[Primex Finance]LTIPP Application - FINAL

# SECTION 1: APPLICANT INFORMATION

Applicant Name: Anton Demenko
Project Name: Primex Finance
Project Description:
Primex v1 is a non-custodial protocol that facilitates spot margin trading on Decentralized Exchanges (DEXs) with decentralized trade execution. This represents the current state of the protocol, where Primex’s primary function is to enable leveraged trades on the spot market for traders, while also allowing lenders to earn interest, which is directly backed by the margin trading fees.

Following the launch of Primex v2, the protocol will evolve into a full-fledged DeFi-native prime brokerage. This will extend its capabilities beyond spot margin trading to include a broader range of leveraged operations, introducing new features and use cases.

How does it work?

  1. Lenders supply liquidity to Credit Buckets and earn yield backed by margin trading fees.
  2. Traders lock in their deposits and borrow lender liquidity from Primex Credit Buckets to access leverage.
  3. Keepers constantly monitor and execute trades when specific criteria are met.

Team Members and Roles:
Vlad Kostanda (CEO)
Dmitry Tolok (VP of Growth)
Alex Marukhnenko (CTO)
Anton Demenko (CMO)
Vladislav Dihtiarenko (Full stack Blockchain developer)
Viacheslav Trofymenko (Solidity developer)

Project Links:
Website: https://primex.finance/
App: https://app.primex.finance/
Docs: https://docs.primex.finance/
Github: Primex Finance · GitHub
Twitter: https://twitter.com/primex_official
Discord: Primex Finance

### Contact Information

Point of Contact: avd
Point of Contact’s TG handle: @avd_01
Twitter: @avd01eth
Email: anton@primex.finance

Do you acknowledge that your team will be subject to a KYC requirement?: Yes

SECTION 2a: Team and Product Information
Team experience:

Vlad Kostanda (Co-founder and CEO):
Academic Background: Vlad holds a Master’s degree in Cryptography from the esteemed Kharkiv National University of Radioelectronics, Ukraine.
Professional Experience: Vlad has 13 years of experience in cryptography and information security, blockchain platforms and smart contracts, software engineering, computer science, team management, and business development. He leads technology and delivery processes at Primex.finance. Previously, he founded Adoriasoft, a software development company, in 2010.
Core Skills: Blockchain, Cryptography, Solidity, Business Management

Dmitry Tolok (Co-founder and VP of Growth):
Academic Background: Dmitry acquired his MSc in Business Informatics from the University of Applied Science Technikum Wien, Austria and his MSc in Business Administration from Simon Kuznets Kharkiv National University of Economics, Ukraine.
Professional Experience: Dmitry is a strategic business development executive with a thorough grasp on the technology startups landscape for over 8 years. In the dynamic DeFi space, Dmitry has shown proficiency in identifying emerging trends and leveraging them to the company’s advantage. His leadership has steered the startup towards significant milestones, contributing to its sustainable growth in the competitive DeFi industry.
Core Skills: Business Development Strategies, Comprehensive Understanding of the Business-Technology Interface

Alex Marukhnenko (CTO):
Academic Background: Alex graduated with an MSc in Cybersecurity from Kharkiv National University of Radioelectronics, Ukraine.
Professional Experience: Alex has deep knowledge and expertise in smart contract development, DeFi, various blockchain platforms, including Ethereum, Substrate, Cosmos, and cryptography. His wide-ranging skillset in programming languages include Solidity, C++, Java, Python. Experience 5 years.
Core Skills: Blockchain, DeFi, Cryptography, Solidity, Computer networks

Anton Demenko (CMO):
Academic Background: National Aerospace University -‘Kharkiv Aviation Institute’ Ukraine, Bachelor’s degree, Information and Communication Systems Security.
Professional Experience: Anton is a seasoned professional in marketing and product management. He previously served as the Product Manager at Adoriasoft and was the Co-founder and Head of Business Development at They Agency. At these positions, he demonstrated his leadership skills by successfully undertaking numerous product launches, marketing campaigns across the CIS, USA, and Europe, and steered various growth initiatives. Experience 9 years.
Core Skills: Brand communication strategy, Digital marketing, Product design, Data Analytics

Vladislav Dihtiarenko (Full stack Blockchain developer):
Academic Background: Kharkiv National University of Radio Electronics, Information analytical technologies and management, Bachelor’s degree
Professional Experience: He is an advanced full stack developer, experienced in both frontend and backend. He is well-versed in several programming languages and frameworks, has 3 years of experience with NFT and DeFi, and can adapt to new technologies.
Core Skills: JavaScript, React, Node.js, HTML, CSS

Viacheslav Trofymenko (Solidity developer)
Academic Background: Makarov National University of Shipbuilding, Ukraine, MSc in Engineering
Professional Experience: Passionate Blockchain (Solidity) developer with 3 years of experience in developing, testing and deploying smart contracts on the Ethereum blockchain. He has a large expertise in DeFi protocols and their integration. He has experience in front-end development using JavaScript, React.js, Next.js and TypeScript.
Core Skills: Solidity, Smart Contract Development, DApps, DeFi protocols

What novelty or innovation does your product bring to Arbitrum?
Primex Finance is a non-custodial prime brokerage protocol that connects lenders with traders. It empowers traders to amplify their trading positions with leverage on DEXs, such as Uniswap. Working with spot liquidity, Primex can provide leverage for a variety of assets already available on the spot market without the necessity to create a new isolated derivative market. On Primex, traders can also benefit from CEX-like trading tools and interfaces. The Primex team is dedicated to providing a universally accessible trading and lending platform, empowering users to exchange value in a more effective way.

What problems does Primex solve?

  • Fragmentation of digital asset markets.
  • Centralized trade execution still present in DeFi
  • Overcollateralization in DeFi
  • Limited number of assets and pairs available for leverage
  • Accessibility

Spot margin trading is the first implemented Primex use case for the liquidity borrowed from Lenders, and it is already live on Arbitrum. Primex aims to expand the number of use cases, with the next priority being leveraged liquidity provision.

In v2, Primex becomes a unique leveraged portfolio protocol and expands its utility to offer universal DeFi-composable leverage. This would allow borrowers to employ borrowed funds across various trading strategies and DeFi protocols, with the sole requirement being the acquisition of sufficient collateral from such activities. In addition to investing the borrowed funds in LP tokens, borrowers will have the flexibility to use the LP tokens they own as collateral in their portfolios. This includes a variety of asset types, ranging from fungible tokens (such as cryptocurrencies and lending LP tokens) to non-fungible tokens (like Uniswap V3 LP position NFTs, among others).

Primex Portfolio will extend the functionality of Primex v1, facilitating a vast array of possibilities for utilizing borrowed liquidity. The key differences and ideas include:

  • Instead of individual Positions, the central element of the protocol is now a Portfolio that is a combination of Positions.
  • A Position can represent any type of value or even debt, expressed as fungible assets (e.g., cryptocurrencies, lending LP tokens, etc.) or non-fungible assets (e.g., Uniswap V3 LP position NFTs, etc.).
  • Collectively, the Positions within a Portfolio have an estimated liquidation value, which must be recalculated each time the price of an individual or underlying asset changes using supported Oracles.
  • In the Portfolio, there’s no need to distinguish whether a Position was provided by the user as initial collateral or if it is the result of a trading operation or a subsequent Portfolio update. What ultimately matters is the Portfolio’s current value and its liquidation value. This approach allows for simultaneous expansion in supporting different asset classes and protocols, both as collateral types and new leverage use cases.
  • A Portfolio may contain debts to multiple Buckets, which are represented as several Debt Positions, each with a negative value. This contrasts with other Positions that hold positive values.
  • Traders have the opportunity to borrow not just ERC20 tokens but various kinds of assets (such as lending LP tokens, Uniswap V3 LP positions, etc.) from specialized Buckets that accommodate the corresponding assets. This makes the Portfolio a combination of owned and borrowed assets of arbitrary types.

For additional details, please check the Primex blog.

Leveraged liquidity provision

The first new leverage use case to be implemented is leveraged liquidity provision on Uniswap v3. Here, a Trader borrows liquidity from a Bucket, optionally swaps a portion of it for another token, and subsequently places the token(s) into a Uniswap v3 pool as a liquidity provider. The Trader can configure the LP parameters in the same manner as on the Uniswap interface. As collateral for the debt, the Uniswap LP NFT is held in Primex’s contracts. Liquidity providers will get the opportunity to amplify their profits using borrowed funds from Lenders.

When the trader decides to close the position, the liquidity is removed from the pool, swapped back for the borrowed asset, and the debt, along with the associated interest, is repaid. The trader is then given the remainder of the tokens. If the value of the position falls to a critical level relative to the debt, the position is liquidated by the decentralized Keeper infrastructure.

Hedging leveraged LP positions with spot margin positions

Traders will have the ability to craft well-balanced portfolios by merging leveraged LP positions with spot margin trading positions. This approach allows them to hedge their risks within a single protocol and eliminates the necessity to rebalance positions across multiple protocols.

For instance, a Trader can supply liquidity to the WETH/USDC pool and simultaneously open a counteracting spot margin position in the WETH/USDC pair. Traders can create and manage these positions through a single, unified interface.

By doing so, the profits from one position can offset the losses from the other, thus mitigating the risk of liquidation. Establishing such a delta-neutral strategy allows the Trader to earn interest from the leveraged liquidity provider (LP) position, which can offset the borrowing costs. This approach is anticipated to yield greater profits than a conventional, non-leveraged LP position with an equivalent investment.

Here is an example of how a properly configured hedging spot margin position can significantly improve the liquidation price of a leveraged LP position, thereby mitigating its losses more effectively. The graph shows the dependency of Portfolio health on the current price.

LP position: Trader borrows USDC, swaps a part of it to WETH and opens an LP position in WETH-USDS pool. Spot margin position: Trader borrows WETH and swaps it for USDC.

By properly configuring a hedging spot margin position, it is possible to significantly improve the liquidation price of the leveraged LP position, thereby mitigating its losses more effectively.

Here is an example of the profitability of a leveraged LP position hedged with a spot margin position vs. a non-leveraged LP position with the same deposit size. The graph shows that, although the portfolio’s profitability is initially lower for a short period, it quickly surpasses that of a simple LP position of the same size, thereby demonstrating the rationale behind such a structure.

More information about the protocol:

https://primex.finance/, Litepaper: DocSend

Is your project composable with other projects on Arbitrum?
Primex provides leverage for various DeFi use cases, the first one being spot margin trading. Trades happen through various DEXs such as Uniswap, Quickswap, Balancer, etc., increasing their volume. Future integrations include lending protocols, staking, and other interest-generating protocols.

Additionally, Primex will integrate the Paraswap router, accessing multiple DEXs within the Arbitrum ecosystem (Paraswap currently supports 35 DEXs on Arbitrum). This integration will broaden market access for traders.

Also, we plan to integrate an Enso router, which facilitates not only simple swaps of ERC20 tokens but also more complex interactions with DeFi protocols, including deposits, withdrawals, etc. This integration is a crucial part of Primex v2’s vision for a leveraged portfolio.

Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?
Gearbox, DeltaPrime, and InfinityPools are comparable to Primex in some areas.

How do you measure and think about retention internally?
We employ several strategies to monitor our performance effectively.

Initially, plan to utilize Dune dashboards that encapsulate all crucial metrics, such as DAU, MAU, WAU, TVL, as well as the numbers of traders and lenders, transaction counts, volume, and so on.

Furthermore, we collaborate with web3 native attribution providers to evaluate our marketing effectiveness and track all sources of traffic. This helps us understand our standing in regards to user growth, growth in TVL and volume, and retention rate, among other aspects. With this data, we can channel our marketing efforts towards only the most impactful activities.

Relevant usage metrics:
Daily Active Users: A time series metric representing the daily count of unique addresses interacting with the protocol’s contracts.
Daily User Growth: A time series metric representing the daily number of transactions interacting with the protocol’s contracts.
Daily Transaction Count: A time series metric representing the daily number of transactions interacting with the protocol’s contracts.
Daily Protocol Fee: A time series data representing the daily total protocol fee generated. For example, swap fees, borrowing fees, etc., comprising all economic value generated through the protocol, contracts, apps, etc., by users.
Daily Transaction Fee: A time series, daily total transaction fees generated daily by interactions with the protocol’s contracts.
Daily ARB Expenditure and User Claims: Data on individual ARB incentive claim transactions made by users, as incentivized by the protocol. It should include the timestamp, user address, and the claimed ARB amount. The spent ARB will allow for the normalization of growth metrics.
Incentivized User List & Gini: The list should include users incentivized by the protocol along with their performance metrics. For instance, if trading volume is incentivized, this would be a list of traders with their respective trading volumes. If liquidity providers are incentivized, it would include a list of LPs and their liquidities in USD. Protocols should also strive for more uniform engagement levels across a wide user base for long-term sustainability, which will be measured through a gini coefficient across reward recipients.
TVL: A daily time series expressed in USD, calculated as deposits minus borrows.
Trading Volume: A daily time series, also measured in USD.
List of Traders: A comprehensive record of addresses or entities engaged in trading activities. This list should include trader addresses and the volume of trades executed.
List of Depositors: A list of current and past participants who have deposited during the incentivized period to the protocol. The list should include depositor addresses, their current deposits in USD, time-weighted deposits in USD, and the duration of their deposit participation.
Daily Borrowing Volume: A daily time series measured in USD for each asset and in total.
Daily Deposits Volume: A daily time series, presented in USD for each asset and in total.
Withdrawals: A daily time series expressed in USD for the amount of net withdrawals out of the protocol
Borrowed Amount: A daily time series measured in USD for each asset and in total.
Utilization Ratio: Optimize the ratio of borrowed to available assets, indicating healthy demand and potential for higher interest revenue.
Liquidations: A daily time series measured in USD.

Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan:
Yes

Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest (Note: this does NOT disqualify an applicant):
No

# SECTION 2b: PROTOCOL DETAILS

Is the protocol native to Arbitrum?:

Primex is deployed on Arbitrum and various other chains.

On what other networks is the protocol deployed?:

Primex is deployed on other chains, including Polygon and Ethereum.

What date did you deploy on Arbitrum mainnet?

01.11.23
Arbitrum Transaction Hash (Txhash) Details | Arbiscan and other transactions from this address

Do you have a native token?

Planned.
Tokenomics: DocSend

Past Incentivization:
There were several types of incentives distributed in early PMX (ePMX) token, about 700k ePMX were distributed.

Current Incentivization:
There are no ongoing incentive programs.

Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?
Recently we’ve started working on Primex v2 supported by UAGP grant.

Protocol Performance:

Over the past 5 months, we’ve had the following performance:
TVL: $396,000
Volume: $123,000,000
Transaction count: 65,000
Users: 8,000

Protocol Roadmap:

During the next 12 months, we will focus on the scaling of the current protocol features and the development of new ones, the main priorities are the following:

  • New DeFi Leverage use cases
  • New collateral types
  • Cross-margin positions
  • SDK for institutions
  • Trading widget
  • Decentralized Order book
  • Fully-functional tokenomics
  • New order types
  • Cross-chain balance transfers

Audit History & Security Vendors:
Primex has passed 7 audits to date, and you can find all the details here: GitHub - primex-finance/primex-audits

Security Incidents:
We haven’t had any exploits.

# SECTION 3: GRANT INFORMATION

Requested Grant Size:

42,000 ARB

Justification for the size of the grant:

With the incentivization program, we aim to provide rewards to both Primex users - Lenders and Traders.

Our estimation is based on the following model: Primex aims to achieve specific TVLs in various assets. To attract these assets, we should offer an APY that is competitive with well-known low-risk lending protocols such as Aave and Compound. These protocols allow lenders to deposit assets without the risk of impermanent or other losses. As reference values from other protocols, we utilized the average 30-day APY from DeFi Llama.

As a basis for interest, we assumed the low-risk interest from stablecoins like USDC and USDT, which is currently about 13% on Arbitrum. For stablecoins, we increased the APY to 20% because they are in high demand across multiple DeFi protocols, and we need them for leveraging any crypto assets. For other crypto assets, we set the APY to 15%, as there are fewer low-risk investment opportunities that offer high APYs.

We aim to reach the target TVL by the end of the incentive program. For simplicity, we assumed a linear liquidity accumulation function, meaning that after the first week, 1/12 of the target liquidity will be accumulated. This may differ from reality, where the accumulation function could take a different form, such as an exponential one. The total interest that should be paid for this liquidity was calculated based on the linear assumption.

Token Target TVL Proposed APY Total interest in USD Be-weekly interest in USD ARB Total
WETH $500,000 15% $ 7,615.38 $ 1,269.23 3,807.69
USDC $500,000 20% $ 11,446.15 $ 1,907.69 5,723.08
USDC.e $50,000 20% $ 1,096.15 $ 182.69 548.08
ARB $250,000 15% $ 4,136.54 $ 689.42 2,068.27
USDT $250,000 20% $ 5,769.23 $ 961.54 2,884.62
WBTC $500,000 15% $ 8,653.85 $ 1,442.31 4,326.92
GMX $50,000 15% $ 865.38 $ 144.23 432.69
LINK $50,000 15% $ 865.38 $ 144.23 432.69
UNI $50,000 15% $ 865.38 $ 144.23 432.69
Total: $2,200,000 $ 41,313.46 $ 6,885.58 20,656.73

As a result, Lenders should receive approx 21k ARB tokens as reward.

Lenders and Traders are equally important Primex participants, so the total reward for Traders should be the same - about 42k ARB.

Grant Matching:

Primex currently doesn’t have a tradeable token, so we’re unable to pair it with token incentives at this time.

Grant Breakdown:

The grant will be distributed over 12 weeks in bi-weekly rewards for users.

21,000 ARB (50%) will be distributed to Primex Lenders to drive TVL growth.
21,000 ARB (50%) will be distributed to Primex Traders to drive volume growth.

Funding Address:

0xfae311af96FbBCc209f944EF2D95aE2e8e76f55F

Funding Address Characteristics:

Safe multisig 6/10 with the keys stored securely

Treasury Address:

0x63464916388dAB4f2e80551250335490C4518D37

Contract Address:

To be determined.

# SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES

Objectives:

The primary objectives of the grant are the following:

  • Boosting liquidity on Primex to $2.2 million.
  • Achieving a cumulative trading volume of $7 million, thereby enhancing the volume on Arbitrum DEXs.
  • Raising the utilization rate of liquidity in Primex Credit Buckets.

Execution Strategy:

We plan to launch the Primex Achievement System, which is designed to motivate lenders and traders to engage in competitive activities. Participants can earn points reflecting their activities and monitor their rankings on a publicly accessible leaderboard. This system encourages an active user community that aims for better results while enhancing their experience working with the protocol.

By creating a competitive environment, users are motivated to increase their involvement and improve their trading and lending strategies. As they move higher on the leaderboard, they can not only track their progress but also see their personal ranking compared to others. This interactive element adds an additional layer of competition and incentivization.

The Trader Achievement System is based on the following criteria:

  • Trading Volume
  • Number of Trades
  • Types of Trades
  • Weekly Activity Maintenance

The Lender Achievement system operates on the basis of several criteria:

  • Daily rewards correlated with the liquidity provided
  • Milestones for lenders that reflect their total locked-in liquidity

More details are available at the link below:

ARB tokens will be distributed to participants on a bi-weekly basis according to their accumulated points. The guidelines for earning points will be made available to all users.

What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric?

The design of the Primex achievement program is expertly crafted to attract new users while simultaneously fostering engagement among existing participants. By implementing bi-weekly point resets and distributing rewards, the program maintains its current TVL and also actively attracts additional liquidity. This approach ensures a steadily growing cumulative volume over time.

Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy.

The key KPIs are the following:

  • TVL
  • Trading Volume
  • Fees
  • Daily Active Users

All data will be available on Dune dashboards, as well as the Primex Achievement system Leaderboard.

Key metrics are the following:

Metric Current After 4 weeks of LTIPP After 8 weeks of LTIPP After 12 weeks of LTIPP
TVL $100,000 $650,000 $1,350,000 $2,200,000
Volume $600,000 $2,500,000 $5,000,000 $7,000,000
DAU 30 45 70 100
Fees $3,000 $7,500 $15,000 $20,000

Grant Timeline and Milestones:

Milestone 1 (4 weeks of LTIPP):

  • TVL: $650,000
  • Volume: $2,500,000

Milestone 2 (8 weeks of LTIPP):

  • TVL: $1,350,000
  • Volume: $5,000,000

Milestone 3 (12 weeks of LTIPP):

  • TVL: $2,200,000
  • Volume: $7,000,000

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?

In the v1 version, Primex Finance operates as a non-custodial protocol that facilitates spot margin trading on DEXs with decentralized trade execution. This is the current state of the protocol, where Primex serves one primary use case: enabling leveraged trades on the spot market for traders while allowing lenders to earn interest directly backed by margin trading fees. The protocol is designed to work on top of multiple DEXs instead of competing with these platforms for liquidity, thereby enhancing the volume on Arbitrum.

Future plans for Primex include integrations with lending, staking, and other interest-generating protocols.

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 5: Data and Reporting

Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?

Yes

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

Yes, we will provide a detailed report on the distribution of ARB tokens to the lenders and traders. Additionally, it will be available on a public dashboard in the Primex app.

First Offense: *In the event that a project does not provide a bi-weekly update, they will be reminded by an involved party (council, advisor, or program manager). Upon this reminder, the project is given 72 hours to complete the requirement or their funding will be halted.

Second Offense: Discussion with an involved party (advisor, pm, council member) that will lead to understanding if funds should keep flowing or not.

Third Offense: Funding is halted permanently

Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.)

Yes

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

1 Like

Hello @avd ,

Thank you for your application! Your advisor will be @JoJo.

Please join the LTIPP discord and ping your advisor in the general chat so they can create a new channel and start communicating with you.

@cliffton.eth Could I ask you to change the name from ‘Draft’ to ‘Final’?

Hey there I’ve amended the title post to reflect that this proposal is FINAL. All the best!

1 Like

Hi! Despite that you have much to do and to improve I vote for your project.Thanks for your development work, for your project, guys. Best wishes!

Primex’s proposal is based on interesting modeling and an impressive achievement points system. However, the council identified shortcomings in the validation of the data presented and the clarity of the implementation strategy. The large amount of requested grants caused some reservations due to uncertainties and a lack of plans to achieve the set targets, such as liquidity increase. In general, we think that the proposal should be reviewed for a more comprehensive evaluation and a solid presentation. For all these reasons, we abstain from voting for the proposal.