We’d like to thank the entire Arbitrum community for their feedback and support, it has been a pleasure to engage in so many discussions with the ecosystem stakeholders. Through this process we’ve gained valuable insight, allowing us to further improve the DAO proposal. Below we will add further context to some of the key points raised, whilst also highlighting the key adjustments made to the proposal itself.
TLDR:
- Grant size reduced from 2M ARB per month to 1.5M ARB per month, for a total of 9m ARB over 6 months.
- A minimum of 33% (500k ARB) is allocated specifically for liquidity pools and integrations that adopt ARB as a base asset
- Clarified proposal objectives and KPIs, to be measured in monthly transparency reports
- Additional parameters for determining liquidity incentives for specific pools and integrations
- A monthly transparency report that provides transparency and holds accountability against the proposal objectives and parameters, detailing how every ARB is allocated
- Added focus on incentivising the adoption and utility of ARB as a base asset
Our view is that the community and ecosystem should be actively engaged to propose, discuss, and shape multiple different grant programmes. There is no one size fits all approach for an ecosystem as diverse as Arbitrum, and a variety of grants will be a necessity to effectively distribute tokens and grow.
We would like to clarify that before proceeding with this proposal, we sought guidance from the Arbitrum Foundation to ensure that Camelot’s approach was aligned with the broader goals of the chain. The Foundation provided guidance that this grant would be an appropriate proposal for the DAO, and therefore we proceeded to post and share it publicly.
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Proposal Updates
In order to take on board valuable feedback and improve the proposal, we’re making several adjustments and additions. These are now implemented directly in the original proposal.
Firstly, we will be reducing the total amount requested to 1,500,000 ARB per month, for a total of 6 months and 9,000,000 ARB. We appreciate the feedback received, and we think this adjustment provides an appropriate response to ensure that the proposal will be as sustainable as possible. As this is potentially the first incentive grant, it is inherently experimental in nature. Therefore, we’re confident that over the 6 month period, we can gain all of the data needed to refine the most effective amount of incentives required for further proposals.
Secondly, we aim to provide much more thorough transparency through clear objectives and a relevant ‘transparency report’ template. On a monthly basis, we will ensure that we’ve clearly documented where every $ARB token has been allocated, the relevant growth metrics achieved, and most importantly the progress for our broader Arbitrum objectives. You can see the objectives below and a template of the transparency report attached. This report will be provided at the latest 72 hrs before the following month’s incentives are to be distributed.
Thirdly, we have now added proposal objectives and parameters, as well as a much greater emphasis on the use of incentives to increase the adoption and utility of the $ARB token as a base asset for liquidity pools and integrations.
Proposal Objectives (Which will be measured and tracked within the transparency report, attached below)
- To grow the liquidity of Arbitrum builders, bringing new users into the ecosystem and directly supporting the growth of ecosystem protocols
- To use the incentives to bring new protocols into the Arbitrum ecosystem
- To support the launch of native builders and their liquidity requirements
- To advance the adoption of ARB as a base asset in liquidity pools
- To advance the adoption of ARB within integration partner strategies
- To provide marketing and community support to the ecosystem builders included in the incentive programme
Accelerating Arbitrum: Transparency Report Template
New Proposal Adjustments
In addition to the transparency report, we have also made Any pool that receives rewards must be included in the transparency report with the relevant context if newly added.
- Incentives will be distributed to a minimum of 30 partner pools, as documented in the transparency report.
- No single pool or partner (excluding core $ARB pools) can receive more than 5% of the total incentives (as measured over a 30-day period)
- No single pool or integration partner can receive more than 5% of its TVL in monthly incentives (as measured over a 30-day period)
- A pool must maintain a minimum trading volume of $1,000,000 annualized to be valid to receive rewards (as measured over a 30-day period).
- A minimum of 33% of the total incentives will be used on liquidity pools with $ARB as the base asset. On top of this minimum, Camelot will provide bonus incentives to teams that actively transition their liquidity to ARB as a base asset too. This will be included and measured within the aforementioned transparency report.
- The partner integration section has now been merged into the “Ecosystem Builders” section, with the relevant parameters above being applicable.
- If at any point the Arbitrum community or DAO is not satisfied with the performance or delivery, they can move forward with a governance vote to end the grant early.
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Why are the proposed liquidity incentives an effective use of grants?
There have been several comments about the need for grants that provide incentives, so we’d like to clarify the value of doing this. There can and should be many forms of grants, but we feel strongly that incentives can provide the most direct and broad growth to the chain.
Simply put, liquidity is the foundation for growth and innovation. Without liquidity, onchain activity and DeFi as a whole are constrained. Focusing incentives on the liquidity of Arbitrum builders will benefit the entire ecosystem in several ways:
- Deeper liquidity for ecosystem tokens will unlock further growth and utility. Users seek deeper liquidity to perform their DeFi actions with the least friction, and protocols want to build wherever the liquidity is deepest.
- This grant is specifically focused on the liquidity of ecosystem projects. The tokens of these ecosystem projects are significantly less liquid and more volatile than tokens like $ETH or $USDC. Therefore, in order to deepen liquidity and attract users, higher incentives are required to compensate for the additional risk.
- The main utility of the $ARB token is for governance, and one of the most important factors for healthy governance is a strong decentralization of the network. The initial ARB airdrop played a pivotal role in this, and we believe that distributing incentives to users whilst growing the Arbitrum protocols is the most effective way to continue to decentralise the network.
- The incentives will be used to bring further adoption and utility for the $ARB token. We’ve updated the proposal to include guaranteed and additional incentives for protocols that use $ARB as a base asset in the liquidity pools, as well as for integration partners that drive value and adoption to the $ARB token.
This grant will enable Arbitrum to become an even more attractive environment for users and builders. Deeper liquidity attracts both users and developers, with incentives playing a key role in this. While incentives may be viewed as attracting short-term mercenary capital, the enduring impact is attracting more protocols and spurring development. Choosing where to build is a crucial decision for a project. Therefore, liquidity incentives will initially attract users, but the sustained growth of the ecosystem will be driven by increased development and the network effects of protocols. Builders are drawn to active, incentivized ecosystems, and this proposal is designed to create such an environment.
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Why is Camelot uniquely positioned to distribute these incentives?
Several comments expressed that the Arbitrum DAO should not favour any DEX over others and that Camelot would unfairly benefit from this grant.
Camelot is home to over 40 ecosystem partner pools and integrations. A new native or multichain protocol would not be in a similar position to receive and distribute a comparable grant. Camelot’s Round Table is formed of over 25 official partners that are formally committed to working closely together and supporting the broader ecosystem. These types of partnerships cannot happen overnight and the material impact can be reflected in the data, which shows that Camelot has the highest TVL of any native DEX, as well as the highest volume for native tokens, and the highest number of partnerships. Camelot can therefore effectively handle the business development and co-ordination required to assist these partners in using ARB as a base asset.
Whilst the table @MrOakilt shared above is not exhaustive, it shows the extent to how many Arbitrum protocols Camelot directly supports and has brought into the ecosystem. Camelot has assisted the onboarding of large multichain protocols like Pendle, hosted the public sale of projects like Penpie, and made close long-term relationships with the largest native players like Plutus and Jones.
How does this benefit the DAO?
As mentioned above, by distributing ARB tokens as liquidity incentives to ecosystem builders, we can unlock significant growth for ecosystem builders, onboard more users and protocols, further decentralize the network, progress the adoption of ARB as a base asset, and overall strengthen Arbitrum’s position as the lead L2 for DeFi.
Arbitrum’s key strength is the ecosystem it has managed to grow, with such a diverse range of protocols and an active and driven community. Camelot has been committed to bringing new protocols into the ecosystem and supporting the launch of native builders, and therefore Camelot can ensure that these incentives are used to continue this pace of growth whilst deepening the network effects. As mentioned above, whilst there may be the perception of incentives being a short-term strategy, the value gained from new builders developing in the ecosystem has long-lasting and permanent effects.
Camelot is the leading native DEX with over >40 ecosystem partner pools and integrations, and therefore is best positioned to ensure that any incentives be can distributed to the teams that actively build on Arbitrum. This extends to incentivising the use of ARB as a base asset within liquidity pools, as well as for integration partners too. This is an important factor that will see value accrue directly to the ARB token itself as its utility increases.