Reserve LTIPP Application
SECTION 1: APPLICANT INFORMATION
Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name: River0x, Thomas Mattimore
Project Name: Reserve Protocol
Project Description: Reserve is a free, permissionless platform on Ethereum mainnet (and Base L2, for now) to build, deploy and govern asset-backed currencies referred to as “RTokens.” RTokens are always 1:1 asset-backed, allowing for permissionless minting and redeeming onchain.
For example, Electronic Dollar (eUSD) was the first RToken and is a safety-first stablecoin (backed by Aave and Compound deposits) that brings together diversified, highly liquid backing with anti-bank run overcollateralization that currently exceeds more than the value of the TVL of the RToken itself. eUSD has been chosen as the stablecoin for two retail user applications: 1) Ugly Cash - an app that gives bank-like services to customers throughout LatAm, enabling them to receive USD remittance from the US at 0% fee and spend their eUSD with a debit card. 2) Sentz - an app built on the MobileCoin blockchain that enables users to send and receive payments globally from anyone you can text for (basically) free.
Team Members and Roles:
This proposal is drafted by ABC Labs, who contributes to the Reserve protocol. ABC Labs team members are largely public. Relevant ABC Labs team members include:
- Thomas Mattimore, CEO of ABC Labs
- River, researcher and DAO BD
- Griffin Peer, strategy and operations
- Akshat Mittal, senior protocol engineer
- Erik, design
- Gary Levin, head of talent
- Soham Mishra, business development
- Meir Galimidi, research lead
- Patrick McKelvy, director of engineering
- James Glasscock, head of ecosystem
- Taylor Brent, lead protocol engineer
A full list of team members with roles is available on abclabs.co.
Project Links:
- Project: https://reserve.org/
- App: https://app.reserve.org
- Protocol Documentation: https://reserve.org/protocol/
- Github/Source Code: https://github.com/reserve-protocol
- Dune Dashboard: https://dune.com/reserve-protocol/reserve-protocol-overview
- Blog: https://blog.reserve.org/
- Audits: Reserve has been audited 8 times, RSR was audited by Solidified
- Communities: Discord 3K, Twitter 111K, 104 GitHub stars
Contact Information
Point of Contact: @mattimost / @river0x
Point of Contact’s TG handle: @mattimost / @river0x
Twitter: @mattimost / @river0x_
Email: tmattimore@reserve.org / river@reserve.org
Do you acknowledge that your team will be subject to a KYC requirement?: Yes
SECTION 2a: Team and Product Information
Provide details on your team’s past and current experience. Any details relating to past projects, recent achievements and any past experience utilizing incentives. Additionally, please provide further details on the state of your product, audience segments, and how you expect incentives to impact the product’s long-term growth and sustainability.
We are excited for the Reserve protocol and RTokens to come to Arbitrum. The platform has been live on Mainnet and Base collectively for over a year now with no security incidents. TVL has grown to over $83M, 8 major audits have been completed, and a $5M ImmuneFi bug bounty continues to contribute to the safety. Additionally, the overcollateralization to protect against depegs was put to test during the Silicon Valley related USDC depeg in March 2023, which led to a successful re-collateralization of eUSD holders.
ABC Labs and others are exploring ways to incentivize usage and holding of RTokens and are very familiar with the incentivization of liquidity through various DEX protocols. We expect incentives to show more users and protocols the value of diversification, overcollateralization and revenue sharing, especially in the lower gas environment and strong DeFi ecosystem on Arbitrum.
We anticipate this program will help to integrate Reserve into Arbitrum’s ecosystem, which provides a key value proposition for our own mission: to accelerate access to stable currency for all and ultimately end hyperinflation. Arbitrum’s low fee, high opportunity environment can accelerate this mission.
This program is the first step in what hopefully becomes a long and mutually beneficial relationship between Arbitrum DAO and Reserve’s ecosystem. It may pay dividends for Reserve’s long term growth and sustainability as it will accelerate integrations with partners, from which yield generated can be used to fulfill its decades-long mission.
Team experience (Any relevant experience that may be useful in evaluating ability to ship, or execution with grant incentives. Please provide references knowledgeable about past work, where relevant. If you wish to do so privately, indicate that. [Optional, but recommended]):
ABC Labs team members have been contributing to Reserve for the past 5 years.
Thomas Mattimore, CEO of ABC Labs, previously led a team of 95 project managers, engineers, designers and data scientists automating the mortgage underwriting process as the company went through hypergrowth. His fintech experience informed his 5 year anon participation in DeFi and transition full time into the space. He has overseen liquidity strategy at Reserve and has overseen protocol growth from $23M to $83M TVL in the past 6 months.
Griffin Peer, liquidity lead at ABC Labs, has been working on crypto strategy since 2020 and was previously at Dinara. He executes Reserve’s DeFi multichain liquidity strategy on a day to day basis and can be directly attributed to the previously mentioned liquidity growth.
Taylor Brent, lead protocol engineer, started out at Google, working on distributed systems programming to handle data and run statistical analyses on natural-language processing data. He leads protocol design for Reserve and has been contributing to the ecosystem for as long as anyone.
Meir Galimidi, ABC Labs’ lead researcher, previously worked bringing DTCC’s Trade Information Warehouse into Solidity with Axoni. He makes granular research reports on how to best boost liquidity across ecosystems, which has closely informed Griffin’s RToken growth success.
What novelty or innovation does your product bring to Arbitrum?
Reserve brings a new type of token, backed by existing network assets.
The Reserve protocol on Arbitrum will allow anyone to create an overcollateralized, diversified, self governing asset backed stablecoin, flatcoin, or index basket. All parameters of the RToken can be customized and changed by governance including changing the collateral basket and revenue distribution. This is not yet possible on the Arbitrum network.
Plus, RTokens can share revenue with various destinations in addition to RSR stakers and RToken holders to enable projects, DAOs, and companies to earn a portion of revenue driven via their platform. For example, a stablecoin powered by the Reserve protocol could share a portion of its revenue with the Arbitrum DAO which, if it became widely used in Arbitrum, could lead to a substantial and sustainable new DAO revenue stream.
As the scaling solution with the most TVL, Arbitrum is suited for Reserve too. RToken deployers are constrained on other rollups by reliance on one asset (e.g. USDC) which limits use cases. RTokens coming to Arbitrum could bring more liquidity and more creative DeFi primitives, potentially enabling them to act in a more dynamic manner than on other L2 networks. This combined with low gas fees could deepen Arbtirum’s liquidity positive reinforcement cycle, further enabling innovation.
In turn, users from other networks may see this flourishing ecosystem activity and will be enticed to take advantage and innovate using this unique cross-section of deep liquidity and low fees.
By nature of their yield-bearing collateral, RTokens are a fundamentally positive-sum asset class that may further cement Arbitrum as the home of DeFi.
Is your project composable with other projects on Arbitrum? If so, please explain:
Reserve is highly composable with other projects. To begin with, all RTokens are backed with assets often held in other protocols. This could include DEXs, multiplication markets, bridges, yield aggregator vaults, liquid staking tokens and so on. As RToken TVL grows so too will deposits in each of these protocols, bringing strong first order benefits to ecosystem participants.
RTokens are not just dollar denominated, as demonstrated by ETHPLUS (ETH+), a staked ETH index on Mainnet. Any RToken may be pegged in price to a variety of underlying assets. This increases the potential for composability.
As RTokens are utilized through the network, they will bring second order benefits too. For example, an RToken in a Curve pool on Arbitrum will bring deeper liquidity and enable larger trades, thereby generating higher fees for all LPs and the DEX itself. This will drive more users to provide liquidity and perpetuate this cycle. This works in sync with RToken backing growing, increasing other protocol deposits.
A similar process occurs on multiplier markets with RToken integrations taking advantage of deep multiplier market liquidity to increase exposure to market opportunities. This will drive up rates, incentivising others to mint RTokens to supply to these markets and earn additional yield, thereby increasing multiplication market TVL. Once more, this is in tandem with RToken backing growing asset deposits in the first place.
This process applies to bridge liquidity pools, using yield bearing assets for perpetuals markets to offset funding rates and yield aggregators. Reserve is thus one of the most highly composable protocols in the space and serves as an amplifier for existing network activity. RTokens can amplify network deposit TVL and bring liquidity, boosting activity, sequencer revenue and attracting new participants. This benefits Arbitrum’s DAO.
Examples of compatible projects (for RToken collateral baskets) may include Aave, Compound, Silo, GMX, Gains, Dolomite, Uniswap, Trader Joe, JonesDAO, Convex, Beefy, Stargate and Yearn. These projects may also integrate the RTokens themselves and take advantage of their benefits.
RTokens themselves can be paired in DEX pools, supplied as collateral (with or without an oracle depending on the protocol), used as collateral for perpetuals exchanges in which yield generated can offset funding, deposited into bridges and so on. RTokens are ERC20s and are highly composable.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?
No: Reserve’s permissionless stablecoin factory is uniquely positioned in both the Arbitrum ecosystem and across blockchains. While many stablecoin projects exist and Arbitrum enjoys a growing stablecoin ecosystem, none operate in the same permissionless, overcollateralized, yield-bearing, self-governing manner. Indeed, while many other protocols act as a hyperinflation hedge, none explicitly aim to eradicate it. Reserve is unique in that it harnesses DeFi to facilitate an environment that may solve an offchain problem.
How do you measure and think about retention internally? (metrics, target KPIs)
Reserve’s mission is to increase access to inflation-proof money. To do this, all barriers to entry must be minimized as many of those most affected by inflation have the most limited access to traditional financial instruments. This means that a highly liquid RToken ecosystem is a fundamental building block to enable access to this inflation-proof money. This means our primary success metric is TVL. This metric is straightforward, universally understood, and difficult to “game”.
Nevertheless, contributors pay attention to the following metrics:
- Number and rate of new RTokens deployed, which is indicative of the number and health of RToken experimentation across the ecosystem
- Number unique RToken minters: this highlights potential user conversion and retention to RTokens
- RToken DEX liquidity - this metric is a good insight into how RTokens are being used in DeFi
We choose these alternative KPIs as useful indicators on the health of the Reserve ecosystem and the rate at which they are being experimented with and adopted. DEX liquidity is especially important to us as it indicates how accessible RTokens are.
Relevant usage metrics - Please refer to the OBL relevant metrics chart 37. For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section:
| Metric | Metric Description |
|---|---|
| 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 user growth (in addresses) interacting with the protocol’s contracts. |
| Daily Transaction Counts | A time series metric representing the daily count of unique addresses interacting with the protocol’s contracts |
| 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. |
| 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. |
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. For any team controlled liquidity that may receive ARB incentives, we will recycle ARB incentives into the following week’s incentive distribution.
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
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the protocol native to Arbitrum?:
The Reserve protocol is not native to Arbitrum; it was first deployed to Mainnet in 2023. Each deployment of the protocol is independent and requires independent collateral plugins for specific networks due to technical differences.
On what other networks is the protocol deployed?:
Reserve protocol is live on Ethereum mainnet (“Mainnet”) and Base.
What date did you deploy on Arbitrum mainnet?:
Reserve contracts are live on Arbtirum mainnet. It was deployed on March 15 and all relevant addresses can be viewed on GitHub.
Do you have a native token?:
Reserve Rights (RSR) is the native governance token for the Reserve protocol and can be staked on any particular RToken, where it has two roles:
-
RToken Overcollateralization: Staked RSR receives a portion of the RToken collateral’s revenue in exchange for being the first capital-at-risk in the case of collateral default.
-
RToken Governance: Staked RSR proposes and votes on changes to the RToken’s configuration, notably on basket composition and revenue distribution among other more technical settings.
RSR Documentation, Mainnet Contract
Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?
Please see details under current incentivization.
Current Incentivization: How are you currently incentivizing your protocol?
As the underlying basket of collateral assets for RTokens are generally yield bearing, RTokens generate revenue that can be used for incentives and it is up to RToken governance to decide where to direct that yield. Most often, the collateral basket revenue is directed to RToken Holders or RSR stakers who provide overcollateralization and governance.
ABC Labs incentivizes liquidity of RTokens in tandem using Curve and Aerodrome through voting power and by posting voting incentives. ABC Labs works to maximize the efficiency of its voting power through a variety of strategies including partnering with other protocols for co-incentives and taking advantage of voting synergies from its vlCVX stack to direct Prisma and f(x) Protocol incentives in addition to Curve incentives.
Additionally, ABC Labs has been partnering with other protocols to create paired pools that are co-incentivized from both partners in an effort to maximize the efficiencies of voting power or voting market budget for both protocols. Two examples of this strategy are the ETH+/pxETH pool on Curve, in partnership with Redacted Protocol, and the MAI/eUSD pool on Aerodrome, in partnership with QiDAO. This co-incentive strategy is directly applicable to Arbitrum, and is being augmented with an scalable, permissionless co-incentivization RToken discussed in Section 4.
Beyond DEX incentives, ABC Labs has worked with DAOs to participate in leveraging RTokens to offer incentives to end users. Over the next several years, a further 20B $RSR will be distributed to accelerate RToken adoption, though the community has not decided as to how.
See the table below for Total DEX TVL for RToken Pools as of 3/12/2024 with source data here. RToken pools currently have about $18M in cumulative RToken TVL on Curve and almost $10M in cumulative RToken TVL on Aerodrome. Results can be found in the Reserve Dune Dashboard and Aerodrome Dune Dashboard.
These incentive programs have been successful growing RToken TVL through yield opportunities for liquidity providers. In this week’s Reserve Yield Update, there are multiple opportunities to earn over 50% APR with RTokens, which attracts liquidity.
See Reserve’s Earn page for a list of RToken opportunities.
One learning from the incentive strategy is understanding the need to develop a standard metric that can be used to compare all opportunities against each other. For Reserve, that metric is dollars of incentives spent per RToken TVL ($ Incentives / RToken TVL) that is driven by a certain opportunity. This metric allows ABC Labs to determine the efficiency of integrations and identify opportunities that are the best use of incentive funds.
Using the data from the Aerodrome Dune Dashboard, ABC Labs can track the weekly efficiency of its strategy to combine veAERO voting and weekly incentives on RToken TVL. Incentive Efficiency can be viewed in this Reserve Aerodrome Efficiency dashboard that shows weekly efficiency at the ETH/USD, RToken, and specific pool levels.
Another example of the incentive program’s success is the rapid rise of TVL for Reserve’s newest RToken BasedETH (bsdETH), a basket of LSTs launched natively on Base. bsdETH was launched less than one month ago and has already reached 569 ETH market cap (~$2.2M). This growth has largely been driven by ABC Labs’ Aerodrome incentive strategy that combines veAERO voting power and weekly incentives on RToken Pools to drive $4.5M in TVL to the WETH/bsdETH pool.
The growth of RTokens native to L2 have downstream impacts on the L2 DeFi ecosystem because the collateral baskets are DeFi backed. When a RToken has a collateral basket made up of assets deposited in multiplication markets (ex. High Yield USD on Base), growth in the RToken’s market cap will also drive growth in the depth of the multiplication markets for the assets in the collateral basket. hyUSD currently has a $2.5M market cap and the collateral basket is 50% USDbC lent on Compound - that is $1.25M of sticky TVL for Compound, or 8% of the total USDbC market. Protocols can take advantage of RToken collateral basket assets to benefit themselves as well. Beyond deepening multiplication market liquidity, the collateral basket revenue can be used in a variety of ways to. A recent use case was proposed by Diva Staking with the purpose of adding their divETH LST product to the collateral basket of bsdETH at launch as a strategy to quickly ramp up TVL out of the gate.
When deployed on Arbitrum, RTokens could have these same effects of supporting other DeFi protocols in the Arbitrum ecosystem, whether by driving deeper multiplication markets or providing sticky TVL to assets, leading to more capital flowing to the network.
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program? [yes/no, please provide any details around how the funds were allocated and any relevant results/learnings(Note: this does NOT disqualify an applicant)]
No
Protocol Performance: [Detail the past performance of the protocol and relevance, including any key metrics or achievements, dashboards, etc.]
Reserve recently hit All Time High TVL at $83M across Mainnet and L2 deployments, with 40% growth in 2024 alone and also has achieved $50M in Cumulative RToken market cap.
There are 6 RTokens that enjoy a market cap over $1M and 2 RTokens with over $20M market cap. To date, some 1,000 RTokens have been deployed using the Reserve protocol. This puts RToken TVL at just under halfway to its July goal of $160M.
Reserve has been undergoing rapid comparative growth benchmarked against DeFi as a whole. This is indicative of asymmetric demand for the Reserve protocol that is far outpacing asset prices and other DeFi activity.
The second Reserve RToken to surpass the $20M market cap milestone was ETH+, which achieved this the first week of March 2024. Since February 1st, 2024, ETH+ has enjoyed over 300% growth in market cap, far outpacing the price increase in ETH and most other liquid staked ETH products in the last month and a half.
Source: Reserve Dune Dashboard
Protocol Roadmap: [Describe relevant roadmap details for your protocol or relevant products to your grant application. Include tangible milestones over the next 12 months.]
Reserve protocol’s mission is to increase adoption of and access to sustainable, inflation-proof, stable currency around the world. Having launched just over a year ago in February 2023, Reserve is looking ahead to 2024 as the year to establish itself as a major player in DeFi and leader in DeFi backed stablecoins and flatcoins (across USD and ETH). ABC Labs and other ecosystem contributors are laser-focused on achieving the following two goals:
- Achieve $160M TVL by the end of July 2024
- Achieve $400M TVL by end of 2024
To facilitate this, Reserve’s ecosystem will be:
- Running a $10M ecosystem grant campaign, which is live now
- Getting oracles for all major RTokens by the end Q1 (eUSD is already live)
- Deploying to Arbitrum (contracts live as of March 15)
- Having RTokens listed on bluechip multiplier protocols by end Q2
- Considering a metagovernance “blackhole” system for 20B $RSR emissions in Q3
- Introducing novel auction initiatives near to Q3
Audit History & Security Vendors: [Provide historic audits and audit results. Do you have a bug bounty program? Please provide details around your security implementation including any advisors and vendors.]
Reserve protocol has been audited 8 times:
Reserve currently has a $5M bug bounty, one of the largest bug bounty programs on ImmuneFi. Enabling greater access to inflation-proof money cannot be realized without faith in the mechanism and so the ecosystem has made safe protocol development its number one priority.
$RSR itself was audited by Solidified.
Security Incidents: [Has your protocol ever been exploited? If so, please describe what, when and how for ALL incidents as well as the remedies to solve and mitigate for future incidents]
Reserve protocol has not been exploited.
SECTION 3: GRANT INFORMATION
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size:
500,000 $ARB
Justification for the size of the grant 37: [Enter explanation. More details are better, including how you arrived at the required funding for individual categories of expenses covered by your grant plan]
This is a large grant request. ABC Labs believes that the initial success of Reserve launching on Arbitrum is directly correlated with the size of the grant since it will determine the breadth and scope of integrations that can be incentivized across the Arbitrum DeFi Ecosystem.
While it is large enough to potentially help achieve good traction, it has been revised down from an earlier ask to demonstrate that Reserve has product market fit on the network before committing additional resources, thereby maximizing value for the DAO and mitigating grant misallocation.
This ask has also been informed with the experience of STIP. Reserve is a project with decades long vision, like Arbitrum. It therefore emphasizes its commitment to a long term, value-add relationship with Arbitrum’s DAO and this involves proving signs of mutual benefit.
Reserve ecosystem contributors plan to initially introduce 3 RTokens to the network (identified in section 4), with the primary objective to move as much TVL from other networks to Arbitrum using RToken TVL growth as an instrument.
A larger grant will attract more users to Arbitrum from other networks and drive deeper network TVL through more attractive APY as the incentives can be spread across a greater number of integrations and further drive sticky TVL from other networks.
Arbitrum’s APY landscape is detailed below as a benchmark for what RTokens should seek to compete with.
To be competitive, RTokens opportunities need to yield ~22% APY. We target a high APY due to market feedback from risks (smart contract, counterparty, depeg, and governance). Across Mainnet and Base, most productive RTokens “earn” opportunities yield in this range or higher (see below screenshot taken from the Reserve App Earn page).
As an example of efficient results, Reserve’s Aerodrome incentive strategy has driven over $16M in cumulative TVL across various RToken liquidity pools in the past 6 months. This has been achieved at an average efficiency level of $0.005 Incentives (weekly) per $1 of RToken TVL deposited in the pools. This is notable as this is held in just one protocol, as opposed to an entire network.
At that level of efficiency and current ARB ($2) and RSR ($0.006) prices and with the same efficiency levels as achieved on Base, the protocol may drive $18.6M in RToken TVL (see calculation below), which could have a roughly 2x multiplier effect (based on RToken-Token DEX pairs containing ~½ of all RToken liquidity on Mainnet) to Arbitrum’s network. This may contribute roughly an additional $18M of TVL (in Reserve’s total ecosystem TVL). This number could be even higher given that Arbitrum has far higher total TVL than other L2s and the deepest DeFi ecosystem, so incentives may be even more efficient.
While this level of efficiency is high, it is indicative of a potentially effective deployment of incentives for Arbitrum and Reserve. Other LTIPP proposals claim a cost for TVL greater than this. ABC Labs plans to replicate its proven strategy from Base L2 but with a much wider scope of potential integrations due to the mature multiplication markets, DEXs, derivatives, and other DeFi platforms on Arbitrum. ABC Labs is already in talks with other protocols such as Silo, Curve, Compound, Beefy, Overnight, Poolside and Curvance to partner on integrations and co-incentive strategies in order to maximize the efficiency of the grant incentives and drive as much TVL as possible.
The 500K $ARB figure was reached as RToken opportunities (identified in section 4) on Arbitrum will endeavor to reach 16% APY natively through yield-bearing collateral. If roughly half are then utilized in other DeFi applications (in line with Mainnet), the ~$1,120,000 on $18.66M may boost DeFi application APY by up to ~12%.
This could result in a highly competitive RToken landscape on Arbitrum with DEX APYs at up to 28% (including trading fees) and collateral asset multiplication market supply APYs of up to 32% (base RToken APY + deposit APY + incentive APY). This will have amplified second-order effects throughout the network, bringing users and TVL from all networks to the home of DeFi to deposit in multiplication markets, trade with deep liquidity and enjoy farming opportunities.
Grant Matching:
Reserve’s ecosystem will match the 500K $ARB ($1M) grant with 20M $RSR ($120K) streamed over the grant timeline. This number was chosen to match 1:4 ARB to RSR as % of total supply (as RSR has a max supply of 100B vs. ARB with 10B). Reserve is matching this grant to demonstrate its long-term commitment to the network.
Grant Breakdown:
On a non-linear weekly epoch basis, ARB and RSR incentives will be streamed to all RToken integration pools that have been created on DEXs / multiplier markets / vaults in an amount proportional to the average RToken TVL of the integration during the epoch.
The distribution will be as follows:
| Month | DEX (65% of incentives) | Multiplier markets (35% of incentives) | Total |
|---|---|---|---|
| 1 (20% of incentives) | 65K ARB, 2.6M RSR | 35K ARB, 1.4M RSR | 100K ARB, 4M RSR |
| 2 (30% of incentives) | 97.5K ARB, 3.9M RSR | 52.5K ARB, 2.1M RSR | 150K ARB, 6M RSR |
| 3 (50% of incentives) | 162.5K ARB, 6.5M RSR | 87.5K ARB, 3.5M RSR | 250K ARB, 10M RSR |
This is done for the following reasons:
- Multiplier market APYs have interest rates assisting them and DEX pairings will reduce the yield-bearing collateral output by half.
- DEXs will receive more incentives to mitigate this difference. They will also receive a share of Reserve’s Curve ecosystem voting power to entice liquidity.
- Multiplication markets’ lower incentives will be mitigated by interest paid by users
- The non-linear distribution of rewards could result in a more procedural ramping up of TVL, which may sustain APYs more effectively as protocol TVL grows on Arbitrum. More predictable APYs are better for ecosystem partners as it assists effective strategizing.
- Additionally, as a new protocol to the Arbitrum network, it will take some time for RToken integrations to gain traction and so this rewards distribution schedule will allow incentives to grow in parallel with RToken TVL.
ABC Labs will track RToken TVL across all integrations on a public dashboard in order to provide transparency and clarity into the direction of incentives from week to week.
Funding Address: [Enter the specific address where funds will be sent for grant recipients]
0x6cDc9C9D1E9017c36B51BdC3ef6CbFbF3B80545b
Funding Address Characteristics: [Enter details on the status of the address; the eligible address must be a 2/3, 3/5 or similar setup multisig with unique signers and private keys securely stored (or an equivalent custody setup that is clearly stated). The multisig must be able to accept and interact with ERC-721s in order to accept the funding stream.
Funding address is a 2/3 multisig composed of ABC Labs members with secure key storage practices.
Treasury Address: [Please list out ALL DAO wallets that hold ANY DAO funds]
Arbitrum: 0x07c8F38a8482A2d7841C79dECD59e1c69901Cd67
Mainnet: 0xC6625129C9df3314a4dd604845488f4bA62F9dB8
Base: 0x6f1D6b86d4ad705385e751e6e88b0FdFDBAdf298
Contract Address: [Enter any specific address that will be used to disburse funds for grant recipients]
N/A
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
Clearly outline the primary objectives of the program and the Key Performance Indicators (KPIs), execution strategy, and milestones used to measure success. This helps reviewers understand what the program aims to achieve and how progress will be assessed.
Objectives: [Clearly state the primary objectives of the grant and what you intend to achieve]
Primary objectives of the grant:
- Reach at least $20M TVL in the Arbitrum RToken ecosystem (including DEX pairs)
- Have 100 unique RToken holders
- Have 2 Arbitrum-native community RTokens deployed and with each hitting $250K TVL
- Have $4M RToken collateral deposited into multiplier protocols
- Bring at least $4M TVL from other chains to RTokens
- Have $8M ecosystem DEX liquidity
These can be verified using the Reserve App, DeFiLlama and Dune queries.
Execution Strategy: [Describe the plan for executing including token distribution method (e.g. farming, staking, bonds, referral program, etc), what you are incentivizing, resources, products, use of funds, and risk management. This includes allocations for specific pools, eligible assets, products, etc.]
ABC Labs has drawn up a 6 step execution strategy. It is conducted on the premise that DeFi participants are profit seeking and will provide liquidity where yield is attractive.
- RToken bridging (compliance period)
ABC Labs will bridge $500K in RTokens from Mainnet to establish a base to pursue liquidity efforts. These will be used to provide minimum viable liquidity on DEXs to allow entry and exit from RTokens without leaving the Arbtirum network. To begin with, 3 RTokens will be bridged over. These will be Electronic Dollar (eUSD), an L1 to L2 yield transporter RToken and a permissionless liquidity co-incentivization RToken.
- Electronic Dollar (eUSD) is a hyper-resilient stablecoin built to endure black swan events, recently proving itself during the run on Silicon Valley Bank. eUSD is backed by a basket of yield bearing USDC and USDT that generates yield for RSR stakers who govern and provide first-loss capital. eUSD has the deepest liquidity of any RToken and is paired to provide liquidity for other RTokens. eUSD has this strategy employed consistently across Mainnet and Base and will be used in the same manner on Arbitrum.
- One ecosystem idea: The L1 to L2 yield transporter RToken. This will tokenize deposits in safe, high yield Mainnet protocols and send the yield to an Abitrum staking vault.
- This transporter may bring better than Mainnet APR on stables, as not every transporter RToken is likely to be deposited into the transporter RToken staking vault on Arbitrum. It could work in a similar fashion to xDAI on Gnosis.
- As a sign of good faith, alignment and gratitude for the opportunities presented by Arbitrum’s network, the community have considered sending a portion of the RToken basket revenue to Arbitrum’s DAO, directly enriching the DAO from liquidity brought over from other networks. This revenue distribution can be encoded in the parameters of the RToken and maintained by RToken governance.
- The permissionless co-incentive RToken Revenue Generating USD (rgUSD) is a new DEX-pair specific stablecoin that sends all RToken collateral yield to a governance collective, which decides pools to incentivize. This could enable permissionless scaling (as incentives directly scale with RToken liquidity) for stablecoin pairs on DEXs.
- The goal is to become a reliable partner for other protocols to pair with in order to be more efficient in driving liquidity for their assets.
- This will reduce a huge amount of governance overhead and friction relating to co-incentivization for any stablecoin project. ABC Labs anticipates this to be the most efficient way to co-incentivize liquidity within the next 3 months on any network.
- rgUSD is an overcollateralized stablecoin that deploys its capital into high yield, market neutral, low risk venues across DeFi. rgUSD directs the revenue generated into supporting rgUSD growth, via incentivizing liquidity pools, multiplier markets and other safe, positive sum growth opportunities. These incentives are distributed proportionally based on TVL.
- Governance of rgUSD is focused on two pillars: finding safe high yield venues to deploy capital and choosing which venues are eligible for rgUSD incentives.
- Onchain Savings Account + RToken deployment monitoring and support strategy (compliance period)
With the Reserve protocol on Arbitrum, the deployer of High Yield USD on Mainnet and Base is interested in launching a similar RToken on Arbitrum. This Arbitrum-native RToken provides a good venue to minimize the effects of inflation. It is likely to find product market fit in Arbitrum’s high yield opportunity, low fee environment in the same way High Yield USD on Base TVL L2 is twice as large as its Mainnet TVL.
- This RToken could be backed by fully onchain yield sources such as Radiant deposits or Camelot LP positions.It could also blend RWA tokens like the recently deployed OpenEden $TBILL, Mountain $USDM or BackedFi $biBTA. This may have synergies with Arbitrum DAO’s STEP initiative.
- The Onchain Savings Account RToken may also redirect a portion of its yield to Arbitrum DAO. This is done to demonstrate alignment and gratitude for the work that has gone into facilitating Arbitrum network opportunities. These parameters may be encoded by RToken governance upon deployment.
See chart below for a summary of RTokens that could be bridged from mainnet to Arbitrum or deployed natively on Arbitrum. ABC Labs plans to drive integrations in the Arbitrum ecosystem and direct incentives as outlined in the next steps of the execution strategy.
Note that these are ecosystem ideas and all parameters are subject to change through RToken governance.
These are just the potential initial community ideas for RTokens. Once Arbitrum and Reserve are integrated, more innovation is likely to occur. This could lead to a flood of new RTokens seen on other networks.
In addition to that, Reserve contributors will pay close attention to RToken experimentation on Arbitrum. As RTokens show early signs of product market fit, ABC Labs can provide assistance to them in the form of technical support, grant writing assistance, collateral plugin development, marketing help, and governance guidance.
- DEX strategy (compliance period)
Contributors will approach Balancer, Camelot, and Curve on Arbitrum to set up liquidity pools and kick start with seed liquidity. ABC Labs will approach the respective DAOs and other protocols on Arbitrum to discuss co-incentivization on RToken pools and pitch the permissionless co-incentivization liquidity RToken. The majority of rewards will be streamed to DEXs, with prioritization focused on co-incentivizing partners when the incentivization period starts. ABC Labs is in active talks with the Poolside protocol to launch AMM pools for RTokens and agree on a co-incentive strategy.
ABC Labs will also leverage its Curve Voting Power in order to incentivize RToken Curve pools on Arbitrum and will continue beyond the grant incentive period to ensure long lasting and sustainable DEX liquidity.
Finally, the rgUSD RToken may be a self-sustaining source of deep liquidity for itself and other protocols by directing collateral basket revenue towards the liquidity pools of the RToken. As other protocols pair with this RToken in order to capture the co-incentives, the RToken TVL will grow, increasing the revenue generated by the collateral basket and therefore growing the liquidity incentive budget. This innovative approach to liquidity co-incentives will last far beyond the Arbitrum Grant Incentives period and ensure long lasting deep liquidity on the Arbitrum network.
Contributors were discussing incentivising bridges directly with emissions to help boost TVL from other networks, but were concerned that this would be easily gamed and may boost unequal grant emissions. Fortunately, DEXs show signs of having the desired effect as arbitrageurs seek to take advantage of attractive DEX incentives. This liquidity can be some of the most value-add, sticky TVL an ecosystem can attain and so ultimately it was decided to not directly incentivize bridges as DEXs offer the same benefits with higher sybil resistance (DEX LP TVL is much more complex to game than bridge transactions). This makes DEX strategy achieve two goals at the same time.
- Multiplier protocol configuration (compliance period)
ABC Labs will set up pools on Ajna for deployed RTokens and seed liquidity to enable multiplication using RTokens. Flatcoins will be deposit tokens and the co-incentive RToken or eUSD will be the multiplier asset.
ABC Labs contributors will then approach permissioned multiplier protocols to list RTokens on their platforms. These include Dolomite, Silo, GMX, Radiant, Aave, Compound, Gains, Vertex and Mux. ABC Labs has relationships with many of these protocols already and plans to discuss RToken integration into these markets as well as co-incentive strategy.
Once RTokens are listed, the markets will be incentivized using RSR and ARB emissions at the start of the grant incentive period.
- Incentive distribution (throughout incentive period)
Once all these steps are completed, incentives will be distributed to all identified venues based on the proportion of RToken TVL in the pool/market/vault. These will be subject to milestones (see following question) and monitored with the KPIs identified in Section 2 and 5.
- DAO Treasury Allocation Strategy (final 4 weeks of incentive period)
Once RTokens become established ($12M ecosystem TVL) in Arbitrum, contributors will approach JonesDAO, GMX, Radiant and other leading Arbitrum DAOs to allocate an amount of their treasury funds to diversify into RTokens and benefit from deployer expertise and gain yield and overcollateralization protection.
Note that alongside this grant-focused plan, Reserve will be actively comarketing its arrival on Arbitrum on platforms such as X and Discord. Reserve’s first network expansion announcement like and view count made the post Reserve’s most successful tweet of all time - it is possible this Arbitrum expansion will have a similar effect. In addition to that, Reserve will be adding Arbitrum to its weekly yield update to demonstrate opportunities to LPs.
Grant Timeline and Milestones: [Describe the timeline for the grant, including ideal milestones with respective KPIs. Include at least one milestone that shows progress en route to a final outcome. Please justify the feasibility of these milestones.]
The first month’s incentives will be streamed regardless of performance but after that will be performance based. The milestones will be:
End of month 1 (20% of the grant will be emitted by this point):
RToken ecosystem TVL (including DEX pairs) should reach $3M by the end of the first month and be integrated into 2 multiplier protocols by the end of the first month. The Target RToken TVL is based on our RToken TVL goal of $18.66M from the incentives program multiplied by the 20% of incentives that will be distributed in Month 1 of the grant period. This target is sufficiently high to ensure that RToken growth on Arbitrum is appropriately fast but with a buffer built in to ensure that the remainder of Reserve’s participation in the LTIPP program is not jeopardized.
End of month 2 (30% of the grant will be emitted in month 2, emitting 50% of the entire grant from the beginning of the period) :
For the second month, RToken ecosystem TVL must reach $8M and reach $500K in RToken multiplier market supply for the third month’s incentives to be released. The Target RToken TVL is based on our RToken TVL goal of $18.66M from the incentives program multiplied by the 30% of incentives that will be distributed in Month 2 of the grant period. This target is sufficiently high to ensure that RToken growth on Arbitrum is appropriately fast but once more is sufficiently achievable so as to ensure continued participation from Reserve and ROI for Arbitrum DAO.
End of month 3 (50% of the grant will be emitted in the final month, emitting 100% of the entire grant from the start of the period):
All primary objectives listed in the “objectives’’ section must be met. If these are met, it is indicative of a successful first step into the network. Protocols with similar profiles such as Radiant and Silo underwent similar (if not slightly slower, though Reserve will be utilizing additional incentives) TVL growth at the start of their time on Arbitrum. This is a reasonable yet commendable result for Reserve to achieve.
These goals are lower than the estimated amount of TVL in section 2 and are in line with the nonlinear monthly 20% / 30% / 50% emission distribution. This is to allow for some degree of inefficiency as the program gets implemented. This will be a learning process for Reserve’s ecosystem as much as LTIPP is for Arbitrum and so tolerance of some degree of deviation is reasonable and appropriate.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem? [Clearly explain how the inputs of your program justify the expected benefits to the DAO. Be very clear and tangible, and you must back up your claims with data]
Grant incentives will help accelerate DEX liquidity and multiplier market usage for RTokens on Arbitrum. The yield opportunities driven by the grant incentives will also drive users to bridge RTokens and other funds to Arbitrum, growing TVL in the ecosystem. This may enable unique financial opportunities on Arbitrum, further entrenching Arbitrum’s reputation as the DeFi L2 and generating sequencer revenue.
While ABC Labs has ambitious goals and expectations for RTokens on Arbitrum, protocols often find themselves with slow starts to attracting TVL and users without sufficient incentives and yield. Arbitrum’s grant incentives will enable the Reserve protocol to overcome this ramping period in a shorter timeline and quickly reach new heights by driving TVL to RTokens and the Arbitrum ecosystem.
This ramping period is reflected in the first few months of Reserve’s deployment to Mainnet, where limited experimentation and traction was seen. At roughly $20M of TVL, new RTokens started to get deployed, bringing new opportunities and new experimentation - a self-perpetuating virtuous cycle the protocol is currently benefiting from. This grant program will help speedrun this hesitant phase for Arbitrum and enable faster innovation and experimentation.
Reserve has proven success on deploying to L2s - almost 1000 RTokens were deployed in the first month of Reserve coming to Base. However, few of these saw significant TVL growth and this could be attributed to a limited DeFi ecosystem. Combining Arbitrum’s rich DeFi history with Reserve’s RToken composability and an attractive incentive program makes the chances of TVL and network success for Arbitrum DAO is high.
Reserve’s proposal is primarily focused on incentivizing DEX liquidity and enabling attractive multiplication rates. This will have a positive impact on Arbitrum that may touch every corner of the ecosystem, thereby facilitating more activity and innovation. It may reduce the cost of using multiplier protocols, enable greater trades, boost profitability, all of which may foster new activity.
Additionally, as a protocol that sits at the intersection of being a building block for experimentation and a product of other protocol’s assets, Reserve is uniquely situated to kickstart a new wave of first and second order benefits for the Arbitrum network. Reserve has seen early signs for product market fit in a high fee environment and an explosion of RToken experimentation. An incentivized launch combined with post-Dencun Arbitrum may supercharge growth of Reserve, which will directly benefit the network as a whole and boost sequencer revenue.
Aside from these more traditional bootstrapping benefits, other growth and innovation may be uniquely enabled through Arbitrum’s low fee, high liquidity DeFi environment.
An example seen on another network is a yield bearing Lock Swap. This helps bootstrap liquidity for a nascent protocol (Epoch Island) while minimizing downside potential using a yield-bearing RToken.
Another experimental (and extremely stylish) RToken, Maat, is seeing early signs of design payoff. It is a flatcoin designed to be backed by both USD-denominated assets and cryptocurrencies like ETH as an alternative to being exclusively backed by crypto or fiat assets.
These are just two examples of permissionless, composable experimentation enabled through RTokens. While they may not lead to 9 figure TVLs, these first few toes dipped in the water could kickstart a butterfly effect on Arbitrum and bring huge value to the DAO and ecosystem as a whole. This effect may be accelerated by the Arbitrum grant incentives, the DeFi native environment, and low fees of Arbitrum, which could allow experimentation to flourish.
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/No]
Yes
SECTION 5: Data and Reporting
OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL 34. Along with this list, please answer the following:
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. There are no special requests at this time.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard? [Please describe your strategy and capabilities for data/reporting]
Yes, Reserve will create a biweekly report for the forum that cites the OBL dashboard for the following metrics:
- TVL of RTokens and their integrations (DEX Pools, Multiplication Markets, Staking Vaults)
- Yield on RToken Liquidity Pools and multiplier pools
- Unique minters of each RToken
- Number of LPs and their balances in each pool
- TVL of RTokens and RSR bridged to Arbitrum
ABC Labs has a long history of data-driven decision-making and protocol TVL growth is testament to that.
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?: [Y/N]
Yes