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

[Gerhart]

At first I personally found the proposal to have substantial merit on many fronts and no real drawbacks. Incentivising liquidity providers as directly as possible and showcasing native Arbitrum infrastructure at the sametime seemed like a good use of resources to me. So I was surprised to see so much negativity in the posts here in the forum, which led me to weigh in on the yes side.

Now I see it quite differently and am not at all interested in having an opinion on the proposal anymore, it’s one proposal, the first of its kind, no big deal if it gets passed or not.

What is a far bigger deal, is the way this governance process has fallen to pieces at the very first hurdle. If you buy into what this is all supposed to be about, we are pioneers trying to build an entire ecosystem. One issue or another is nowhere near as important as how we build it and with what intent. The way the trolls have been out in full force, like something out of LOTR should not be seen as an attack on Camelot’s proposal or themselves. It is a much more personal attack on the governance process itself and by extension the entire Arbitrum ecosystem.

There is absolutely no way at all that Arbitrum can progress without getting the governance right. We are here to build something new and groundbreaking. Yet at the very first attempt we fail so utterly, so miserably and why? Simply because we are continuing to attempt to govern in the way that all governance ever has. With short sighted and misguided self interest at the heart of the debate and in every corner. We look no better than the senate of old Rome who did nothing but squabble, back stab and even assassinate each other. That is how petty and narcissistic this governance process now looks, well done to the few.

I think it is very important to look deeper than the proposal here, let’s look at this governance process. This reasonable proposal has been attacked in such a ridiculous way, to pretend it has been fair argument is completely naive and foolish. We will get nowhere unless people man up and take a stand for what is best for the ecosystem.

What sort of foundations are we laying? Ones that will support the weight of an entire ecosystem or ones that will be left to rot to dust because people are incredibly short sighted and only care about their own completely misguided self interests. If we don’t speak our minds and all sit on the fence, then what is even the point of all this?

There are some real high quality posts here, no doubt about it, some brilliant minds we have, let us not let the noise from the few drown out a reasonable and veritable discussion. Let us elevate this entire process and ourselves with some illumination, let us forget our bias and concentrate on what is best for the process and the future of the Arbitrum ecosystem. We are laying the very bedrock of the foundations here, time to stand up, choose wisely.

[Frey]

Unquestionably, erecting an unprecedented necessitates an all-encompassing and exclusive governance framework.

The discourse appears to have descended into fractious disputes and self-centered contentions, evoking reminiscence of the ancient Roman Senate’s dysfunctions.

Constructive dialogue and contemplative deliberations were frontlines in the first line to clamor and ad hominem assaults.

Recognize the presence of sagacious minds and invaluable contributions within the community. Shall we?

[mfer]

I don’t like the attacks I’m seeing AGAINST DEMOCRACY.
Forget about trolls in this chat. This discussion has “only” 97 participants.
Focus on what has real weight in the governance which is the voting power. There are 43600 voters on snapshot.

Just because you consider some people here as trolls, you cannot revoke legitimacy to an entire process that involves 46k actors.
Or… May you tell me that the tens of thousands who voted against are all trolls?
Maybe what happens here is a LACK OF TOLERANCE to people who think differently?

Every single one that votes is invested in Arbitrum, that’s why has right to vote. If votes in opposition of what he thinks is best (trolling), then is harming his own investment and voting against his own interests.
Do you really think the majority of people acts this way?

Out of Top50 voters, holding over $25K worth in ARB each:
-36 voted against
-12 vote for
-2 voted abstain
-Some of them are delegates

Do you think people with such a large bags of ARB are not smart enough to take reasonable decisions? Do you think they are voting against the Arbitrum good on purpose?

I think everyone vote what they really think is the best. Could you consider that the majority genuinely don’t like this proposal?

Democracy is about involving people with different thoughts to vote together for a common cause and everyone accept the most common thought. It’s about RESPECT and TOLERANCE.
And sure, not everyone is gonna be as smart as you are, but doesn’t matter, some of them will contribute with more liquidity than you, others with more work, etc.
Tolerance is a must to participate in a democratic process.

All this people who start insulting and disrespecting the ones that voted differently of them… and also the ones who call the voting process a fail just because they don’t like the result… all these individuals have a problem and this problem is not trolls but a lack of tolerance.

To begin with, the process didn’t end yet and still can have a turn, but if this proposal doesn’t pass, it’s not going to be a fail of the governance but just a fail of the proposal, which is not a bad thing even for the ones who are in favor since it shows the community sentiment and is a learning for stronger future proposals.

Actually I think the governance is pretty healthy when you see 46k wallets participating.

[Woo_woo]

Arbitrum (💙,🧡)

The foundation has announced their grants program.

[kingofsparkles]

Fair point, but one thing you failed to recognize is that the votes of 46k wallets don’t really matter when the top 10 delegates have the power to overvote any proposal. In my opinion, this proposal highlighted that Arb DAO isn’t truly ready for governance just yet. The amount of toxic misinformation and nonsense spread around forums and ct that people blindly follow because some influencers fabricated it is appalling.

[kingofsparkles]

Did you even read the blog post? This program does not align with what Camelot is asking for, as it doesn’t cover incentives. If this is the framework people have been discussing, then the post above only proves that the framework needs to be laid out by the DAO. Camelot’s proposal could serve as a fundamental brick and example for other protocols to follow.

[Woo_woo]

It doesn’t exclude incentives, although I imagine raw incentives will be a lesser part of this program by the foundation. I still maintain that there should be a DAO framework for grants similar to what optimism has. It looks like there are discussions of this topic elsewhere on the forum, so you can’t say the work isn’t being done. I think the round model works well for situations like this where one party getting incentives ahead of time gives them a competitive advantage.

[Frey]

That right , i must agree on this fact : conveying unequivocal and perspicacious action steps assumes a paramount significance .

Thank you all for this healthy exchange.

The embers of decentralization and equitable competition nurture community consensus.

Glean wisdom from triumphant endeavors, and embrace the ever-evolving spirit of improvement.

The clarion call echoes for specificity, meticulous feasibility assessments, and equipoise in emphasis, humbly acknowledging potential shadows in the light as we chart a course to the pinnacle of DAOs.

[Bob-Rossi]

I have a few thoughts given the current iteration of this proposal.

Grant Framework

Others have voiced the potential issue with Pluralistic Labs and Quest Book’s proposals having passed as a start to a grant framework, and where this ties into that with Camelot as a separate proposal. In fairness to Camelot, those are not active at the time of proposal, however I think it is a valid question on how to handle this. I’m a little torn, as I’ve always had a mentality that it’s better to do something then nothing… but the risk here is that this proposal undermines what those two frameworks were trying to start up.

My specific thoughts - with the caveat of I know we have to start somewhere, my fear is Camelot will unfairly benefit compared to other DEXs due to being the first to get a grant. I’d rather see a comprehensive framework setup for DEX and/or liquidity in which Camelot would apply for. I think that creates a more level playing field, as the goal of the ARB DAO should be to grow it’s ecosystem, not necessarily pick winners/losers. Again, I’ll emphasize I say that with the understanding that isn’t necessarily Camelot’s fault, given the DAO’s somewhat slow start to setting up a program like this.

Cost

Cost seems to be a prevailing theme of the discussion. As a young DAO, we have little to compare to internally for level-setting. I’ve seen two main trains of thought - one saying the cost is justified as a relatively small % of total treasury, others saying the funding is simply very large compared to other projects (namely, the two Grant Framework proposals, as well as in relation to Camelot as a DEX).

To me the costs seem to high. In the vacuum of this one grant compared to the entire DAO treasury, it seems reasonable enough. However, it will be a precedent setter. A similar discussion has come up with HOP’s DAO - once is manageable, but what does this cost look like if other DEX’s come along and ask for the same funding? Will this be a tenable amount if it was paying 15M a month because 10 9 other DAO’s applied? Plus, this project would still be more costly then both Questbook / Puralistlabs combined.

Potential Compromises

The two things above seem to be the most hit on topics from my skimming of the responses. Given the current snapshot voting, I’m thinking towards what might be potential changes to be more tenable to the DAO if it does fail.

• Grant Framework - is this something worth re-visiting once a more robust framework is in place? A compromise here might be to apply within those frameworks. Or at least pause until those frameworks give a little more context to what grants look like for ARB long-term.
• Other DEXs Involved - I wonder if the appetite for this would grow if it was a join proposal brought together by multiple DEXs. This would help avoid the feeling of giving the liquidity boost to one specific protocol.
• Camelot Matching - A high cost may be more easy to stomach for the DAO if Camelot brought some of their own ARB and/or their own token to offset or Match on it. i.e., ARB DAO gives $750k a month but Camelot must match that cost to meet the 1.5M.

Overall, I’m fairly neutral when it comes to the importance of liquidity incentives. I see both sides, but not sure I lean hard either direction. I’m open to liquidly boosting projects, but as this specific project stands it feels like a lot of ARB being spent for something that doesn’t help the ecosystem on the whole enough to justify that cost.

[mfer]

I agree. It’s not that I don’t recognize this point, it’s just that I didn’t get into it in my last post, but I certainly did it in another post above, mentioning the concern around “cartelizing” the chain:
[Proposal: Accelerating Arbitrum - leveraging Camelot as an ecosystem hub to support native builders - #228 by mfer]

That’s why a few days ago the discussion was around the conflict of interest involving partners/friends managing heavy voting power and the proposers themselves, and that’s also why the idea of establishing a Code of Conduct came out, which is something I’d support.

But yeh, that’s not a guarantee of use and it could fall into different subjective interpretations.

Ideally, I’d disable the possibility of delegating the governance. Honestly, to me if someone is too lazy to cast a vote himself or too “limited” to understand what’s up to vote and make a decision, then that voting power would simply be lost for that occasion.

Anyways this went probably too off-topic to be discussed here.

[mhiztasolid]

You have a valid opinion here. I hope they look into it

[BlockworksResearch]

Blockworks Research has chosen to abstain from this proposal. Camelot is a proven contributor to the Arbitrum ecosystem and has a unique ability to aid long-tail projects; however, we are not sure that the liquidity incentives as proposed provide a quantitative framework to ensure a high probability of a positive expected value for the DAO relative to the cost.

[Curia]

We want to express our concerns and perspective on the current proposal from Camelot for a grant to be used for liquidity incentives.

1. Upcoming Grant Frameworks: We note that Camelot’s proposal comes at a time when we anticipate the implementation of comprehensive grant frameworks, such as those from Pluralistic Labs (passed temp-check)and QuestBook (currently in on-chain vote process). These frameworks aim to offer definitive guidelines for protocols requesting grants from the Arbitrum DAO. By ensuring a standardized evaluation process for all grant requests, these frameworks will contribute significantly to the transparency, fairness, and integrity of our ecosystem. I am of the opinion that we should wait for these frameworks to be in place before considering such substantial grant proposals.

2. Camelot have comparatively low efficiency: The Volume/TVL ratio, a metric that measures the usage of the exchange per dollar of Total Value Locked (TVL), is noticeably lower for Camelot compared to other DEXs. For Camelot, the ratio is 0.08 which is around 7.5x less efficient than other DEXs. This discrepancy raises questions about the efficiency of the platform and whether it would be rational for the DAO to provide liquidity incentives.

3. Organic Growth and Incentives: Arbitrum has experienced significant organic growth, becoming the top 3 largest blockchain network in terms of DEX volume, mostly without incentives. We question the need to allocate substantial resources to liquidity incentives when its ecosystem has been successfully expanding without them. We suggest that we instead consider allocating these resources to builder grants to stimulate innovation and development within Arbitrum instead.

4.1 Potential Impact on Competition and Precedent Setting: Providing a significant liquidity incentive to a single DEX, like Camelot, could hinder the growth of other DEXs and stifle competition within the ecosystem. This could have a negative impact on innovation and diversity, which are key factors in the sustained growth and resilience of the ecosystem. Furthermore, as the first to receive a grant, Camelot could unfairly benefit at the expense of other DEXs. This sets a precedent that could become unsustainable if multiple other DEXs follow suit and request similar funding.

4.2 Support for a More Inclusive Proposal: We believe that a more comprehensive proposal encompassing multiple DEXs would better serve the broader ecosystem. Instead of favoring a single protocol, this approach would provide a level playing field for all DEXs and would better align with the ARB DAO’s goal of fostering growth in its ecosystem.

Hence Camelot already owns around 2.2m of ARB from the initial airdrop, we suggest maybe use these funds for liquidity incentives first before requesting additional funds from the DAO? By doing so could not only demonstrate Camelot commitment to the ecosystem but also provide valuable insights into the potential impact of such a program without putting the DAO funds at risk.

In light of these points, while I acknowledge Camelot’s contributions to the Arbitrum ecosystem and the potential benefits of liquidity incentives, I see considerable risks and issues with the current proposal. Until we have a fully operational robust grant framework and a more inclusive and fair approach to supporting DEXs, we will be abstaining this proposal for now.

[DisruptionJoe]

Thanks for a well though out reply. Here are a few things I can add to the conversation in relation to a grants framework.

Understanding What a Framework Provides

The framework we are working towards at Plurality Labs (PL) will not only help us to guide decisions in terms of funds distributed through PL chosen programs, but by the DAO as well.

I listed some suggestions of how the DAO might think in a principles first way here: Proposal: Accelerating Arbitrum - leveraging Camelot as an ecosystem hub to support native builders - #201 by DisruptionJoe

Now, I’ll discuss what this might look like. Imagine we run a Governance Month promotion where we have the DAO vote on multiple Principles, such as do we support grants for liquidity mining AND if yes, do we want to avoid “kingmaking” or grants that reduce competition.

We might learn that 30% of voters DO support liquidity mining, 30% are against, and 40% don’t feel strongly either way. We also might learn that 70% don’t want kingmaking grants.

Our framework when applied to a direct request from the DAO (as opposed to through a program) would offer the suggestion that we perform the following steps.

1. Set a monthly and yearly budget total
2. Suggest a percentage of the budget which should be used for liquidity mining
3. Create a model for allocating the budget between competing DEX including eligibility criteria, how the allocation split is determined
4. Temp check ratify that the DAO approves of the model.
5. Pass a Tally proposal allocating the incentives for a test period of x months

This is very high-level, but might help people think through how a grants “framework” differs from a grants “program”. The programs selected by Plurality Labs would likely be focused on building, but the framework provided will help the DAO set priorities and make better informed governance decisions.

A key goal of the framework is to massively scale the amount of funds the DAO can intelligently allocate between all of it’s programs.

[fexac769]

@olimpio emerges as one of the primary voters, emphasizing the issue of “conflict of interest.” Notably, Olimipio holds a significant role as one of the prominent Optimism delegates, engaging in “airdrop” pursuits on other L2s. As a member of the Arbitrum community, I cannot help but find this interplay of interests fascinating.

Capital efficiency comments seem rather perplexing (such as the remarks made by @Curia above), demonstrating a lack of in-depth understanding of AMMs and liquidity by the majority.

Imagine crafting a stablecoin pool that boasts soaring trading volume, low Total Value Locked (TVL), and nominal fees—thus achieving the epitome of “highest efficiency.” It is simply illogical to compare such a pool with the liquidity of an Arbitrum native project or a newly bridged team’s pool. Comparing these entities is akin to juxtaposing apples and oranges. Efficiency, without broader context, holds little relevance and is, therefore, an inconsequential point.

While I remain a staunch supporter and user of Arbitrum, the ongoing conversation does feel somewhat complacent. It’s essential to assess how many delegates have practical experience in building something from scratch. After all, incentives play a pivotal role in attracting fresh projects to the platform.

In my view, it would merely take the migration of one or two significant protocols to Optimism to awaken the community’s awareness. Delaying incentives for the most prominent native contributors may prove to be a grave error in the long run, considering Optimism’s proactive approach in reaching out to projects.

Arbitrum cannot afford the luxury of postponing treasury decisions for 6-12 months while comprehensive proposals are already in circulation.

While I genuinely respect the efforts of individuals like Questbook and other frameworks, believing that they offer a superior allocation of ARB tokens over liquidity incentives seems misguided.

This entire discussion should be driven by the protocols actually building and contributing to the chain, not governance delegates that are also deciding the fate of other L2s.

[Griff]

Camelot is really cool, but I will be voting against any project focused request for funding directly from the DAO.

These sorts of requests should be made to a competitive grant program, otherwise they give an unfair advantage to the Governance savvy.

[Gerhart]

Griff, you received a single delegation of 10m ARB.

All of the projects building frameworks have stated that Camelot is not applicable within those, including the Foundation.

Your voting power is significant, and yet your comment is Camelot are “cool”?

Something doesn’t feel right here. Please elaborate @Griff

[limes]

I share a general resistance to this proposal similar to the comments made by Matt here. It seems odd to pump funds into one specific DEX based on a vote rather than let markets decide. Any short term liquidity gains wouldn’t stay after incentives move somewhere else.

[krst]

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).