“As in, are we just going to continually shoot liquidity incentives at a bunch of DEXs expecting a different result?”
No, that’s not the intention. The goal of this proposal is to establish KPIs and a framework for perpetual DEXs to bridge the gap with centralized exchanges (CEXs). This research is essential because we aim to avoid repeating past approaches. Instead, we want to implement a strategy that fosters long-term alignment between Arbitrum, the protocol, and the broader ecosystem.
You raised several relevant points. As mentioned earlier, this program is not designed to simply distribute rewards; rather, it aims to implement KPI-based non-dilutive incentives. An important question still under consideration is whether these incentives should operate at the protocol level or the network level. Based on prior discussions, network-level implementation appears preferable for establishing a level playing field.
Ultimately, the objective is to empower perpetual DEXs to build robust standards around quoting, execution, and settlement, positioning Arbitrum as the primary destination for derivatives trading. Fortunately, we already have powerful tools, such as cede.store and Boost, that help bridge the gap between CEX and DEX trading and enhance the incentive structure.
Research Phase Timeline: The research phase is set to take 1.5 months. While this is an ambitious timeline, the targeted approach of interviewing senior CeFi users and protocol teams should allow for comprehensive insights within this period. Given the limited number of power users and market makers, interviewing a cohort of 15-20 participants in a month seems achievable. The main challenge may lie in efficiently analyzing the data collected within this timeframe.I agree with prioritizing large, active CEX users in the interview process. Identifying short-term versus long-term barriers to on-chain integration is a core objective of these interviews, as understanding these distinctions will help inform a more targeted approach.
Clarification on Proposal Scope: Questions 2-5 raised great points, and I realize I need to clarify my initial post. Funding for the actual pilot program was planned to be part of a separate proposal. The aim of this current proposal is to focus on developing the most effective frameworks and KPIs for the pilot. Once this groundwork is established, we would submit a separate funding request for the pilot program itself. However, if the DAO prefers a combined proposal covering both framework development and pilot funding, I’m open to restructuring accordingly.
Hey, I should be more clear. The research did not take a full year to complete. It has taken nearly a year to get the appropriate support to push this forward. The drafted proposal made by Joseph of the ARDC was never fully completed but happy to share the doc. He has not given me permission to share it publicly. If that changes I am fine with sharing it publicly. For now I have sent you a copy to your DMs and happy to do that for anyone else.
Additionally, you stated “We’re not convinced about the budget amounts. For more clarity, which RFCs did you base this budget on?”
I made the budget for the work based on the RFC for funding an incentive working group. I am more than happy to bring this inline with Arbitrum funding standards.
Long-term User Retention:
Drawing from comments by Darius at Vertex during a recent STIP Detox call, there seems to be a form of “integration lock-in” for larger traders and institutions once they incorporate a protocol into their trading flow. In essence, while the volume and transaction frequency may fluctuate after incentives taper off, these users are technically integrated and likely to continue participating to some extent.
Incentive Allocation Criteria:
This proposal aims to establish a fair allocation method. A network-wide KPI approach could offer the most equitable distribution, compensating users or protocols proportionally based on their volume, transactions, and other contributions. However, further analysis and consideration are needed to finalize this framework.
Budget
I referenced the RFC - Fund an Incentives Working Group for budget planning. To clarify, this proposal is currently focused on research, which will inform a formal proposal for a pilot program with an appropriate budget. However, if delegates prefer a combined proposal covering both the research and pilot program budget, I am more than willing to consolidate them into a single proposal.
Do we really need a research to know why people currently prefer CEX over DEX for perp trading?
I mean everyone who traded perps on both immediately sees and feels the difference.
Personally I still prefer CEX mainly because of the deep liquidity and assets you can trade.
And this is one major problem arbitrum currently has, its shrinking TVL see here
Yes in terms of USD its growing, because the market overall gained a lot over the past few weeks but in terms of ETH Arbitrum is stagnating.
Also UI/UX is currently way better especially with mobile apps where it is extremely easy to load up funds and trade. You cannot really do this with Metamask mobile or other mobile apps, its just a nightmare to use.
Yes, there are great perp dexes like gains.trade but it has its limits and these are the ones to eliminate not do another round of research then present the results.
Because whats next? Who is now going to build this super dapp? Who will help to onboard more user and bring in more TVL?
In my opinion the problems are already clear, what is needed is a top notch team building this product.
There are some solutions already, one could source liquidity from lending markets like Aave, thats what Contango for example does. That way we strengthen the Defi ecosystem and really do Defi-lego instead of liquidity fragmentation.
The following reflects the views of GMX’s Governance Committee, and is based on the combined research, evaluation, and consensus of various committee members.
The proposal currently suggests establishing a working group to start research on CEX-to-DEX users. However, in its current form, it focuses solely on perps and futures rather than addressing the broader ecosystem projects. Additionally, the proposal lacks clear goals outlining what the program aims to achieve. If the author wants to fund this research, they could apply for the Firestarter program to get started. As it stands, we will be open to supporting this proposal if the required changes are implemented.
I totally get the pain point about CEXs like Binance and Bybit taking up most of the market share, and solving this is definitely important. But to be honest, I don’t think we’ll fix it in just 3 or 6 months.
I conducted 5 mins survey on why people switch from DEX to CEX for my audiences on X. Feel free to check it out at - x.com
Overal it feels the proposal just needs more work, especially on clarifying what activities are needed, budgeting each activity, and then that leading to the final budget. A workgroup is a non starter budgeting wise IMO