maximize the Value of ARB. Additionally, offering compensation in ARB helps to attract contributors who believe in the future success of Arbitrum.

Below is a breakdown of the Advisor’s responsibilities as well as the expected amount of time they will take to complete.

The Multisig

A new multisig will be created for this program. A few individuals from the original STIP-ARB multisig used in Round 1 and the backfund proposal are now serving as council members in LTIPP which could create a conflict of interest. Additionally, a new multisig will help to prevent confusion regarding which funds are from STIP and which belong to LTIPP. Finally, a new multisig reduces redundancy of signers across multiple DAO programs which helps to protect the DAO by increasing decentralization.

The new multisig will be a ⅗ multisig and include:

  1. Lindsey
  2. Limes
  3. Joseph
  4. Bobbay
  5. Alex Lumley

Multi-sig address: 0x544cBe6698E2e3b676C76097305bBa588dEfB13A

The funds in the multisig belong to the DAO, and the signers act as grant managers on behalf of the DAO in coordination with the Arbitrum Foundation. In LTIPP, the council is responsible for deciding when to halt streams and can coordinate with the multi-sig signers so they can enact this request. Funds held in the multisig are explicitly banned from usage in DAO governance, including delegation.

The multisig includes two features to ensure the accountability of signers and grantees:

  1. Clawback capability so the DAO can retrieve funds if the multisig violates the agreement.
  2. Streaming of funds to grantees every second week for the grant’s duration using Hedgey. This allows for the halting of funds if misuse is discovered to stop bad actors, not punish bad designs.

Multisig Budget

Each Multisig signer will receive 1,000 ARB streamed biweekly throughout the program.

In LTIPP, the council is responsible for deciding when to halt streams. This has decreased a significant amount of the multisig’s workload. Due to this, the budget has been lowered from the STIP budget.

Program Manager

The Program Manager will be responsible for coordinating between all parties involved to ensure the Pilot Program runs smoothly. They will be available to answer any questions the DAO has regarding the Pilot Program and will publish bi-weekly reports so the community understands the status of the program. This role is designed to add efficiency and clarity to all aspects of the Pilot Program. The Program Manager will have no input into which protocols receive funds. However, they will be responsible for handling any operational tasks that arise throughout the Pilot Program.

Matt from StableLab will act as the program manager. StableLab will function in a similar capacity as they did for STIP Round 1. They will help coordinate between the multisig, council, Advisors, applicants, foundation, and community to ensure the Pilot Program program runs smoothly. StableLab will serve as a neutral party and have no power to decide which protocols receive funding or which streams are halted.

StableLab was responsible for designing this Pilot Program and will continue working on designing a long-term Framework with the help of the incentives working group and the DAO. StableLab will be responsible for publishing a research report on the effectiveness of the Pilot Program and their findings on how it operationally compared to STIP V1.

Should the DAO feel StableLab is not fulfilling their duties as program manager, they may remove them using a snapshot vote. An emergency Snapshot vote will then be used to elect a replacement program manager.

In the Long Term Incentives Framework, this position will be decided by the DAO. However, because the Pilot Program is intended to move quickly, it will continue using StableLab’s services given they have experience from managing STIP V1 and already have knowledge from designing this process.

Program Manager Budget and Responsibilities

The Program Manager will receive 70,000 ARB total streamed biweekly throughout the program.

The Program Manager will be compensated at 83.33 ARB per hour. The amount is denominated in ARB to incentivize Advisors to try to maximize the Value of ARB. Additionally, offering compensation in ARB helps to attract contributors who believe in the future success of Arbitrum.

Below is a breakdown of the Program Manager’s responsibilities and the expected amount of time they will take to complete.

Responsibility Estimated time Spent Compensation
Pre Application period
  • Setting up council/advisor elections
  • Coordinating between council and advisors to ensure rubrics and templates are created
  • Connecting data provider to council and advisors
  • Preparing forum application set up
  • Creating systems for the Council and Advisors to track progress of applications
  • 40 hours per week for 2 weeks = 80 hours 6,666.4 ARB
    Application Period
  • Guiding protocols on the application process
  • Checking Protocol eligibility
  • Providing announcements regarding stages of the application period
  • Coordinating and broadcasting Advisor Office hours to applicants
  • Connecting applicants to their Advisors
  • Assisting Council and Advisors to stay organized and ensure they are properly reviewing each applicant
  • Closing applications at deadline
  • 40 hours per week for 4 weeks = 160 hours 13,332.8 ARB
    Screening / Voting Period
  • Providing operational assistance to the council to help with communication and process of screening protocols and protocols and release of rubrics
  • Coordinate between foundation and protocols to finish KYC
  • Preparing snapshot votes for protocols that pass the council screening process
  • Organizing Hedgey Streams for selected protocols
  • Answering questions from delegates regarding how to vote
  • Communicating with DAO to keep everyone updated on the progress of the program as well as which protocols will move to vote
  • Encourage delegates to vote plus guide them to applications/feedback to make informed choices.
  • 40 hours per week for 2 weeks = 80 hours 6,666.4 ARB
    Incentives Period:
  • Help data provider connect with protocols to ensure proper data is collected
  • Coordinating and ensuring Protocols post their updates
  • Bringing concerns of misuse of funds to the council
  • Organize research bounty RFP selection process
  • Answer stream questions from protocols
  • Help protocols who have questions regarding the incentive rules/timelines
  • Addressing issues between protocols and their advisor
  • Provide Bi-weekly updates on the status of the program
  • 30 hours per week for 12 weeks = 360 hours 29,998.8 ARB
    Post Incentives
  • Coordinating retroactive funding.
  • Coordinating Reflection Pieces from contributors
  • Conducting reflection interviews with applicants, contributors, and delegates
  • Providing operational reflection reports and recommendations for future programs.
  • Ensuring all unused arb is transferred back to the treasury
  • 40 hours per week for 4 weeks = 160 hours 13,332.8 ARB
    Total = 840 hours 70,000 ARB

    Data and Analytics Provider

    Overview

    The Pilot Program will onboard OpenBlock Labs as a service provider for data and analytics monitoring and reporting.

    To optimize each initiative, the DAO must collect and analyze data regarding the efficacy of incentives. For the two prior incentive programs, the DAO has partnered with OpenBlock Labs to provide robust incentive data, which can be found here. In addition to the data, OpenBlock provides biweekly updates to the forum, and has collaborated with dozens of protocols and delegates to share meaningful insights; our most recent analysis can be found here.

    In the following section, we outline OpenBlock’s scope for the LTIPP.

    Responsibilities

    Incorporate Past Learnings: Collaborate with LTIPP advisors to strategically distribute incentive budgets across categories and protocols, utilizing insights derived from OpenBlock’s STIP efficacy analysis. Our previous endeavors have uncovered millions of dollars in unoptimized spending, and we are confident that OpenBlock is well-positioned to guide the DAO in implementing improvements based on these insights.

    To illustrate these insights more vividly, we present two examples of real scenarios within the STIP where OBL’s recommendations could effectively guide substantial capital allocation in a meaningful direction, showcasing the potential ROI of OBL’s work:

    1. Concentration of Rewards: A handful of protocols have dispersed the majority of their rewards (50-70% or more) to a small group of users (less than 10). In such cases, the DAO is essentially committing millions of dollars to highly concentrated bets on user acquisition. Frequently, these major stakeholders have vested interests in the protocol, resulting in rewards flowing toward rent-seeking participants. The underlying data is available in the “User Claim Activity” section here.
    2. Excessive Spending: Some protocols have distributed significant rewards without showing substantial additional growth compared to their pre-STIP trajectory, as observed in our competitive analysis control groups. Leveraging the data, OBL can offer insights on optimizing allocations and implementing mechanisms to enhance the efficiency of incentive spending. This includes setting specific performance targets to guide the continued deployment of funds. Since we have already spent a lot of time investing in these relationships with protocols, we are in a prime position to efficiently offer these services. The underlying data is available in the “Protocol Metrics Normalized” section here.

    Protocol Data Aggregation: Interface with each protocol to audit and aggregate data on their KPIs. Monitor efficacy through a diverse set of metrics, mirroring the approach taken in the STIP (such as nominal TVL/volume/fees/DAU growth at the protocol level, normalized by claimed ARB, competitive intelligence, aggregated data at the category and ecosystem levels, etc.). Leverage any additional resources to help teams optimize their incentive mechanisms by building more granular insights. To provide more clarity on the resources required for this section, we have detailed the scope below:

    Protocol-Specific:

    1. Reach out and establish connections with protocols and their data teams.
    2. Audit existing queries for accuracy and relevance.
    3. Understand the KPIs and metrics associated with their queries.
    4. Build new queries or modify existing ones based on identified KPIs.
    5. Implement ETL processes. Manage separate ETL streams for teams with data in APIs or other platforms.
    6. Create visualizations tailored to each protocol.
    7. Collaborate with protocols to appropriately label their contract addresses.
    8. Flag any instances of misbehavior to the organizing team.

    Aggregate:

    1. Track the flow of funds within the protocols.
    2. Develop aggregate views based on the ecosystem.
    3. Conduct competitive intelligence analysis spanning various ecosystems.
    4. Generate aggregate views covering all categories within the ecosystems.
    5. Research efficacy metrics and establish normalization standards.
    6. Compile biweekly reports summarizing findings and insights. Engage with the community and iterate on findings to inform recommendations.

    Making Data Publically Available: The Data provider will be responsible for making the data behind each dashboard publicly available. This will ensure those completing the Research Bounties have access to this information so they can provide proper analysis of this data. Easy access to data will allow for the Bounty completers to provide better reports and data visualizations for the community. This provides the DAO with a decentralized method for analyzing and understanding how effective this program is as well as better setting up the DAO for the Long Term Framework.

    Monitor For Misuse of Funds: The data provider will monitor data from all funded protocols to detect any misuse of funds. Should they find suspicious activity the data Provider will be responsible for sharing this with the Council.

    Create a Recap Report: The Data provider will be responsible for creating a recap report that tells the story of the Pilot Program and breaks down the successes and failures of the different incentive strategies.

    Biweekly updates: The data provider will provide biweekly updates of the overall themes, trends, and findings from the program.

    Interface with the council, advisors and protocols: The analytics providers have access to a wealth of incentive data, thus they are expected to leverage this data to provide feedback to teams who are designing incentive programs.

    Interface with the research bounties and community: The analytics provider should work with the research bounty teams and any interested community members to ensure all data is open source and available for teams to access and interact with.

    Expectations

    Impartiality: The Data Provider must remain unbiased. While the Data providers will not have the power to halt streams themselves, they must be impartial when it comes to reporting the data and examining for any misuse of funds. Any suspicious behavior they find must be communicated to the council for further review.

    Continuous Monitoring: The Data Provider must continually update the data to reflect the latest updates. This will ensure the bounty researchers and community have access to the correct information. They also must continually monitor for misuse of funds to allow the council to act quickly should any issues arise

    Selection and Ratification

    This will be an elected position in the long-term program. Additionally, given the long-term framework will have a much larger scope and will include many separate incentive categories, it will most likely require the DAO to onboard multiple different organizations to handle the long-term framework’s data monitoring and reporting. However, because the Pilot Program is intended to move quickly, the Data provider will be selected and ratified by the DAO similar to STIP round 1.

    Data Provider Budget

    The Data and Analytics Provider will receive 100,000 ARB streamed throughout the program.

    For this budget, OpenBlock Labs will commit 3 full-time equivalent data scientists.

    During this time they will be responsible for:

    • Using the data and learnings they gathered during STIP to:
      • Help the advisors recommend strong incentive ideas to applicants
      • Help inform the council as to what a quality applicant looks like
    • Meet with all successful applicants to create public dashboards displaying all required metrics
      • Make the data open source so the research bounty teams have easy access to all data
    • Monitor all incentive programs for misuse of funds and report any finding to the council
    • Communicate with Research Bounty teams via telegram to ensure they have full access and understanding of the data that has been collected from the protocols
    • Provide Bi-weekly updates regarding the progress of the program.
    • Creating a final report with recommendations for how to structure future incentive programs.

    Proposal Authors

    This proposal has been continuously worked on by the authors since the middle of November after requests from the DAO emerged to create an alternative round 2 of STIP. The protocol authors have drafted the proposal, met with delegates for feedback, presented open workshopping calls, implemented feedback, and progressed the proposal towards a vote for the past few months. This funding section retroactively compensates the proposal authors for the hundreds of hours of work put into creating this proposal.

    Below is a breakdown of the three contributors as well as their time commitments over the past few months of creating this proposal.

    Total Cost 30,000 ARB

    Contributor Responsibility Estimated time Spent Compensation
    StableLab Authoring the proposal, leading efforts to gather delegate feedback, co-hosting workshop calls and working group pitches 30 hours per week for 8 weeks = 240 hours 15,000 ARB
    Alex Lumley Assisting in proposal design, leading efforts to gather delegate feedback, co-hosting workshop calls and working group pitches 20 hours per week for 8 weeks = 160 hours 10,000 ARB
    Bobby Bola Advising proposal design, assisting with delegate outreach and feedback 10 hours per week for 8 weeks = 80 hours 5,000 ARB
    Total 450 hours 30,000 ARB

    Research Bounties

    The Pilot Program proposal will include research bounties to ensure the DAO collects sufficient data and draws meaningful conclusions from STIP, the Backfund, and the LTIP Pilot Program to help inform the future LTIP design. There will be up to 200,000 ARB available to those who complete bounties.

    This process guarantees the DAO will have multiple teams working on providing meaningful conclusions regarding incentive programs. These conclusions will be essential to allow the DAO to possess all the information necessary to create the best possible long-term incentive framework.

    The Council will be responsible for creating the research bounties RFPs that will include what question the research should answer as well as a maximum budget.

    Some possible questions the bounties could address are:

    • Which protocol incentive designs were most effective at attracting sticky users/liquidity?
    • What is an appropriate budget for a Long Term Incentives Incentive Program?
    • What was more effective the council or delegates voting?
    • What category of protocol received the most funding? Were any categories left out?

    Note: See more community-created research buckets in the forum here

    Researchers will then apply to claim these bounties by providing why they are the best fit to answer the question as well as providing a budget.

    The DAO will be responsible for selecting who completes each bounty based on the applicant’s experience and proposed budget.

    The 200,000 ARB is the maximum amount spent on research bounties. Should the DAO choose to fund lower budgets, any unused funds will be returned to the DAO.

    Retroactive Community Funding

    In STIP Round 1 we saw many community members go above and beyond by providing valuable contributions without any funding. 100,000 ARB will be allocated for retroactive funding to community members who add valuable contributions during the Pilot Program. Earmarking these funds upfront lets people know there will be retro funding which will encourage community members to contribute. This section is intentionally vague to encourage all kinds of community contributions. The DAO will have the final say in how these funds will be used.

    The exact methods used to distribute the funds will be selected by the DAO. The council will create a list of possible ways to retroactively distribute funds to those who have contributed to the Pilot Program. The DAO will then vote on which retroactive method(s) should be used. The DAO will also decide on who these retroactive payments will go to.

    Arbitrum Delegates

    This program is designed to reduce the large burden delegates faced during STIP round 1. While many of their responsibilities will be taken on by the Council and Advisors, the Arbitrum delegates will still retain the final say in many aspects of this proposal.

    Delegates will retain the following powers:

    • Elect Council Members and Advisors
    • Ratify all additional roles included in this proposal
    • Remove any position holder via a snapshot vote should the delegates feel they are not fulfilling their responsibilities
    • Vote on all incentive proposals selected by the council.
    • Select who fulfills the research bounties
    • Select the Method of distributing Retro Funding
    • Select who receives retro Funding

    Eligibility Requirements

    The pilot program is for protocols that did not receive ARB during STIP or the Backfund. However, protocols that received grants from the Arbitrum Foundation, Questbook’s grant program, or any other Arbitrum Grants program are eligible to receive Pilot Program funding. Additionally, receiving funding from the Pilot Program does not prohibit protocols from applying for funding from other DAO or foundation programs including the Long Term Incentives Program.

    Additional eligibility requirements

    • Grantees must be live on Arbitrum at the time of application
    • Grantees must refrain from farming their own incentive programs.
    • Grantees must outline a spending plan, provide a pro forma, and state the grant’s objective.
    • Grantees must commit to providing data on distributions, all ARB spending transactions, and key metrics like daily TVL, transactions, volumes, unique addresses, and transaction fees. This data should cover 30 days before, during, and after the Incentivization period, and be presented preferably in a Dune Spell/dashboard.
    • Grantees must agree to share all contract addresses being used to distribute incentive rewards.
    • Grantees must disclose the contracts being incentivized and denote any external contracts being incentivized as part of the program.
    • Grantees can only incentive contracts on the Arbitrum Network.
    • Grants are not to be used in DAO governance.
    • Grantees are expected to not encourage or partake Sybil attacks against the forum to sway community opinion.
    • Grantees must agree to KYC with the Arbitrum Foundation to receive funds.
    • Grantees must apply using the approved program application template

    By streaming grant payments, the multisig will be empowered to hold grantees accountable to their proposals by halting fund streaming for any of the following reasons:

    • Any use of funds not explicitly described in the grantee’s application.
    • Failure to comply with data reporting standards.
      • Grantee recipients will be required to provide Dune dashboards uploaded and posted to the forum by eligible teams
        • Dashboard requirements are: Daily TVL, transactions, volumes, unique addresses, and transaction fees for incentivized protocols. This data should cover 30 days before, during, and after the Incentivization period. If a metric does not apply, or this is not achievable, it should be noted in the application.
        • More granular dashboards (including pool-level and user analysis) will be noted by the community for future programs.
      • If dashboards are not posted by this date, the multisig will be empowered to halt incentive funding streams for protocols at their discretion.

    In that this proposal aims to be experimental, the multisig is not intended to provide quality control on the design of incentive programs. Rather, they are empowered to halt streaming in the event of negligence or misuse of funds.

    Steps to Implement

    • The Council and Advisors have already started creating the application template and rubric
    • When the Tally vote ends the Application period will begin the next business day. Protocols will apply using the application template
    • At the same time, applicants will begin the KYC process with the foundation to expedite the process should they receive funding.
    • The Advisors and the council will begin providing feedback on proposals on a first come first serve basis.
    • Once this proposal passes the on-chain vote, the total amount of ARB will be sent to the multisig.
    • During the review period, the Protocols will work with Advisors to improve their applications.
    • During the review period, the council begins creating the research bounty questions.
    • All protocols that pass through the council screening phase, pass KYC, and sign grant agreements will move to a snapshot.
    • Applicants who pass the snapshot will have their streams automatically funded
    • Successful applicants will receive incentives for 12 weeks and will provide bi-weekly updates
    • The community will vote on who will fulfill the research bounties
    • The community will vote on Retrofunding
    • After the completion of the program, final reports will be posted to the forum
    • Any unused funds will be returned to the DAO

    Overall Cost

    Total Cost: 45,735,000 ARB

    • Incentives: 45,000,000 ARB. The entire budget does not need to be spent by the council. Any unused funds will be returned to the DAO
    • Council Members: 125,000 ARB - 25,000 ARB each
    • Advisors: 105,000 ARB - 35,000 ARB each
    • Research Bounties: 200,000 ARB Total - the exact amount and sizes of specific bounties will be selected by the Council and can be vetoed by delegates.
    • Data and Analytics Provider: 100,000 ARB for data monitoring and reporting
    • Program Manager: 70,000 ARB for program design, organization, management, and research report. See the full list of responsibilities above.
    • Proposal Authors: 30,000 ARB Total. 15,000 to StableLab, 10,000 to Alex, and 5,000 to Bobby paid retroactively for writing proposals, hosting proposal office hour calls, and communicating with delegates to gather feedback.
    • Retroactive Community Funding: 100,000 ARB
    • Multisig Signers: 5,000 ARB - 1,000 ARB each

    Voting Options

    1. For
    2. Against
    3. Abstain
    6 Likes

    Thank you to everyone who has left comments regarding LTIPP and those who voted in the snapshot proposal and council/advisor elections!

    Below are the changes and clarifications added to LTIPP after feedback from the community during the Snapshot vote.

    The updated proposal has been posted above. We will allow a couple of days for the community to review these changes before we move the proposal to Tally later this week.

    1. LTIP Intention: Makes it clear this proposal is intended for protocols not yet funded by STIP or the backfund as some delegates communicated this was not clear during the first vote.

    This can be discussed should the DAO feel they would prefer this program to be open to all applicants.

    1. Budgets: Added clear budgets with hourly expectations and responsibilities for the Council, Advisor, Program Manager, and Data Provider positions.

    2. Council Conflict of Interest: Council members will have to disclose any COIs and provide a reason. If they are unsure or there is a dispute, other council members will vote on whether or not the situation warrants the council members abstaining from grading that applicant.

    3. Bounties: The council will work with the advisors to create the RFPs for the research bounties. The DAO delegates will then select who will complete each of these RFPs

    4. Maximum Budget Spend: 45M ARB is the maximum budget. The council will screen and only select proposals they think should move a vote. Any unused funds will be returned to the DAO. The council can not spend more than 45M arb

    Additionally, making it clear the DAO can vote down any proposals during the snapshot phase, saving even more funds which will also be returned to the treasury.

    1. Multisig signer compensation: Reduced to 1000 ARB per signer. This is due to many of their responsibilities being alleviated by the council as well as community feedback.

    2. New Multisig: This is done to avoid conflict of interest as many individuals on the past incentives multisig are now serving as council members. This will also help to prevent confusion regarding which funds are from STIP and which belong to LTIPP.

    3. Data provider role: OBL has clarified their role by providing the exact services they will offer as well as to fill this position. Further info can be found in their SoW

    4. Retrofunding: The council will create a list of possible ways to retroactively distribute funds to those who have contributed to the Pilot Program. The DAO will then vote on which retroactive method(s) should be used. The DAO will also decide on who these retroactive payments will go to.

    8 Likes

    Hi @Matt_StableLab, I’ve noticed that in the updated proposal for the on-chain vote—there’s a change in the selection process of data providers from the initial temp-check proposal that was voted on the snapshot.

    In the LTIP pilot program temp-check proposal, as I understand it, it will follow a selection process similar to STIP in selecting the provider for this position.

    Temp-check:

    Abitrum Short-Term Incentive Program (STIP) Data Monitoring and Reporting]

    On-chain vote:

    Could you provide details on when these processes were carried out for this pilot program? I’m interested in knowing about the other data provider applications that were considered, besides OpenBlock Lab.

    1 Like

    Steps to Implement

    • The Council and Advisors have already started creating the application template and rubric
    • When the Tally vote ends the Application period will begin the next business day. Protocols will apply using the application template
    • At the same time, applicants will begin the KYC process with the foundation to expedite the process should they receive funding.

    Will the application template be available before the Tally vote ends? The Tally vote just went live, and based on the “Flow of Pilot Program” the application period is only 2 weeks. Based on that it sounds like the application template won’t be published until the vote is over?

    Also, can the KYC process be explained a little further. Under the “Flow of Pilot Program” the 3 Week Compliance Period has Arbitrum Foundation reaching out to programs that pass Snapshot vote.

    Compliance Period (3 weeks)

    All protocols that successfully pass the voting period will undergo a KYC period during these three weeks. Arbitrum Foundation members will reach out to coordinate these KYCs. All protocols will be required to complete the KYC during this period or they may be disqualified from receiving funds.

    Once all KYCs are completed, there will be one vote to ratify the DAOs selection of screened and KYC’d protocols. In the event that the Snapshot vote is favorably concluded, protocols will commence receiving its funding through an Hedgey stream, facilitated by oSnap execution.

    But the steps to implement reads as if KYC process should be done at the same time the Application Period begins, and KYC must be passed before going to Snapshot

    Steps to Implement

    • The Council and Advisors have already started creating the application template and rubric
    • When the Tally vote ends the Application period will begin the next business day. Protocols will apply using the application template
    • At the same time, applicants will begin the KYC process with the foundation to expedite the process should they receive funding.
      […]
    • All protocols that pass through the council screening phase, pass KYC, and sign grant agreements will move to a snapshot.
    1 Like

    Treasure’s Arbitrum Representative Council voted “For” this proposal.

    We have consistently backed this program as it navigates through the governance process. Arbitrum operates in a fiercely competitive environment, where incentives play a crucial role in enticing and retaining users while fostering ecosystem growth. Though STIP had its flaws, it served as a valuable first experiment, with lessons learned integrated into the more comprehensive incentive program outlined here.

    Moving forward, we are eager to see data analysis taking a pivotal role in guiding the continuous funding of projects and commend the efforts of OBL and @paulsengh thus far. Through rigorous analysis, the Council and DAO should be empowered to more effectively evaluate the highest return on investment for its funds and concentrate distribution toward protocols that demonstrate the most efficient utilization of incentives to stimulate sustained user growth. While defining “success” with incentives may not always be straightforward, we have faith in the multitude of highly skilled individuals collaborating within LTIPP and throughout the DAO to formulate comprehensive solutions to this question.

    It is worth highlighting that we were dissatisfied with the mechanism behind the election. Our comments on this topic can be viewed here. However, we are keen that perfect not be the enemy of good and so will continue to offer our overall support for the program.

    We wish the LTIPP Council and Advisors the best of luck and they step up to take on this critical role for the DAO :saluting_face:

    4 Likes

    I voted for this onchain proposal on Tally.

    I think funding incentives is an important and valuable use of the DAO’s treasury. I appreciate the work the LTIP program team has done to put together a pilot program that builds on the learnings from STIP. Going forward, I think it’s important that we rigorously analyze the impact of the pilot program incentives to establish reliable models to direct DAO funding on an ongoing basis.

    2 Likes

    The Princeton Blockchain Club is voting in favor of the LTIPP on Tally.

    Although we didn’t comment on the forums for the Snapshot vote, we’ve been very supportive of the LTIPP on Twitter, and our reasoning hasn’t changed. The LTIPP builds on what we’ve learned from the STIP and addresses many of the challenges we faced. We hope that the LTIPP will help the DAO establish continuous support for the Arbitrum ecosystem moving forward!

    Best of luck to the Council and the Application Advisors!

    2 Likes

    Our team voted FOR this proposal.
    We support the development of support for projects on Arbitrum and attracting new users and liquidity. We are glad that our comments at the forum were taken into account in this proposal.

    2 Likes

    Echoing my sentiment from the Snapshot vote, I will be voting “For” this on Tally.

    I will add that since the Snapshot vote I am very pleased to see delegate feedback addressed in the Tally vote. I look forward to see how this next iteration of the grants program looks and am confident in those who were elected to the Council / Advisor roles to do a great job!

    Thank you all who helped make this happen!

    3 Likes

    Created an issue Retroactive Community Funding · Issue #19 · OpenDataforWeb3/DataGrantsforARB · GitHub, please provide feedback on whether you believe the analysis is necessary.

    Also provided a summary on Unveiling the Long Term Incentives Pilot Program - A New Era for Protocol Incentivization

    2 Likes

    any update on when it will be open for projects to apply? @Matt_StableLab

    1 Like

    I want to share this idea here because it builds on this conversation.

    The ThankARB governance framework is attempting to set standards for how we assign the deciders at each level of funding throughout a contributors pathway.

    It is easy to see that different “categories” of grant funding have different pathways to success for those who need them. Fill in the blanks here for each category to say how do we go from a first grant to scale? Who makes the decision to move forward at each level? What do we offer at each level?

    To learn more about these categories, check out this chart:

    2 Likes

    The Savvy DeFi DAO’s Arbitrum Council has decisively voted FOR this proposal.

    We have been following this proposal for several months, and we value the detailed analysis from previous experiments to iterate and continue incentivizing protocols within the ecosystem to facilitate the growth of Arbitrum.

    Moreover, we believe that the team behind it possesses all the necessary tools to execute this program with meticulous attention to detail. Above all, their adaptability to take feedback, iterate, and drive continuous improvement for this project.

    Vela Exchange has voted FOR regarding this proposal.

    • Many folks have been waiting for a round 2 during the STIP, and assumed there would be funding left over for their proposals

    • The addition of councils and other new mechanics enriches the overall experiment of the incentives programming

    L2BEAT has been actively involved in the discussion around both STIP and LTIP/LTIPP programs. While we believe these initiatives to be imperfect, we agree with the arguments that in this case we need to experiment on a scale and with a significant amount to better understand the potential for such programs in the future.

    Therefore, following our previous signal of support for this program, we are voting FOR it in the on-chain vote.

    1 Like

    Hello @Matt_StableLab ,

    Sorry to bug you.

    I wanted to know the details about Research bounties and Retroactive Community Funding.

    For Retroactive Community Funding, I wanted to know what kind of contributions and how meaningful we can contribute for LTIPP to be eligible for this funding.

    And for Research bounties, I wanted to know where we can find the details about Research bounties and how we can apply for the same.

    Can you please help me out with the details regarding the same?

    Thank you in advance.

    The Savvy DeFi DAO’s Arbitrum Council has decisively voted FOR this proposal.

    We have been following this proposal for several months, and we value the detailed analysis from previous experiments to iterate and continue incentivizing protocols within the ecosystem to facilitate the growth of Arbitrum.

    Moreover, we believe that the team behind it possesses all the necessary tools to execute this program with meticulous attention to detail. Above all, their adaptability to take feedback, iterate, and drive continuous improvement for this project.

    Hello everyone,

    We (Lampros Labs DAO) have created a live voting dashboard for LTIPP to track the voting of all 77 protocols in real-time.

    This dashboard provides info about all the application’s snapshot voting links, forum proposal application links, asks and live voting statuses for each proposal, all in one accessible dashboard.

    Delegates can personalize the dashboard for them by creating a copy of the sheet, allowing them to update the status of voted proposals in the last column of the dashboard and see dynamic changes in cell background colours for the first four columns to track their own votes. (P.S. - Please note that while personal copies enable personalization, the sheet will not be updated for personal copies, the main public link remains active and is updated every 5 minutes for all community members.)

    I would love to receive feedback, suggestions or any changes you would like to look into this sheet.

    This sheet was completely inspired by the Voting Dashboard created by Inspex for STIP.

    And lastly thanks to Applicant advisors and Council members for working tirelessly for the past few weeks to bring the best applications up for voting.

    Check out the dashboard from the below link and do share your feedback for the dashboard.

    Dashboard link - LTIPP_Voting Dashboard_Created by Members of Lampros Labs DAO - Google Sheets.

    4 Likes

    The below response reflects the views of L2BEAT’s governance team, composed of @krst and @Sinkas, and it’s based on the combined research, fact-checking, and ideation of the two.

    In order to inform our decision for the LTIPP vote, we carefully reviewed the Council’s Feedback on all the applications, and turned to the applications themselves when there was conflicting feedback (e.g. on 3/5 votes). After reviewing everything, we found ourselves not having any objections with the Council’s recommendation.

    All the applications that are currently up for a vote on Snapshot are the outcome of the LTIPP process, and since the sum of the amount of ARB requested is within the available budget, we’ll be following the Council’s recommendations and voting in favor of all the applications.

    3 Likes

    After carefully reviewing the LTIPP applications and the Council’s feedback, I’ve decided to vote in favor of all the proposals currently up for a vote, with the exception of the Bunni proposal. As a contributor to the Bunni project, I’ve abstained from voting on their application to avoid any potential conflict of interest.

    To make an informed decision, I took a close look at the Council’s Feedback for each application. When there were differing opinions among the Council members, like in the case of 3/5 vote scenarios, I made sure to examine the applications in more detail. This extra scrutiny helped me gain a clearer picture of the projects and how they could benefit the Arbitrum ecosystem. In the end, I found that my views were in line with the Council’s overall recommendations.

    The Arbitrum ecosystem has been growing at an impressive pace, and I believe the LTIPP programs play a crucial role in maintaining this momentum. The applications demonstrate a deep understanding of the ecosystem’s needs and propose innovative solutions to facilitate further growth.

    I’m particularly impressed by the teams behind these proposals. They’ve shown adaptability, attention to detail, and a willingness to iterate based on feedback. These qualities are essential for the successful execution of the LTIPP programs.

    Considering the total ARB requested is within the approved budget, I firmly believe that supporting these applications is a step in the right direction for the continued growth and success of the Arbitrum ecosystem.