Thank you for your detailed proposal.
I have many questions regarding financing: (besides, I don’t think that increasing the cost of ARB was the goal of any of the grant programs)
Firstly, I see that the top 10-20 projects are being promoted at the expense of Arbitrum, without doing anything for it, right?
I am not very happy with the one-line cost of $2.85 million. I think this should be the most detailed point of your proposal, because it is a large amount
You write that $100,000 will be spent on KPI tracking and I don’t understand where the expenses are? What will this money go towards? If these are specialists who will collect data, then write so.
$15k/month will be spent for each or $7500 each?
I understand the part of the proposal that concerns promotion, but I think it should be separated from the grants, which in the future Arbitrum plans to revive with new specific goals (or use Questbook, which recently started its program and you could join them to promote companies receiving their grants)
Depends on how you perceive Arbitrum’s business model. Each wallet, each transaction generates sequencer fees which are one of the most important revenue sources. On every strategy that has positive ROI and will be continued (since it’s economically feasible) Arbitrum will make long-term revenue once the program ends.
OK, we will add details to the upgraded proposal version.
We will also explain what this amount covers exactly.
$7500 each.
This proposal is a result of ARB Liqudity Incentives discussions that were happening for the last few months and we agreed to run a first iteration of this program to see the results and modify it accordingly. Hopefully at some point we will be able to scale it to the whole ecosystem!
Your insights are always very welcome @danielo! Regarding ROI - as outlined above, the assumption is that strategies with positive ROI (or close to positive) would be continued after the program ends, bringing in new wallets that Arbitrum genereates revenue from. If we assume that sequencer fees are the core part of Arbitrum’s revenue stream, then successful user acquisition through dApps & Protocols is crucial. I think that exchanging this budget to ownership would be unjustified as acquiring new users through protocols means also acquiring new Arbitrum wallets - this isn’t one-sided promotional activity.
I hear you that protocol fees has been the core business model to date. I just don’t think it’s sustainable. Like let’s do a quick calculation of what a wallet can provide, and then see what’s the LTV or at least what’s the value over 3-4 years. And what % of wallets would provide positive ROI over a 3-4 year period. Because my concern is we’d have almost 0 wallets that actually generate positive ROI and crypto’s incentives are completely unsustainable.
We can keep dancing musical chairs ignoring this risk, but it feels irresponsible for me as a delegate and someone who believes in this ecosystem to not at least request a paper calculation. Hope that makes sense
I’m very interested in this proposal, which wants to optimize user acquisition strategies and improve the growth efficiency of the ecosystem.
Previously, IOSG proposed a growth framework, which I strongly agree with:
The proposed growth framework operates as a self-reinforcing system, beginning with comprehensive user analysis and service optimization. This foundation attracts high-calibre projects to the ecosystem, fostering healthy competition in serving user needs. As these projects optimize their offerings, they generate sustainable MEV through organic user activity, creating a virtuous cycle where enhanced user retention drives ecosystem value. This increased value, in turn, attracts both additional users and innovative projects, perpetuating the growth cycle and strengthening Arbitrum’s network effects. ARB's Wake-Up Call: A Critical Pivot is Necessary
The proposal is based on this core idea, and on that basis, some personal questions
This proposal is worth trying in many places, after doing it first, you can iterate to see how effective it is, how to do the balance here with so many projects allocated for the 3 million dollar program?
Why not integrate it with LTIPP/STIP instead of creating a separate program?
Arbitrum DAO already has LTIPP and STIP to facilitate ecosystem development, increase TVL and acquire users. While these programs have not been very effective and have encountered some problems, why not refine their frameworks instead of introducing a completely separate program?
3, It is mentioned here that the true effectiveness of these campaigns is measured through kpi and then data tracking and analytics. does the tool provided by Patterns have an advantage over the existing data analytics tools? These on-chain data tools already provide a lot of analytics capabilities, where is the value-added that Patterns provides? And it costs $15,000 to hire 2 full-time staff. All funds are honored according to KPIs, but what if the project falsely declares KPIs? Is there a strict verification mechanism?
my opinion consider combining with LTIPP / STIP or extending the program to improve overall governance efficiency, need more detailed LTV / CAC calculation methodology and impact tracking program.
Just as an example to get a better understanding.
Should funds for example be used to like promote Arbitrum Dapps in a mobile app like Rabby or Family wallet? Cause I think the best way to get off-chain user on-chain is by focusing on mobile initiatives. Everyone has a phone nowadays and apps are the best way to engage with.
Would also be in line with this
I think the amount is very high compared to the applicants number.
10-20 only? Thats a lot money per applicant.
Hey @danielo, you have a very correct line of thinking - what you just said is also an important discussion on our team. Let me firstly answer the user acquisition argument because the reality doesn’t look as bad as one could imagine:
The lowest CAC we have seen in 3 surveyed protocols that actually calculated it was $50 (declared by middle-sized DeFi). This is roughly equal to 0,02 ETH. I personally believe it’s possible to cut down this number by two but it requires a lot of experimentation.
In order to generate 0,02 ETH in gas fees a wallet needs to make around 100 interactions with dApps / Protocols.
100 interactions translate on average to 40-60 transactions (each transaction can trigger multiple interactions between smart contracts which can be tracked by traces).
40-60 transactions is an achievable threshold for dApps & Protocols, that’s why we focus on them in this proposal. This is of course ROI calculation for the ecosystem, we don’t calculate additional revenues / fees for protocols themselves.
Second part of what you said is that you think protocol fees as a business model are not sustainable. We’re aware of Arbitrum experimenting with Orbit so a multi-chain model similar to OP but this is also covered by other programs.
What other business models do you have in mind that could be developed in order to make the ecosystem profitable and sustainable?
@kamilgorski I know we are having a call tomorrow but another thought that came up while discussing this with others.
Off-chain crypto Ads unfortunately seem scammy to a large part of the population. In my opinion to avoid this education is needed - the best I have seen until now is SheFi (https://www.shefi.org/), who in her latest cohort is onboarding 4k new (female and non-binary) users.
I have chatted to Maggie (Founder of SheFi) briefly about this and she licenses her courses as well. Creating something like the Arbitrum Education Hub, where if certain milestones are met the next course is unlocked might bring new users directly to Arbitrum instead of having them meander around?
This is something running Ads is easier for, we can leverage our good brand name & we can use the SheFi strategy (aka if you get into the program you need to create X posts about it) to organically grow it.
Hey @duokongcrypto, thanks for your thoughts! Let me answer your questions below:
The framework here is designed as self-balancing - by requiring ambitious goals (in order to get accepted) and making projects responsible for their results (in order to receive a full refund). Other than that, we’ll be calculating CAC, LTV & ROI to do the balance math if that’s what you’re asking
We have nothing against integrating with STIP / LTIPP but honestly, I don’t see much framework we could integrate. It’s great that we have plenty of Dune dashboards - this can be reused for tracking KPIs. What else would you see integrated?
Patterns tool is basically a wallet CRM for dApps & Protocols - that’s the main advantage. This means that we can actually calculate LTV for wallets interacting with Arbitrum dApps, which is very complex (requiring converting ABI events from all contracts into human readable conversions) and not possible with other tools. And yes, we can verify KPIs in our tool.
The choice of strategy will belong to the dApp / Protocol and we’re perfectly fine with promotion in mobile apps - that sounds like a good idea if the target audience is similar!
That’s around $50k budget per month per applicant - assuming $50 CAC mentioned above, it’s 1000 users / month. I wouldn’t say that’s a lot for a big or medium-sized app.
This sounds great although I’m not sure it matches my (anecdotal and limited) experience. Most transactions are now $0.01-$0.05 even bridging funds across protocols is relatively cheap. I see plausibility in what you’re saying but I’m not yet convinced. Could you maybe provide some references for the sort of protocol interactions you’re talking about?
And I guess we’re specifically talking about a heavy DeFi user demographic? No problem if so, but would be important to characterise them properly to understand. e.g. I’m a crypto native and use some DEXes etc but I’m not a trader nor degen, so clearly understanding whether I should be counted or not within this users you suggest would help me understand the business case better. (as the question is also where these specific users would come from: other ecosystems or new users, or a mix).
I believe investments as a business model should be VERY seriously considered. This following Mariana Mazzucato’s (a famous economist) thesis on the entrepreneurial state and all our research on ecosystem development and future-proof organisation design plus pain points around projects migrating to other ecosystems and otherwise outsized value capture by grant recipients vs ecosystem.
Off-chain ads and content campaigns are really a good user acquisition strategy, but many dApps and protocols don’t do enough in this area, especially the lack of CAC and LTV calculation, which is like “blind men feeling the elephant”, and it’s hard to evaluate the effect. Can you provide more details here?
The program proposed by Patterns places special emphasis on “measurability” and “return on investment”, which is important. However, a budget of $3 million is a bit large, and we need to make sure that every penny is well spent. It is suggested that we could start with a small pilot and see how it works before deciding whether to expand. Would you consider phasing in the program?
3, I think we can strengthen the on-chain incentives a bit, such as lowering the user threshold through account abstraction and subsidizing the gas fee, so it’s easier for new users to come in. Also, the popularization of off-chain tracking tools is crucial, without data support, it’s hard to assess the effectiveness of the campaign.
I hope the Patterns team will listen more to the community, especially those dApps and protocols that are already doing user acquisition, their experience is invaluable.
Thanks for the detailed proposal. The data showing that 0% of protocols know their LTV and only 21% know their CAC is exactly whats wrong with this space. Projects are just burning money without tracking results.
I like the KPI approach and specially the idea that if you only achieve 60% of KPIs you only get 60% of funding. Thats some skin in the game right there!
But instead of spreading resources thin, why not identify the few projects that could actually bring NEW users to Arbitrum? Im talking about projects with genuine product-market fit that just need a boost to capture users from outside our ecosystem.
Pick 2-3 promising projects that can prove they’ll bring external users
Test the KPI model with them
If successful, then we expand
End goal is $ARB value. Lets be strategic about it - start small, prove it works, then scale up.
Yes, EOA <> EOA transactions on L2s are very cheap (as you said, $0.02 - 0.05 per TXs) but EOA <> SC are much more expensive because of the processing power needed to run them. It’s hard to calculate an average because every smart contract is designed differently (eg. swapping tokens on GMX right now costs around $0.24 in network fees), on L2fees.info you can find some comparisons between L2s based on L2Beat data. Just to give you a quick overview of differences between dApps:
This is Mux dApp data for Arbitrum One during last week - as you can see, it had 65 wallets that generated $61 in gas fees for Arbitrum. That’s $4 per wallet per month, $48 per year. Of course, you’ll find protocols that have 5x less or 5x more.
Regarding your bridging example - there are different types of bridges (decentralized / centralized) and I believe many native bridges cover the gas fees for user with ERC4337 for the same reason we’re also including covering gas fees for bridges into this program - once the funds are inside an ecosystem, they generate further revenue & fees. So this exact case may not be the most representative.
We’re talking about DeFi user demographic when it comes to DeFi category we’ve outlined in the proposal. Please consider that gaming / social protocols have very low volume but at the same time they generate a lot of interactions with the network - also generating fees
I agree with your perspective and think the answer to this is not going to be one-sided - meaning Arbitrum will have to experiment with different business models to be sustainable - including gas fees, RaaS (rollup as a service), etc. I think at some later stage ecosystem’s business model will be similar to current cloud providers models (AWS, Google Cloud, Azure). They do also offer free credits & additional programs to help their clients.
Hey @kuiclub, thank you Let me answer your questions:
So for LTV calculation we’ll be calculating LTV for the ecosystem (gas fees) and LTV for the dApp itself (revenue from fees) for every wallet. At the same time, we’ll be calculating CAC from both off & on-chain campaigns. On-chain is pretty simple to calculate but off-chain may be much more complex because of multiple tools that may be used - so every traffic source will be registered separately and have its own CAC.
During ARB Liquidity Incentive calls we agreed 20 protocols is an optimal number as a pilot - 5 per category, 2-3 big, 2-3 medium & small. As stated above, with assumption of CAC = $50 the budget fits well.
This budget is also multiple times smaller than IOSG proposal ($100m) and Merkl’s (around $40m) which I believe will be voted in the same batch.
Thanks! Yes, I totally agree
We’re trying to listen as much as possible, that’s why we started working on this proposal with surveys and outreaching to protocols.
Thanks @Zeptimus, really appreciate this I think in order to be objective, we need to have all 4 categories included and be able to test it with smaller / bigger projects. Time is of big importance here. Also, since this is a DAO proposal, it needs to be quite neutral so I’m not sure we should be cherry-picking only selected projects.
Thanks, first convincing analysis I have ever seen on giving away free cash for growth.
The proposal would be even stronger if there was something to mitigate for protocols migrating to other ecos shortly after but even without I think I can support a pilot in good consciousness.
User acquisition is always a top priority for any project, even in Web2 business. After going through your proposal, here are a few thoughts:
Budget of $2.85M, $150K-300K per project for 3 months? that’s a pretty big budget for any campaign(s). For DAOs funding this, they’ll want to see clear results (both quantitative and qualitative)) rather than just the execution details. So I think the ROI part isn’t really clear here.
It looks like the dApps and protocols will run their own campaigns, with Patterns helping to monitor and optimize. While that’s useful, it might limit flexibility, especially since each project has different marketing needs.
Could you share some case studies or reports from campaigns you’ve run before? Especially those focused on user retention once incentives are done
I couldn’t access the X on your website, and your Telegram seems very inactive. That makes me a bit cautious about the credibility and reach of your agency.
As previously mentioned, we’re going to aim at ~20 protocols with an average budget of $50k / month. This is not much looking at the biggest protocols out there and for each of these we’ll be calculating ROI based on CAC (for each channel x project) & LTV (for each project & ecosystem).
The exact reason we decided to do it this way was to not limit flexibility but there are some participants of the discussion above who prefer 3rd parties engaging more into campaign creation. Tracking & optimizing is the bare minimum and doesn’t limit campaigns in any way. We’re still deciding how campaign creation is going to look like - whether 3rd parties should engage or not.
Patterns is an analytics tool, not a marketing agency - we don’t run marketing campaigns for the same reason you mentioned in question 2. If we were an agency, we wouldn’t be objective and probably acquire most of the budget which wouldn’t make sense from DAO perspective - it’s projects that need to start building their own campaigns. We cooperate with Optimism Foundation, Polkadot, Bifrost, Aleph Zero and other projects.
Thanks @danielo for your support - I know you’re experienced in DAO economics & P&Ls so your opinion is very valuable for us. I’m excited to push this discussion further once we have some initial insights!
We had a chance to have a chat with Kamil regarding the proposal and he was able to answer most of our questions. We still have a few more questions it would be great if Kamil can address them!
. What safeguards are in place to ensure funds are used efficiently, especially since only 21% of protocols currently track CAC?
. What happens if a project fails to meet its KPIs? Will there be partial funding or no funding at all?
. How will Patterns measure and verify the LTV of users, given that 0% of protocols currently track this metric?
. How will Patterns ensure that the user acquisition campaigns lead to long-term retention and not just short-term spikes in activity?
. How frequently will updates be provided to the Arbitrum community during the campaign period? During STIP and LTIPP, the applicants used to do bi-weekly reporting.
Here are some ideas on how the program could be improved
. Include retention-focused KPIs (e.g., DAU/MAU ratio, repeat transactions) in addition to acquisition metrics to ensure that campaigns lead to long-term user engagement.
. Involve few Arbitrum community members in the selection process by allowing them to vote on or provide feedback on the proposed campaigns. This would increase transparency and community buy-in.
. Introduce a tiered funding model where dApps/protocols receive incremental funding based on achieving specific milestones (e.g., 50% funding for 50% of KPIs achieved). This would ensure accountability and reduce the risk of funds being wasted.
. A lot of these protocols wouldn’t have the infrastructure built to run incentives, and due to the budget being small, it would be ideal if you could provide the infrastructure for these projects to run incentives.
. $3 million seems to be a really small amount for incentives do you plan to increase the budget if needed?
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
The proposal’s focus on structured, metrics-driven user acquisition is a step in the right direction. However, several critical concerns need to be addressed:
Budget Justification: The $3M budget seems excessive given that protocols currently lack the expertise for off-chain marketing. If most teams don’t have the know-how, why isn’t infrastructure being provided instead of expecting them to manage $50K/month in ad spend?
Lack of Shared Infrastructure: Many projects don’t have the capacity to execute these campaigns effectively. Shouldn’t the DAO be organizing infra/tools rather than relying on protocols to figure it out independently?
Retention & Long-Term Impact: The focus is on acquisition, but without retention strategies, this risks being another short-term spike in activity. More emphasis is needed on sustained engagement.
Arbitrum-Led, Chain-Wide Approach: Instead of fragmented, protocol-specific campaigns, we prefer a coordinated Arbitrum-led initiative with a clear, aligned goal that protocols can plug into, ensuring better efficiency and impact.
While the goal of fostering Web3-native acquisition strategies is commendable, this approach raises serious questions about execution, fund allocation, and long-term effectiveness.