[MUX Protocol] [FINAL] [STIP - Round 1]

DAO Grant Programs Incentive Framework (Round 1)
1

Hi everyone, I want to apply for Pinnacle Grants (> 2M ARB) on behalf of MUX Protocol.

MUX Protocol has been live on Arbitrum for over 13 months, the current TVL on Arbitrum is over $40M, and the latest 30d organic volume (without offering any trading incentives) is over $1B.

SECTION 1: APPLICANT INFORMATION

Applicant Name:

dumbird - MUX

Project Name:

MUX Protocol

Project Description:

Decentralized perps trading aggregator

MUX offers the first widely adopted decentralized perps trading aggregator. The MUX aggregator is currently native to Arbitrum, and has integrated with GMX V1, GMX V2, Gains and MUX native pool on the trading side. MUX aggregator automatically routes traders’ positions (one whole or split positions) to the most suited liquidity source/sources based on market, position size, available liquidity, composite trading cost and user preferences. In addition, MUX also offers various unique features for integrated protocols, like liquidation price optimization, leverage boosting, TP/SL orders, auto-pool selection, aggregated position & display and more, without applying additional costs. The goal is to offer the best possible trading cost and experience and onboard more users to the decentralized trading world.

In less than 13 months, MUX has generated over $15.2B organic volume for integrated protocols.

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In addition, MUX also has the 3rd highest TVL in the entire on-chain perps sector.

Team Members and Qualifications:
  • Jean - growth contributor
  • dumbird - growth contributor
  • 24lu - dev contributor
  • mus - dev contributor
  • rex - dev contributor
  • DC - community contributor
Project Links:

Contact Information

TG:
Twitter:
  • @muxprotocol
Email:
  • dumbird@mux.network
  • jean@mux.network
Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?:

Yes

SECTION 2: GRANT INFORMATION

Requested Grant Size:

6,000,000 ARB
(The original size was 9,000,000 ARB, and after learning community opinions, the requested grant size is lowered by 33%.)

Grant Matching:
  • MUX will use the in-house budget to launch multiple promotional campaigns and onboard more users to the ecosystem.
Grant Breakdown:

MUX plans to use the grant to onboard more organic users to the Arbitrum ecosystem and increase user engagement, trading volume, TVL and transactions.

Tentatively, 55% of the grant will be utilized to reduce trading fees for GMX V1, GMX V2, Gains, and MUX native pool positions opened through the MUX aggregator.

Please note, for the proposed rebates, the rebate rate will be based on the users’ actual fees spent; if the integrated protocols also offer additional rebates/rewards separately, MUX will ensure the final total rebates won’t exceed the fees paid. There will be no trade-to-earn opportunities during this campaign. In addition, MUX contributors will closely monitor and prevent wash trading and Sybil-attack-related activities from this campaign to ensure proper grant usage; addresses involving wash trading or Sybil-attack-related activities will be published and excluded from receiving the rebates.

  • Fee rebates
    • ARB tokens will be distributed as fee rebates to traders weekly on Thursdays UTC based on the fees they spend during the week.
    • The fee reduction will be applied to all integrated protocols without discrimination.
      • This covers all markets offered by GMX V1, GMX V2, Gains and MUX native pool.
    • The rebates that traders can receive won’t exceed the fees they spend on trading. There will be no room for trade-to-earn activities.
      • The rebate rate will be based on the users’ actual fees spent; if the integrated protocols also offer additional rebates separately, MUX will ensure the final total rebates won’t exceed the fees paid.
    • The grant spending pacing will depend on organic trading activities during each week.
      • MUX contributors will closely monitor and prevent wash trading and Sybil-attack-related activities from this campaign.
      • Addresses involving wash trading or Sybil-attack-related activities will be published and excluded from receiving the rebates. MUX contributors reserve the right to identify any Sybil-attack-related addresses and exclude them from the incentive program.
      • The anti-wash-trading & anti-Sybil-attack rules will remain unrevealed. Otherwise, the rules can be abused with planned strategies. Just like before a network or protocol launches the airdrop, they announce the Anti-Sybil rules afterward instead of beforehand. This is intentional to ensure the proper grant usage with no wash-trading or Sybil attacks.
    • Integrated protocol trading fee rates before and after reduction
      • GMX V1: 0.1% → 0%
      • GMX V2: 0.05% / 0.07% → 0%
      • Gains: Crypto 0.08% → 0%; Forex 0.012% / 0.016% / 0.02% → 0%; Commodities 0.05% / 0.08% → 0%
      • MUX Native Pool: 0.06% → 0%
      • If more perps trading protocols in the Arbitrum ecosystem are integrated into MUX during the campaign, the fee deduction will be applied to them as well.
  • Trading competitions & other forms of promotional trading events
    • Aside from the trading fee rebates, MUX can potentially launch promotional trading events, not limited to trading competitions, based on market sediments and volatility.
    • The objective is to boost user adoption and trading demand, referencing organic market trends.

Tentatively, 45% of the grant will be utilized to increase yield for the MUX native pools on Arbitrum.

  • Context
    • The MUX native pool currently has the 3rd highest TVL in the on-chain perps trading sector. Over 80% of the MUX native pool TVL is on Arbitrum.
    • In addition, the aggregator has also integrated with the GLP pool, GM pools and gDAI vault to offer the currently deepest aggregated liquidity in the on-chain perps sector for traders.
    • However, when trading demand surges, the open interest caps can still be reached across all integrated protocols, limiting traders to opening more needed positions.
  • MUXLP stakers currently earn #RealYield in the form of $ETH tokens weekly from protocol income. By offering additional $ARB token incentives for LPs, the pool size can increase to support more trading demand and initiate a flywheel effect with the trading incentives.

The grant allocation ratio for trading and liquidity incentives is tentative and can be adjusted based on performance.

  • If the trading demand and trading fees surge more than expected, more incentives will be allocated toward the trading side to ensure 0% trading fees for all integrated protocols.
  • If the liquidity cannot support enough trading demand and guarantee optimized trading experiences, more incentives will be allocated toward the liquidity side.
  • The incentive mechanism can be adjusted accordingly to ensure the most efficient usage and results for accelerating user adoption.
Funding Address:

0x4Fa610DD115e790B8768A482Fc366803534e9Adc

Funding Address Characteristics:

2/3 multisig

Contract Address:

0xe21d366d5042F713C0C872591e610fB6a74C775b

SECTION 3: GRANT OBJECTIVES AND EXECUTION

Objectives:
  • Accelerate user adoption for the Arbitrum ecosystem.
  • Increase organic transactions and sequencer fees for Arbitrum.
  • Increase trading volume & protocol income for all integrated protocols, and further onboard more LPs to all integrated liquidity sources and the Arbitrum ecosystem.
  • Strengthen the Arbitrum ecosystem as the on-chain derivatives trading hub.
Key Performance Indicators (KPIs):
  • Trading Volume
  • Daily Active Users(DAU)
  • TVL(Product and Protocol side)
  • Sequencer fees
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:

MUX has integrated with three leading perps protocols regarding TVL and organic trading volume in the Arbitrum ecosystem: GMX (V1 & V2), Gains and MUX native pool. Users can freely choose preferred protocols for opening needed positions, or the aggregator can automatically select the most suited liquidity source based on market, available liquidity, and trading cost. As a result, MUX has onboarded a community of web3 native traders to Arbitrum and contributed a notable amount of organic volume to integrated protocols in the ecosystem.

Currently, DEX to CEX futures trading volume is between 1% - 2% daily The trading cost is the one key factor constraining trader acquisition for perpetual DEXes, as the typical fee rate range on CEXes is 0.02% - 0.05%, while the standard fee rate range on DEXes is 0.05% - 0.1%. As the trading experiences and features on perp DEXes advance, the higher trading cost is still a barrier for more traders to onboard.

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Arbitrum is the epicenter of perp DEX innovations; 5 of the top 6 perp dexes in TVL are currently deployed on Arbitrum. If the trading cost barrier can be crossed for a decent amount of time, the Arbitrum ecosystem can accelerate user adoption and onboard more traders from other web3 and web2 ecosystems.

In addition, a notable number of yield farming protocols have integrated with GLP, GM, gDAI and MUXLP. Boosting trading volume for the integrated protocols on the MUX aggregator will help increase the yield for related pools and can potentially onboard more LPs.

The MUX native pool currently has the 3rd highest TVL in the on-chain perps trading sector. Over 80% of the MUX native pool TVL is on Arbitrum. In addition, the aggregator has also integrated with the GLP pool, GM pools and gDAI vault to offer the currently deepest aggregated liquidity in the on-chain perps sector for traders. However, when trading demand surges, the open interest caps can still be reached across all integrated protocols, limiting traders to opening more needed positions. By offering additional $ARB token incentives for LPs, the pool size can increase to support more trading demand and initiate a flywheel effect with the trading incentives.

Justification for the size of the grant:

The campaign duration is estimated to be 4 months.

For the trading incentive: MUX plans to use the grant to directly rebate trading fees for traders, the contributors estimated the grant size based on the organic trading fees that the MUX aggregator generated for all integrated protocols in the past 4 months.

Between June 21 and September 21, the total organic trading volume on MUX was $5.63B, and the trading fees generated for integrated protocols were over $4M. The volume and income were generated without offering any forms of trading incentives, proving MUX aggregator’s proper product-market-fit and organic user base. If the fees can be further lowered through rebates, we can reasonably expect the aggregator to onboard more traders from other ecosystems. MUX contributors used the metrics as a reference and wished to reduce the trading fees with the grant to accelerate trader adoption.

Regarding liquidity incentives, the MUX native pool currently offers a significant portion of protocol income through $ETH tokens and additional $MUX token incentives for LPs. The APR has been between 15% - 50% in the past four months. The MUX native pool TVL reached over $60M at its peak because of the high yield. Through offering additional $ARB token incentives for LPs, the pool size can increase to support more trading demand and initiate a flywheel effect with the trading incentives.

Execution Strategy:
  • MUX contributors will add a trading fee rebate distribution setup to the Dapp.
    • All trading fees that traders spend on any integrated protocols (currently GMX V1, GMX V2, Gains and MUX native pool) during the campaign will be tracked.
    • MUX aggregator will distribute trade fee rebates to traders weekly on Thursdays in the form of $ARB tokens.
    • Upon distribution, the number of ARB tokens rebated is calculated based on traders’ weekly trading fees and the real-time ARB token price.
  • MUX contributors will closely monitor and prevent wash trading and Sybil-attack-related activities from this campaign and ensure the proper usage of funds.
    • Addresses involving wash trading or Sybil-attack-related activities will be published and excluded from receiving the rebates.
  • Distributed rebates will be entirely based on the organic trading fees that traders spent during the week.
    • The grant spending pacing will depend on organic trading activities during each week.
    • If all approved grants are spent before January 31, 2023, the campaign will end early.
    • If the approved grants are not fully spent before January 31, 2023, the remaining grant will be returned to the Arbitrum DAO.
  • If MUX does launch additional promotional trading events during the campaign, MUX dev contributors will develop needed setups for the events.
  • For liquidity incentives, $ARB incentives will be added to the rewards composition.
  • MUX contributors will launch multiple marketing campaigns using the in-house marketing budget to promote this campaign and accelerate trader adoption for the Arbitrum ecosystem.
Grant Timeline:

October 14th, 2023 - January 31, 2024

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

Is the Protocol Native to Arbitrum?:

The MUX aggregator is native to Arbitrum and has only integrated with protocols on Arbitrum.

The MUX native pool is multi-chain native, while 80% + of the TVL is on Arbitrum and leveraging Arbitrum as the base chain to handle all staking activities.

On what other networks is the protocol deployed?:

MUX Aggregator

  • None

MUXLP Pool

  • Avalanche
  • BNB Chain
  • Optimism
  • Fantom
What date did you deploy on Arbitrum?:

Aug. 1st, 2022

Protocol Performance:

By September 21, 2023, the following MUX metrics are

  • Cumulative trading volume on Arbitrum: $14,290,826,513
  • Arbitrum TVL: $41,161,410
  • Historical total users: 18,014
  • Arbitrum transactions: 671,693

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References: Dune Dashboard, Metabase Dashboard

Protocol Roadmap:

Q3 & Q4 2023

  • Launch a new trading setup to support more markets
  • Launch a new liquidity setup to support long-tail markets
  • Launch a new MUXLP liquidity setup to meet diverse risk exposure preferences
  • Allow collateral token swap
  • Allow updating placed orders

Long Term

  • Aggregate more innovative perps trading protocols
  • Continuously onboarding organic traders
  • Further lowering trading costs for traders
Audit History:

SECTION 5: Data and Reporting

Is your team prepared to create Dune Dashboards for your incentive program?:

Yes, MUX contributors will create a Dune dashboard to track the grant usage and all KPI metrics.

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread?

Yes, MUX contributors will provide bi-weekly program updates along with needed metrics on the Arbitrum Forum thread.

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

3 Likes
2

fee rebates and marketing? nah

1 Like
3

Reserved for comments

4

MUX has been an integral part of the arbitrum ecosystem in various iterations essentially from the first days. The current fusion product between protocol native LP and seemless integration of a DEX perp aggregator into the UI offers something unique to traders in the arbitrum ecosystem. On various days, the routed volume through GMX or GAINS was standing for more than 50% of the traded volume on those platforms, not only enabling MUXLP growth, but also accounting significant amounts of fees earned for the aggregated protocols.
All of this was managed with a lean team- and funding management. Very much looking forward to seeing further developments and growth and strongly support this proposal.

3 Likes
5

Thank you for presenting the proposal related to MUX on Arbitrum. I appreciate the effort, but I must express some reservations about supporting this proposal. Below are my concerns:

  1. Integration of New Perpetual DEXes: MUX, as a DEX aggregator, has played a significant role in the Arbitrum ecosystem. However, I’ve noticed that MUX hasn’t integrated any new perpetual DEXes in over 8 months. As a DEX aggregator, its primary objective is to provide users with the best trading options based on fees and liquidity. I believe that MUX could enhance its effectiveness by considering integration with the promising perpetual DEXes that have emerged on Arbitrum since its last integration in February of this year. MUX’s lack of integration calls into question the team’s commitment to achieving its original objective, and I hope we can see more integrations or at least some commitment from you that you’ll be integrating with more platforms in the near future.

  2. Overlapping Grant Distribution: I’ve also observed an overlap in grant distribution between MUX, GMX, and Gains. Both GMX and Gains are actively incentivizing trading activities on their platforms. To avoid redundancy and ensure efficient allocation of resources, I propose that MUX focus on subsidizing trading fees for its own native pool. This way, it can optimize its impact and resources without duplicating efforts already addressed by its partners.

  3. Grant Amount: I understand the importance of providing support to MUX, but the requested grant amount does seem relatively high given the current competitive landscape on Arbitrum. With the emergence of new platforms, MUX has faced increased competition and a shift in its position within the ecosystem, which may suggest that MUX is losing its product market fit due to the lack of integration mentioned in #1. By design, DEX aggregators are not direct competitors of other perpetual DEXes but act as a complement. The fact that there has been a significant decline in the trading activities on MUX while many new perpetual platforms are still growing, at the expense of MUX, does substantiate the validity of my concern raised in #1. In addition, to my point above, MUX should not leverage the grant to support an overlapping proposal by Gains and GMX. Thus, I suggest considering a more modest grant size, with 750K ARB as a maximum.

In conclusion, I believe MUX can continue to play a valuable role in the Arbitrum ecosystem with some adjustments to its strategy and grant allocation. My intention is to encourage thoughtful consideration of these points to ensure the best outcome for the community and MUX’s continued success. Would appreciate a response from the team.

6

This is way too much considering we are seeing huge proposals for GMX, Gains and other perp DEXs that MUX is built on top of.

9m ARB is an insane amount, especially when as mentioned, all of these perp DEXs are also trying to request ARB for their own trading comps and incentives.

I don’t see how this brings new value to Arbitrum or expands the ecosystem, it just adds double incentives on top of the perp DEXs that are already potentially getting the largest amount of ARB.

The amount needs to be reduced, and MUX should form a proposal that is better aligned with all the other perp DEXs, since this just adds double rewards on top of what other protocols are already asking.

2 Likes
7

MUX has integrated with GMX V1 & V2 and Gains, but there is also the MUX native pool with the 3rd highest TVL in the entire on-chain perps trading sector. MUX has onboarded a notable number of real organic traders for the ecosystem and all integrated protocols with its user-centric functionalities and deepest aggregated liquidity. In the past MUX has only promoted organic volume without offering any trading incentives (except only one trading competition in May) or promote airdrop farming activities. The $15B+ organic volume is a proof of MUX’s real user adoption and product-market-fit. Through offering rebates to lower the trading fees further, it’s reasonable to expect the protocol to onboard more cost-sensitive real traders & users from other ecosystem, even the CEX landscape.

Even without offering any incentives and when the volatility is at its historical low, MUX still managed to generate over $4M fees for all integrated protocols in the past 4 months. If there is a rebate program that can bring fees to 0%(lowest will be 0% and won’t exceed to create trade-to-earn opportunities), it’s reasonable to assume the volume and fees to 1.5x - 3x. In this case, MUX’s rebate will be able to help boost volume and income for GMX V1, GMX V2 Gains and MUX. The goal is to efficiently use the grant to enable a volume > fees > yield > TVL growth flywheel for 3(currently 3, and potentially will be more) leading trading protocols in the ecosystem, and also benefit a diverse range of users including traders, LPs and all related community holders.

Regarding the concerns surrounding double incentives, the proposal indicated " * The rebate rate will be based on the users’ actual fees spent; if the integrated protocols also offer additional rebates separately, MUX will ensure the final total rebates won’t exceed the fees paid."

3 Likes
8

Hello @realdumbird thank you for your application! Your submission meets all requirements to be considered for a snapshot vote.

1 Like
9

This is an incredibly large request, well above guidelines established by the DAO and well outside of any sensible rationale. This proposal is severely lacking in depth and justification for such a sum with a highly questionable execution strategy.

No guarentees in place just some contributors checking things

Loose commitments

Literally two lines about ‘marketing campaigns being launched’

9m of ARB incentives starts next week apparently

MUX asking for this amount and providing this proposal, highlights a general sense of zero consideration outside of their own platform equipped with a D-tier effort.

1 Like
10

MUX is one of the protocols that are eligible to apply for Pinnacle Grants (> 2M ARB) based on Arbitrum deployment duration (12+ months), TVL($30M+) and latest 30D volume($200M+). MUX meets requirements from all 3 metrics.

Regarding wash trading & Sybil-attack prevention, the rules need to remain unrevealed. Otherwise, the rules can be abused with planned strategies. Just like before a network or protocol launch the airdrop, they always announce the Anti-Sybil rules afterwards instead of beforehand. This is intentional to ensure the proper grant usage with no wash-trading or Sybil-attacks.

For the promotional trading events, it can be trading competition or in other forms based on the market sentiments, and that’s why the setup can’t be 100% determined. This space and market moves and changes really fast, so the more determined it is, the less effective it might be. But what is determined is the additional trading events is optional and may only use a smaller portion of the grant; the trading fee rebate is still the main dish.

Regarding "zero consideration outside of their own platform equipped with a “D-tier effort,” considering the specified metrics, the number of organic traders and LPs MUX have helped to onboard to the eco and all organic volume that MUX has contributed to the integrated protocols and the eco, as well as initiating the perps aggregator narrative, the insults won’t be taken seriously :slight_smile:

MUX’s proposed grant usage is 100% going to users, and it’s gonna be applied to all intergrated protocols that have proven product-market-fit and user adoption. So we do care very much about the users.

1 Like
11

MUX has been a crucial stakeholder in the perp ecosystem on Arbiturm. MUX has generated over $15.2B organic volume for integrated protocols - which shows a key line of value accrual not just for itself for the ecosystem partners also.

We at Stella believe that only MUX, but the ecosystem partner protocol (like GMX, Gains) stand to gain from this proposal. We support this proposal by MUX!

1 Like
12

i discovered MUX rather recently (via GMD discussions) and it’s an excellent project and i support their proposal too (even tho it may be a little high like GMX imho)

1 Like
13

In the Arbitrum ecosystem, MUX Protocol is an innovative component, providing traders with a streamlined method for trading various assets. Its unique features amplify the value it adds to Arbitrum. The Magpie Ecosystem recognizes the substantial contribution the MUX Protocol offers to the Arbitrum ecosystem and has confidence in the team’s capabilities moving forward. With the STIP award, MUX Protocol is poised to foster growth and draw more users to Arbitrum.

1 Like
14

MUX is an excellent protocol in concept and will facilitate healthy competition in the Arbitrum DEX space, but 9M Arb is vastly excessive. I support a grant but it should not be this size.

15

Requested grant size seems high, but I’d support this proposal as MUX has played a crucial role as aggregator in perp dex ecosystem within Arbitrum.

I think LP TVL is a crucial metric for long term success of any perp dex platform because of its impact on scaling of volume, and Gains LP TVL is seeing a declining trend whereas MUX LP TVL has seen an increasing trend. If Gains is requesting 7million ARB, then MUX’s request looks reasonable.

1 Like
16

Hello @realdumbird,

Now that your application has been marked eligible, please be advised of the remaining steps in the application process to be completed prior to the Review Period Deadline:

Please complete the following steps required for your application to proceed to Snapshot:

Once you change your proposal title to final, please tag an Arbitrum Foundation Forum Moderator (@ stonecoldpat @ cliffton.eth @ eli_defi) by the Review Period deadline to notify them of your proposal’s readiness.

Once marked as [Final], your application post will be locked by moderators and you will no longer be able to edit your proposal.

1 Like
17

Got it, thanks a lot for the updates, Matt! MUX contributors will work on some final refinements regarding this proposal and will then update the proposal to [Final].

1 Like
18

@realdumbird Great thanks!

To change your proposal to final, please tag an Arbitrum Foundation Forum Moderator (@ stonecoldpat @ cliffton.eth @ eli_defi) by the Review Period deadline to notify them of your proposal’s readiness to proceed from [Draft] to [Final] status.

Once notified, the Arbitrum Foundation Forum Moderator will adjust your title from [Draft] to [Final] status. Once marked as [FInal], your application post will be locked by moderators and you will no longer be able to edit your proposal.

1 Like
19

Firstly, thank you for your proposal and for your interest in contributing to the Arbitrum ecosystem.

Introduction and Rationale

Mux is seeking a 9mm $ARB grant to bolster their operations as a pioneering perp dex aggregator. This represents a significant portion of the grant fund, given that the total available is 50M ARB. Mux brings an innovative spirit and valuable diversity to our ecosystem with their early adoption of perp dex aggregation. However, their primary strength seems to lie in their native liquidity, which is the major driver of their trading volume. We see potential in this proposal, but we also have some reservations.

Major Concerns

Concern Regarding Grant Size and Efficiency

  • Grant size seems disproportionate compared to their TVL and volume
  • Our recommendation for change: The grant size should also be revisited to be more in line with their TVL and market position.

Minor Concerns

  • The actual effectiveness of the perp dex aggregation feature, as most volume is native
  • There is a potential for redundancy in incentives due to overlap with underlying perp dex grants

Summary

Castle Capital appreciates the innovation and diversity that Mux brings to the Arbitrum ecosystem. However, in its current form, we do not support the proposal moving forward. Specifically, we recommend adjusting the grant size to reflect Mux’s TVL and volume.

We hope our feedback is constructive and contributes to refining your proposal for the betterment of the whole ecosystem. Thank you for your commitment to innovation and growth.

1 Like
21

I agree that the grant size requested is way too big for this one, even though I would argue that TVL is not the best way to measure it, especially for an aggregator

What I don’t understand from your feedback though, is why would anyone have a problem with incentivising aggregation? That’s the whole point of an aggregator right? It routes to other protocols to find underutilised liquidity and create the best route for the users. Hard to make that more attractive for users without incentivising it.

Also, your recommendations are very contradicting: you suggest to focus on their native trading, but are then concerned because most of their volume is native and then proceed to recommend to make aggregation more attractive because of that. Very confusing advise if you ask me

2 Likes