Hey everyone,
With already 11 weeks in the books and the end of the LTIPP program getting closer, I wanted to reach out to the Arbitrum DAO to update you on how this went for the Pyth Network as well as request an extension of this grant beyond the initial 12 weeks.
Reminder:
- Pyth Network was allocated 1,000,000 ARB
- These ARB would be used to pay back the gas costs incurred by dApps when updating Pyth prices onchain
- By August 12th, about 66,300 ARB had been distributed to over 80 protocols ; with another 9,000 ARB expected to be distributed on Aug 26th
Growth of the Pyth Network on Arbitrum
Prior the start of the LTIPP program, there were 7-8K price updates per day on Arbitrum.
The number of updates per day peaked on the back of the LTIPP program on July 14th (over 70K). However, seasonality and market slowdown seem to have cooled activity on Arbitrum to ~20k updates per day.
You can see the daily price updates for Arbitrum here.
The number of contracts/applications using the Pyth oracle have also increased by 50%. From 35 contracts daily updating prices onchain, data now shows about 60 distinct contracts triggering price updates. As the number of distinct protocols using Pyth continues to grow, we believe that covering gas costs during launch and market activation periods is important to the long-term success to such protocols.
Total Value Secured: Prior to the program starting, the total value secured by the Pyth oracle on Arbitrum was around just over 43,000 ETH at the time — it is today at 52,500 ETH ; an increase slightly above 20%.
Total Trading Volume enabled: Pyth has enabled over $16.1B in trading volume on various Arbitrum decentralized perpetual exchanges for the months of June and July (no data available yet for August).
All in all, we believe that the Pyth Network has greatly benefited from this LTIPP program but so did the applications powered by Pyth: higher (ETH) TVL, increased trading volume, more frequent price updates from the general increased activity/greater number of applications becoming powered by Pyth.
Why 900,000 ARB remaining?
While initial activity goals set up in the grant request were mostly met (25,000 daily price updates among others), how is it possible that the Pyth Network only had to use 8% of its total allocated grant?
- Blobs and cheaper transactions!
Indeed, at the time of the grant request, blobs were not or just had gone live.
Before blobs, a single Pyth price update was costing about $5 ; within the 1st days of blobs being live, cost was trending below $1 ; and on average today, a price update merely costs $0.03.
Given that payback of gas costs to users was $ denominated, the 20-30x decrease in gas fees from the request date til now also naturally drove the actual ARB amount required much lower.
- Transaction activity on Arbitrum has trended lower
The number of transaction on-chain is a leading indicator to the number of oracle updates that enable such transactions. as such, the recent cooldown in transaction growth (here) on Arbitrum meant less price updates required and thus less gas to rebate.
What to do next, after the end of the LTIPP program?
We acknowledge and fully understand the upcoming grants detox, as delegates of the Arbitrum DAO want to realign going forward but given how successful this program has been for the Pyth Network and the Arbitrum applications relying on its price feeds, we’d like to propose an extension request option to the Arbitrum DAO.
- Option: 3 months extension
3 months extension (ends on 30th November 2024) as the new grant strategy and process come live. We would also actively take part in shaping how could infrastructure (oracles and beyond) can participate in such future endeavours.
To reach end of November, we would request to keep a total of 250,000 ARB (75,000 of which would have been already distributed part of the initial LTIPP program).
And 750,000 ARB would thus be returned to the Arbitrum DAO at the end of the LTIPP program on August 26th. If market conditions improve during the following 3 months and transaction volumes substantially pick up, the PDA might request additional resources to sustain the goals of the initial grant.
If not approved by the DAO, all the remaining ARB (900K+ estimated) will be sent back to the Arbitrum DAO at the end of the LTIPP program.
We sincerely think that this extension for the Pyth Network will greatly benefit the Arbitrum whole ecosystem, from its applications to DeFi users.
First and foremost, we’d like to emphasize that incentives around infrastructure protocol / public goods like the Pyth oracle are not impactful overnight but rather take weeks if not months in some scenario. Indeed, if you are an existing DeFi application, changing your oracle to another is no simple feat and often requires a new audit — similarly expanding from any chain to Arbitrum could take longer than expected as demonstrated by the Synthetix case here.
As of now, and thanks to this LTIPP program, Arbitrum dApps can build at will robust oracle systems for over 500 assets (crypto, FX, stocks, ETFs, commodities) where outdated onchain price updates, and elevated costs are all but ancient history. This situation also helps establishing Arbitrum as the go-to layer for DeFi as all are empowered to build the best applications without restrictions.
We would love to hear any feedback regarding the above proposal and would be willing to fine tune it as desired by the DAO.
Thanks a lot for the time!