Proposal: Accelerating Arbitrum - leveraging Camelot as an ecosystem hub to support native builders

Proposals
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At L2BEAT we are voting FOR this proposal in the temperature check.

Rationale

While we hear and respect all the objections raised here in the comments (we summarize our understanding of them later), we believe that overall this proposal is a net benefit to the Arbitrum ecosystem. More importantly, we believe that the opportunity cost of not doing this proposal is higher than the actual risk of this proposal not meeting all of its goals.

How we view proposals as this one is that they are quite similar in nature to special economic zones from the traditional world. When the government sets such a zone for some company, it’s not just a support for that company, but rather a long-term investment that is supposed to provide a long-term benefit for the whole ecosystem.

That’s exactly how we view this proposal and how we assess it. We echo the sentiment expressed in some comments that Camelot is clearly aligned with Arbitrum as being the native Arbitrum DEX means that Camelot cannot succeed without Arbitrum succeeding, and the long-term success of Camelot is beneficial to the overall Arbitrum ecosystem. However, with this grant we want to make sure that Camelot commits itself to providing additional benefits to the community. For example, we would like to see Camelot committing long term to support native Arbitrum project, especially those that received support from ArbitrumDAO or Arbitrum Foundation through grants or otherwise. So looking at it from the DAO perspective, we look into it not just as a support for Camelot, but rather as a two-way mutually beneficial deal we’re making.

Regarding the arguments that say we need to wait until there is some established framework for handling grants such as this one before we can proceed with it, I tend to disagree. I do engage in work on all existing grant framework proposals and I don’t think any of them is currently suited for such grants. Moreover, I believe that with grants of that size only DAO itself can push such proposals forward.

I also don’t think that approving this request sets a precedent for future requests from other parties. Arbitrum DAO does not have to be a fair judge, treating all existing and future parties fairly, it should always act in the subjective interest of the ecosystem at the given time. If a similar proposal from another DEX appears in the future, we should judge it in the context given at that time and through the lens of the ecosystem benefits provided in the proposal at that time.

Having said all of that, we’d like to express our support for this proposal in the temperature check, so that it can be discussed and modified in such a way as to dispel the doubts presented in the comments in this thread. We will facilitate this discussion going forward if there will be interest in it.

Appendix: Our understanding of the context of the proposal and main points FOR and AGAINST it

Some data:

In the 6 months of Camelot’s existence, it has achieved:

  • $2,5B total trading volume
  • $100M TVL at its highest point with an average of about $80M
  • Over 300,000 unique users
  • Averaging $450K in weekly fees
  • Averaging $18M in daily volume

Facts to take into account:

  • Camelot is a strictly Arbitrum native project
  • They have 25+ partners on Arbitrum network
  • GRAIL-ARB pair is the largest ARB native pair with over $700K in liquidity.
  • Similar grant provided to Velodrome in Opitmism resulted in a positive impact on the whole ecosystem

Key Points FOR

  1. Camelot is an Arbitrum native DEX with a great track record across various metrics, and with a vested interest in the success of Arbitrum and ARB.
  2. 100% of the ARB requested will be distributed as liquidity incentives, without any of the grant going towards GRAIL or the Camelot team.
  3. The opportunity cost of not doing anything is likely bigger than the cost of funding this grant, especially that it’s going to be distributed to the end users. (reflected also by fexac769)
  4. Providing Camelot with this grant will give Arbitrum exposure as a DeFi friendly ecosystem and may attract new builders.
  5. Camelot has helped many protocols by providing liquidity incentives in GRAIL and xGRAIL in lieu of their own incentives helping them drive emissions down. (By Ice).
  6. Not supporting this grant proposal would send a dubious signal to builders in Arbitrum, since Camelot has demonstrated that they’re committed to Arbitrum. (By MrOakilt)

Key Points AGAINST

  1. The size of the incentives will likely attract a lot of opportunistic capital, rather than sticky, with the value gained by Camelot to be less than the cost of the incentives, and with the value gained by Arbitrum to be minimal. (By MattOnChain)
  2. Lack of details around the planned allocation of the grant. For a grant of this size, there should be more quantitative details available upfront. (By Flindy)
  3. We should consider long-term effects of LP incentives before considering such a grant, and only if we determine that the projected outcome will be a success we should move forward. (By Ameeradmi)
  4. Possible concentration of benefits specifically on Camelot. Direct grants to associated protocols could be a work-around, instead of funneling all the grant money through Camelot in the form of LP incentives. (By 0xCoolPaper)
  5. There’s potential COI in the Snapshot vote, as Jones DAO is voting in favor of the proposal, but they’re benefiting from ARB incentives on Camelot’s pool. On top of that, Camelot is also voting for their own proposal with the tokens they received from the airdrop. (Point 8 and 9 by Olimpio)
  6. Camelot has comparatively low efficiency - in the range of x7.5 less efficient than other DEXs. (By Curia)
  7. A thread detailing some quantitative reasons why Camelot receiving such a grant might not be the most efficient use of capital. (By BoredGenius).
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