[Perennial] - Final STIP Review
The STIP program for Perennial was designed with the overarching objective to “…position Perennial V2 for sustainable long-term growth through the use of targeted incentives…”. Looking back our KPIs, we can confidently say that the STIP program achieved this.
Perennial Finance is focused on supporting a flourishing ecosystem of derivatives related products through its composable approach. Rather than aiming to be a monolith the Perennial team has chosen to focus on building with and attracting teams to the Arbitrum community.
The 750,000 ARB STIP greatly helped Perennial achieve this objective. Over the last few months Perennial has been able to onboard developers, professional market participants and onchain traders to its platform. The grant has helped kickstart the flywheel required to compound the growth of an ecosystem around Perennial V2’s new hyper-efficient markets primitive.
Major outcomes of Perennial STIP:
- Onboarding Kwenta — We think this is one of the major outcomes of the entire STIP program. Kwenta accepted our DAO proposal to come to Arbitrum & build on Perennial. With a modest STIP grant, Perennial was able to outcompete protocols across DeFi that are multiple of our size to onboard the largest source of retail trading flow in the Optimism ecosystem. Kwenta does $billions in monthly volume and routinely has over $100mn in OI. This is a huge win for Perennial, and the broader Arbitrum ecosystem, as these onboarded users will go on to use many defi protocols.
- Proving out protocol mechanism — Taker volume fluctuated over the course of the STIP grant, but one thing was clear — when taker demand flourished, Perennial liquidity mechanisms performed as good as any in DeFi. Perennial reached a peak of over 5x liquidity to TVL (meaning $1 in TVL was supported $5 in total protocol liquidity), a DeFi-leading metric. And Perennial’s capital efficiency was on display with pro makers earning 3-digit apy of in-protocol yield (before we gave them ARB incentives). We discussed one such pro maker who was earning over 200% APY (before incentives) by LPing into Perennial’s ETH & BTC pools with 6x leverage. This gives us confidence Perennial can scale capital very quickly in response to trader demand.
- Taker Growth across the board — Perennial V2 bootstrapped a number of new markets including ETH & BTC markets, which continue to do solid volume each day, and a number of novel/long-tail markets like RLB, TIA, XRP, JUP, ETH^2, BTC^2. These markets are well positioned for further growth going forward. Integrations with RageTrade (completed), Kwenta (in progress), and more should work to drive additional taker volume.
Key Metrics
Alongside our overarching objective we had a number of more granular KPIs that we chose to help define success. We were very happy with the progress we made on them, with 10 out of the twelve aims improving.
We chose the first three categories as a way to prove out the new mechanism and then drive the real aim of the STIP program as a whole: Arbitrum ecosystem growth.
Here’s a breakdown of these KPIs:
Markets
Launch & Incentivise 4 initial markets - ETH, BTC, SOL, MATIC created- Bootstrap 6 longer-tail markets - RLB, TIA, XRP, JUP, ETH^2, BTC^2 bootstrapped.
Deploy at least 2 market focused on NFT - announced partnership with Astaria, currently in audit, launching soon.- Deploy at least 1 market focused on RWAs - Ready to launch.
Trader Growth
Notional Trading Volume - Increase total volume by $500m- Time Weighted Open Interest - Increased by 723%
- Unique Trader retention - Increased by 153%
Maker
- Liquidity Depth - 3x increase in absolute TVL, 6x increase in Total Liquidity
Liquidity Provider Churn - Lowered churn by 24%- Maker Diversity - Pro Maker & Vault utilization increased 4x
Ecosystem
- # of teams building in the Perennial ecosystem - Increase by 4 teams, inc Kwenta!
% of flow driven by ecosystem partners - The integrations have not yet launched.
In addition to these KPIs, we reviewed the capital efficiency of the protocol during the STIP period. We found that at times, the protocol was able to offer 5.5x the amount of liquidity to traders that other protocols.
This was achieved due to the protocol design of Perennial, but also the ability to incentivise makers to experiment with our “Pro Maker” feature. The STIP grant has helped derisk a new way for makers to operate in the market.
ARB Distribution
Our STIP grant allocation was 750,000 ARB tokens. Over the entire program, including the deadline extension, we distributed a total 749,992.45 ARB. This left a remainder of 7.55 ARB that will be returned to the treasury.
As required, we kept the community up to date on the latest changes to our program through fortnightly updates on the forum (See here). As well as publishing a Dune dashboard covering key metrics surrounding the protocol (See here)
Learnings
The STIP program was pitched as a learning experience for the Arbitrum community around how to devise, distribute and analyze a rewards program. Ecosystem partners like OpenBlock, and the STIP stewards team, have done an excellent job of pushing the initiative forward. The Perennial team looks forward to their comments post the program.
Throughout the process we have gained a number of insights around the creation and administration of the grant.
Incentive Design
As with any direct to consumer grants program, a confluence of factors can affect the results of the applied incentives. Guided by our KPIs and the overarching KPIs, we modified the allocation of the STIP rewards almost each epoch.
The changes would occur every season (~2 weeks) and allow for the team to observe & modify based on users behavior. With smaller incremental changes this showed us how best to apply the ARB rewards to ensure the value per ARB distributed.
Sybil Resistance
For the first two weeks, we tested OI incentives to bootstrap the initial 4 pools. We came up against the challenge of ensuring Sybilers didn’t receive an outside portion of the rewards each season. We employed our own methodology in detecting and removing these actors to a decent amount of success.
Ultimately, while these incentives proved effective at increasing OI and volume, it was clear that we needed to focus on other forms of incentivisation to ensure an organic continuation of activity when rewards were wound down.
Conclusion
The whole team at Perennial Labs greatly appreciates the support of the Arbitrum community in voting for our STIP proposal. The grant set out to encourage the creation of a more diverse derivatives ecosystem on Arbitrum, through the STIP program we were able to kickstart this journey .
Perennial’s unique protocol design provides a contrasting offering from other established protocols and has helped to attract what we hope will be a long lasting community of traders, developers and established projects to continue building with Perennial and the Arbitrum ecosystems.
What’s next
Coming off the back of the STIP grant program we have a number of exciting initiatives & upgrades that continue the spirit of the STIP goals.
- Kwenta X Perennial - A grant to the Arbitrum DAO to help supercharge Kwenta’s launch.
- Further interface integrations with the likes of Rage Trade, Siren and others.
- Launch of NFT & RWA markets
- Perennial Version 2.3
