[Non-Constitutional] Invest in Builders & Ignite ARB Demand with q/acc

[Griff]

Thanks for the kind words @Tane! I’ll jump straight to answering your Q’s

@Tane

Examining the Polygon pilot, particularly the top-funded cohort such as x23.ai, the current liquidity is under $120k against a fully diluted valuation (FDV) of approximately $800k (link). Considering the scale of investment, such limited liquidity may neither significantly extend project runway nor improve token price discovery. In practice, it could inadvertently amplify token launch risks rather than alleviating funding pressures.

We ask you to explicitly evaluate the liquidity provision mechanism’s empirical effectiveness in meeting builders’ core financial needs to see if this is better than simply giving funds to them.

The $120k liquidity is just the Liquidity in the DEX, but their Augmented Bonding Curve (ABC) also has over $100k in it, it just doesn’t show on gecko terminal. Here is a screen shot of the dashboard we use for internal tracking, which shows the collateral for each ABC in the protocol:

As far as empirical effectiveness, if you go to your link and click Show X23/WPOL Price Chart in WPOL

You will see that EVERY token has beaten the price of POL, which is pretty incredible considering that the market was tanking to unexpected lows during the short 2 months that these tokens have been liquid. For a 6-figure market cap token to have such a strong resistance to downward market pressure is impressive to say the least.

You can also simply try to buy and sell the token on quickswap to see the experienced liquidity:
https://dapp.quickswap.exchange/swap/best/0x3c499c542cEF5E3811e1192ce70d8cC03d5c3359/0xc530B75465Ce3c6286e718110A7B2e2B64Bdc860

And

The token is paired with POL so it has great routing so any token can be used to buy it and $3000 moves the price 1% either direction.

As far as “meeting builders’ core financial needs.” Arbitrum has a lot of programs to do that. Questbook, AF & OCL are throwing money at builders left and right, and I am excited for their programs to recommend great builders to us.

We help them launch their token on Arbitrum, lock them into the Arbitrum ecosystem, and create demand for ARB in the process. This is not for every project, but for many projects, it is a perfect fit.

@Tane

Token issuance complexity

Requiring every recipient to spin up a live token adds a layer of operational drag that many seed-stage teams are ill-equipped to handle. Beyond smart contract deployment, founders must craft vesting schedules, mediate community expectations, often before product-market fit.

Although it seems there is some legal support provided, that’s not the entirety of this complexity. How do you think this complexity/cost can be overcome or mitigated?

You are absolutely right, most seed stage teams are not ready for a token, even though MANY want it. The key feature to mitigate this issue is the screening process, we had less than a 4% acceptance rate for projects in the first cohort. We choose teams that are ready to integrate a token into their product and have figured out where the demand will come from.

Also, as far as vesting schedules and all the other token design related issues. We have that all set for the team, they just need to say the addresses for their vested tokens and its done, and the rest of their token launch process from the technical side, is covered.

From the social side, absolutely they now have a second product to sell… their token! But we try to choose builders that have a token design that supports the needs of their core product., like the gas token for an L2 (Prismo) or creative ideas like what To Da Moon is doing.

@Tane

Sell Pressure Mitigated, or Essentially Just Burned?

We recognize the ABC mechanism significantly reduces immediate sell pressure on ARB tokens by locking them within liquidity pools. However, this approach effectively immobilizes capital in very low-turnover micro-pools (in certain amount of cases), functionally resembling a token burn. Or, is there any way the DAO can reclaim ARB provided at some point?

We aren’t just “mitigating sell pressure” the ARB is acting like a magnet, attracting more ARB! As tokens get sold via q/acc, ARB gets sucked into the ABC. We created over 400k POL demand with our program in season 1 on zkEVM, we can create even more demand for ARB given the lessons we’ve learned so far.

We don’t currently have a mechanism for the ARB to be clawed back, other than token sales.

@Tane

Incentive Alignment & Upside Capture

Although receiving 5% of each project’s token issuance is attractive, governance tokens from small-cap projects are notoriously illiquid and may impose significant portfolio-management overhead relative to the potential return. If we are to focus on this aspect, employing a dedicated investment vehicle, similar to the GCP, might offer a more strategically sound approach to capturing economic upside from supported projects. We’d love to understand the rationale of gaining tokens of projects that this type of funding mechanism targets actually benefits Arbitrum DAO financially after some operational overhead.

These tokens are very liquid by design, but I would keep the operational overhead light and just make a simple rule, like sell 1/2 tokens if they are over 20M market cap, another 1/4 at 50M, move the rest into treasury or something like that. There is no reason to bloat this proposal with bureaucratic overhead… We can let an AAE handle the treasury management.

@Tane

Comparative Precision and Evaluation Metrics

Gitcoin’s recent transition from broad quadratic funding (QF) rounds to the more focused DDA framework underscores some needs toward precision capital deployment. Likewise, Arbitrum’s own DDA pilot programs have demonstrated the operational advantages of DDA-based funding.

In that regard, it would be beneficial to outline explicitly how q/acc’s structure specifically outperforms DDA on key dimensions such as project targeting accuracy, evaluation overhead or so.

Or, it is also beneficial to demonstrate strong post-launch KPI performance (revenue, user retention, and actual product-market fit) clearly linked to the ABC and quadratic funding structures. Transparent and detailed reporting of these outcomes will ensure this design could potentially outperform the existing funding scheme.

I would consider q/acc to be a specific domain itself: Small startups that want to tokenize. This is the domain we want to support. I think its important to not be overly exposed to one narrative, AI, NFTs, DeFi, Wallets, Gaming, DAOs, Music, L2s; we have helped teams from all of these verticals launch tokens. If we were only oing AI tokens, and the AI narative dies, we are in trouble.

Instead we are going more horizontal, supporting small teams that want to launch a token for their product, and we will make it easy for them to launch their token here on Arbitrum.

I don’t see us needing to out perform DDA programs on these metrics, we work along side these programs to support the builders that go through them to help them launch their token (if they need one) and create demand for ARB while we do it!

Most of the KPIs we hope to be judged on are not even on the table for DDA grant programs, they don’t generate ARB demand and they don’t launch tokens.

@Griff

To measure success, we will track:

Onchain Growth – 10x – Market cap growth (in ARB) compared to ARB granted to teams. E.g If we give the teams a total of 1M ARB, we will produce 10M ARB worth of market caps

ARB Demand Ratio – 25% – Ratio of ARB in protocol vs ARB granted to teams. E.g If we give the teams a total of 1M ARB, we will capture 1.25M worth of ARB in the protocol, creating 250k worth of ARB buying pressure.

Sustained Value – 1 year – Long-term market cap growth (in ARB) of tokens. E.g The 10x growth will last for at least a year.

First-time Arbitrum Users – 500 – Number of q/acc participants new to Arbitrum that buy more than $10 of tokens. E.g 500 users that pass our sybil filter will have never used Arbitrum before.

On-Chain Activity – Varied – Trading volume, user participation, and liquidity metrics. This will be tracked but it is so gameable, it’s not worth creating an exact metric, but we will create a lot of onchain activity.

[Federico]

Appreciate the energy and thinking behind this proposal. I like how you try to tackle genuine issues with traditional grant programs – especially around mitigating token sell pressure and providing the DAO with direct upside.

However, I’m not convinced that strong teams would choose to launch tokens through q/acc. Giving up 10% of total token supply in exchange for ~$50k in ARB (which is locked and not immediately usable) seems like a poor trade. This setup doesn’t offer a meaningful runway, pushing teams to prioritize token hype over genuine product development – a distraction from achieving PMF. And at that point, teams might as well use permissionless launchpads or other, less dilutive options instead.

It’d be helpful to clarify exactly what kind of teams q/acc is targeting. Later-stage projects with established PMF likely won’t accept the dilution and complexity, while high-quality early-stage projects will typically prefer to delay token launches until after achieving PMF. In my experience as an investor, most token launches are successful only after clear PMF is achieved, making the proposition here difficult for both builders and investors to justify.

While some q/acc projects (like those from Polygon Season-1) might see short-term activity, I’m skeptical they’ll sustain meaningful long-term value, which makes me think that there are better ways to spend the treasury’s ARB. I’d be more supportive of pursuing a more traditional venture investing approach (similar to what the GCP is currently doing) than adapting token launch mechanics into a grants framework.

[Griff]

@Jose_StableLab

Strengthen Long-Term Value Alignment with Arbitrum

Given q/acc’s track record on Polygon and cross-chain operability, we’d like to see stronger mechanisms that ensure enduring alignment with Arbitrum. While this deployment may initially target Arbitrum-native teams, there’s a risk that some projects might migrate or operate cross-chain post-launch, diluting the value created for the Arbitrum ecosystem.

We suggest exploring:

• Exclusive launch commitments or delayed multi-chain deployment periods to retain stickiness for teams launched through q/acc.
• ARB-denominated milestones or reward unlocks that incentivize measurable contributions to the Arbitrum ecosystem (e.g., transactions generated, unique users).
• Encouraging participating teams to explore Orbit deployment paths or integrate deeply with Arbitrum-native infra and community programs.

I love these suggestions… one important thing that maybe I didn’t make clear in the proposal is that each team is absolutely locked into the Arbitrum ecosystem and the success of ARB because their token’s price is directly pegged to the ARB price.

The Augmented Bonding Curve’s (ABC) collateral will be ARB and the LPs on Camelot will be ARB pairs so if ARB goes up 5%, the builder’s token goes up 5%, if ARB goes down 3%, the builder’s token goes down 3%. There is a direct economic connection between each team’s token and $ARB. Even if they nridge their token to other chains… their liquidity is here and denominated in ARB. I can’t think of another program that offers stronger aligned incentives.

Also, we are absolutely excited about doubling down on our successful launch of Prismo’s L2 gas token, and would love to repeat that same success with Orbit chains.

@Jose_StableLab

Reducing the per-project ARB allocation to $25–30K for initial cohorts, scaling upward based on community traction or usage milestones.

We can’t really do this, we are using bancor-style bonding curves with a 12.5% reserve ratio, this means that if we only put $25k in the bonding curve their fair launch would start at a market cap of $200k. This is too low in my opinion for most teams we are talking to. We could do funny things… like launch the ABC with less collateral than it is supposed to have, but that is very bad practice.

@Jose_StableLab

• Conditioning the release of collateral on demonstrated KPIs like volume, active users, or protocol fees.
• Defining a clawback or reallocation mechanism if projects fail to graduate or meet minimal engagement thresholds.

We are looking at a solution that could work like this, where we would put KPI vesting on the team’s tokens. This was in the original ABC design. The main KPIs we would look at are related to secondary market liquidity, circulating supply and market cap.

If we can implement KPI vesting then we could have a clawback mechanism.

[Griff]

@Federico

I’m not convinced that strong teams would choose to launch tokens through q/acc.

The twelve teams that have launched on q/acc so far can be found here:

Quadratic Acceleration

They are pretty great projects. These 12 teams wanted to launch a token, but they were short on capital. We offer them a fair launch platform, and a deep liquid low cap token. Many of these projects see ways where a token can enhance their product, or is core to their product, but the complexity of executing on a token launch is a lot of work, we streamline that process for them and they really appreciate it.

Jump to 2:19 and hear what one of our builders has to say about the experience:
https://x.com/Nofuturephoto/status/1918297827425271885

@Federico

It’d be helpful to clarify exactly what kind of teams q/acc is targeting. Later-stage projects with established PMF likely won’t accept the dilution and complexity, while high-quality early-stage projects will typically prefer to delay token launches until after achieving PMF. In my experience as an investor, most token launches are successful only after clear PMF is achieved, making the proposition here difficult for both builders and investors to justify.

We are definitely targeting the high-quality early-stage projects. The reason they need to delay their token launch is because they don’t have q/acc to handle it for them! The q/acc launch helps them build an early committed community and unlike most token launch strategies, they have an external team doing it for them and deep liquidity & a price floor once they hit dexes. They can launch and then have effectively 6 months before the tokens from the fair launch unlock, so they have 6 months to get PMF.

Not every project will benefit from launching a token before PMF, it depends on the project. But there are a lot of instances where the token is integral to the project (e.g. the gas token for an Orbit chain, but also many other instances) where a token is a core part of the product and needs to be launched, or there is a strategic benefit to building incentivized community early, or several other circumstances.

[CastleCapital]

We’re supportive of the direction q/acc is taking, particularly its use of DeFi-native mechanisms to align incentives, reduce ARB sell pressure, and offer a more sustainable approach to token-based funding. It’s clear that the program is designed to help teams launch tokens with improved structure and community alignment, and early results from Polygon show promise.

That said, the proposal leans heavily toward projects that are already looking to launch a token. While that’s a valid subset of builders, many high-potential teams on Arbitrum are still in earlier phases focused on technical development, infrastructure, or product validation before a token is even on the table.

At present, q/acc reads more like a launchpad with some added support layers. To maximize its impact, we suggest exploring stronger collaboration with other grant domains (e.g., Domain Allocator Offering) to ensure that technical and pre-token projects also receive the resources they need. This could create a more holistic pipeline from early R&D through to tokenization while keeping Arbitrum attractive to a broader range of builders.

[Saurabh]

The following reflects the views of GMX’s Governance Committee, and is based on the combined research, evaluation, consensus, and ideation of various committee members.

@Griff

Sell Pressure on ARB: Teams sell granted tokens to cover expenses, driving down ARB’s price and reducing ecosystem stability.

In the current DDA program season three the grantees are paid in USDC. It was a similar case in season 2.

We like the new approach taken instead of traditional grant approaches. The approach is promising aligning incentives through q/acc, bonding curves, and fair launches it also resembles more like a token launchpad ( Fjord Foundry). The price of the token is very substantial and depends on the market.

Are there any legal challenges to this? If yes how do you plan to address these?

Prismo has a partnership with (DBM) of the Philippines and just has a working MVP how to do you deem this as pmf? The project is supposed to launch it’s mainnet in Q2.

While the projects might have liquidity, but there is little to no trading volumes which raises our concern on the demand for these tokens.

The success of these project also depends on how they plan to utilise the 90% tokenomics if they won’t utilise it efficiently it is most likely going to fail.

Our suggestion would be make this program more suitable for Arbitrum Native Projects since we have wider ecosystem than Polygon. Preference for Arbitrum native or Arbitrum aligned projects those from STIP, LTIPP, or other DAO efforts.