Serious People, Research Proposal: Liquidity Acquisition for Arbitrum’s Long-Term Incentive Pilot Program

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Application for Research Bucket: Liquidity Acquisition for Arbitrum’s Long-Term Incentive Pilot Program

Proposed Research Topic:

Evaluating the Efficacy of Liquidity Acquisition in Arbitrum’s Long-Term Incentive Pilot Program

Why this is an Important Topic to Research:

The success of Arbitrum’s Long-Term Incentive Pilot Program (LTIPP) is pivotal in ensuring sustained growth and stability in the ecosystem. By comprehensively analyzing liquidity acquisition, dispersion, and retention, we can derive actionable insights that will inform future incentive programs. This research will help the DAO understand the impact of incentives on liquidity, optimize future programs, and ultimately contribute to a robust and sustainable foundation for the ecosystem.

Research Focus Areas:

Liquidity Acquisition:

  • Total liquidity acquired during the program.
  • Average and peak liquidity levels.
  • Distribution of liquidity (number of wallets and concentration).
  • Efficiency of liquidity acquisition.

Questions to Answer:

  • What sectors saw the largest growth in liquidity?
  • How did the distribution of liquidity vary by protocol category?
  • How much of the acquired liquidity was sustained beyond the incentive period?

Liquidity Retention:

  • Amount of liquidity remaining post-incentives.
  • Capital efficiency of liquidity usage over time.

Questions to Answer:

  • What percentage of liquidity was retained after the incentives ended?
  • Were there significant differences in retention across different protocol categories?

Liquidity Utilization:

  • Types of tokens involved.
  • Trade volume through the incentivized pairs.

Questions to Answer:

  • Which tokens were most commonly used in liquidity pairs?
  • Did the incentivized pairs see a sustainable increase in trade volume?

Strategic Analysis:

  • Identifying the most effective strategies.
  • Analysis of why certain strategies outperformed others.
  • Identifying the least effective strategies and understanding the reasons for their underperformance.

Questions to Answer:

  • What strategies led to the highest liquidity retention?
  • Why did some strategies fail to retain liquidity effectively?

Outcomes and Recommendations:

  • Deriving key outcomes from successful strategies.
  • Providing actionable recommendations for future incentive programs based on these insights.

Questions to Answer:

  • What are the key takeaways from the most successful liquidity acquisition strategies?
  • How can future incentive programs be optimized based on these insights?

Presentation to the DAO:

We will present our findings through a comprehensive report, including:

  • Detailed data analysis and visualizations.
  • Case studies of key strategies.
  • A webinar to discuss our findings and answer questions.
  • A summary document highlighting key insights and recommendations.

Frequency of Updates:

  • Monthly updates to the DAO and broader community on research progress.

Research Team Information:

Team Background: Serious People is a seasoned team specializing in blockchain analysis, token economics, and return on emissions studies. Our team members have extensive experience in financial analysis, business development, and economic modeling. More info on the individuals that make up Serious People can be found here: Our Story.

Why Our Team is Best Fit: Our expertise and prior initiatives uniquely position us to conduct this research. We initially proposed this research idea in January (Serious People: Research Bounties for LTIPP), along with a few others, and have been actively studying liquidity and incentive mechanisms for years prior. Our deep understanding of return on emissions (ROE) is critical to our core business model, which focuses on coaching protocols towards sustainability. Our first proposal, co-authored with Sushi, to the DAO was a comprehensive 25+ page document advocating for a network-wide POL campaign, showcasing our capability to handle complex research tasks.

Additional Work:

  1. STIP Case Study
  2. Proposed LTIPP KPIs

Budget:

Requested Budget: 45,000 ARB

Cost Breakdown:

  • Research and Data Collection: 5,000 ARB
  • Data Analysis and Visualization: 25,000 ARB
  • Report Writing and Compilation: 10,000 ARB
  • Presentation and Webinar: 5,000 ARB

Methodology:

  • Data Sources:
    • On-chain data from Arbitrum, provided by OpenBlock Labs (or other data provider selected by the DAO for LTIPP).
    • Data from specific protocols participating in LTIPP.
    • Surveys and interviews with protocol teams and users.
  • Metrics:
    • Total Value Locked (TVL) segmented by protocol category.
    • Liquidity retention rates post-incentives.
    • User behavior analysis with ARB rewards.
    • Comparative analysis with other chains (Optimism, Polygon).
  • KPIs for Research:
    • Precision in liquidity metrics (TVL, retention).
    • Number of actionable insights derived.
    • Improvement in future incentive program designs based on research findings.

Integration with Ongoing Strategies: The insights derived from this study should be able to be integrated into future strategies and incentive programs to ensure that the best performing incentive methods are repeated and the worst performing are retired. We will collaborate with the DAO to ensure that our findings are actionable and align with Arbitrum’s strategic objectives.

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Hi @SeriousPeople,

Thanks for the research proposal! The outline focus areas look okay, but we find them pretty generic and think it would be more valuable to the DAO and council if they were a bit more specific in scope with more questions you want to find answers to. When you compare it to the list provided by the council members, there is a quite a big mismatch.

It would be great to also understand a bit more about how you define liquidity - is it TVL? if so, do you plan to segment by protocol category? We saw a lot of different STIP and LTIPP applications across various protocols where liquidity/tvl is not necessarily the driving factor of success.

Other than the above, the requested bounty seems reasonable!

1 Like
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The Serious People have contributed to the Arbitrum DAO and have done some good work, whether with their working group or their research. Looking at their website and their previous case study they have a really strong record as a team

After looking at their proposal we have some concerns about the proposal.

  1. The proposal lacks a clear plan for using the research findings long-term. It is essential to understand how the insights derived from this study will be integrated into ongoing strategies and future incentive programs to ensure continued relevance and impact.
  2. The proposal mentions various aspects of liquidity acquisition, retention, and utilization, but it is unclear how comprehensive each analysis will be. Specific methodologies and metrics should be detailed to ensure the research will provide actionable insights.
  3. The proposal needs to define clear key performance indicators (KPIs) for measuring the success of the research itself. Without these metrics, it will be challenging to assess the study’s effectiveness and impact on Arbitrum’s ecosystem.
  4. While the proposal includes plans for presenting the findings, it does not specify how frequently updates will be communicated to the DAO and the broader community. Regular updates are essential for maintaining transparency and engagement.

Scope required

  1. If we can get data on the funds bridged from other chains and L2s to Arbitrum.
  2. It may be difficult to assess why one protocol strategy outperformed another, having the context broken down by category might enlighten the picture much more in assessing why strategies did better or worse.

By addressing these concerns and defining the scope more clearly, the proposal can better demonstrate its potential impact and feasibility, ensuring it aligns with the strategic objectives of the Arbitrum DAO.

1 Like
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Thank you for the application @SeriousPeople. The focus on liquidity acquisition and efficacy pairs well with your prior contributions to the ecosystem.

We would like to gain a deeper understanding around your methodology for measuring liquidity acquisition, retention and utilization as well as more detail on your proposed analysis expanding beyond which strategies were most and least effective. Additionally, some added context around what questions you are looking to answer with your research would be appreciated (and potentially tying them into some of the Council’s proposed questions).

Outside of these concerns, the amount requested seems very reasonable.

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Thanks for submitting your application, @SeriousPeople.

My comments are in line with the other council members re: the scope of work and the offering back to Arbitrum DAO while also contrasting it to the other LTIPP research bounty proposals that were submitted that provide coverage on the requested topics.

What I like:

  • Serious People has a great team and strong track record in providing value within the Arbitrum DAO ecosystem through their work in other initiatives.
  • Proposed budget is reasonable.
    • However important to note that this research proposal potentially overlaps with some of my personal recommendations on the selection and will carry us close to the full budget allocated to proposals. While the budget may be available, it does not necessarily need to be fully spent.

My concerns:

  • Main concern is around explicitly responding to the council-proposed LTIPP bounties as others have raised.
  • Would like to see more details behind the methodology of analysis and measurement.
  • Would like to see more detailed milestones and estimations of time spent across this research proposal.
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Thank you for your feedback @WintermuteGovernance @Saurabh @404DAO and @karelvuong

We have updated our post to incorporate your feedback and hopefully address your concerns. We put together a list of changes that were made and linked them to the specific concerns that were listed:

  1. Scope and Specificity:

  • Concern: The proposal was too generic and lacked specific questions and detailed scope.
  • Changes Made:
    • Added detailed research questions under each focus area (Liquidity Acquisition, Liquidity Retention, Liquidity Utilization, and Strategic Analysis).
    • Included specific metrics and areas of investigation, such as sector growth, distribution of liquidity by protocol category, and retention rates post-incentives.
  1. Definition of Liquidity:
  • Concern: The proposal did not clearly define liquidity (e.g., TVL) or how it would be segmented by protocol category.
  • Changes Made:
    • Clarified that liquidity will be measured in terms of Total Value Locked (TVL).
    • Included a plan to segment TVL by protocol category and to analyze the distribution of liquidity.

  1. Methodology and Metrics:

  • Concern: The proposal lacked specific methodologies and metrics to ensure comprehensive analysis.
  • Changes Made:
    • Detailed the data sources, including on-chain data and surveys/interviews with protocol teams and users.
    • Defined specific metrics for analysis, such as TVL, liquidity retention rates, user behavior analysis with ARB rewards, and comparative analysis with other chains.
    • Outlined a clear methodology for collecting and analyzing data.

  1. Integration with Ongoing Strategies:

  • Concern: The proposal did not have a clear plan for using research findings in the long term.
  • Changes Made:
    • Added a section explaining how the insights will be integrated into ongoing strategies and future incentive programs.
    • Highlighted collaboration with the DAO to ensure findings are actionable and align with Arbitrum’s strategic objectives.

  1. Key Performance Indicators (KPIs):

  • Concern: The proposal did not define KPIs for measuring the success of the research.
  • Changes Made:
    • Defined clear KPIs for the research, such as precision in liquidity metrics, the number of actionable insights derived, and improvements in future incentive program designs.

  1. Frequency of Updates:

  • Concern: The proposal did not specify how frequently updates would be communicated to the DAO and the community.
  • Changes Made:
    • Included a commitment to provide bi-weekly updates to the DAO and the broader community on research progress.

  1. Alignment with Council’s Questions:

  • Concern: The proposal did not sufficiently align with the council’s proposed research questions.
  • Changes Made:
    • Incorporated questions from the council’s list, such as analyzing user retention, identifying mercenary users, assessing the effectiveness of different strategies, and comparing Arbitrum’s performance with other chains.
    • Ensured the research focus areas and specific questions addressed themes such as liquidity acquisition, retention, user behavior, and strategic analysis.

  1. Budget and Cost Breakdown:

  • Concern: The proposal needed more detail on the budget and cost breakdown.
  • Changes Made:
    • Provided a detailed cost breakdown, including research and data collection, data analysis and visualization, report writing and compilation, and presentation and webinar.

  1. Methodology for Analysis and Measurement:

  • Concern: The proposal needed more details behind the methodology of analysis and measurement.
  • Changes Made:
    • Expanded on the methodology, detailing data sources, metrics, and the approach to analyzing data.
    • Included specific methodologies for measuring liquidity acquisition, retention, and utilization.

  1. Milestones and Time Estimates:

  • Concern: The proposal needed more detailed milestones and estimations of time spent.
  • Changes Made:
    • Included a commitment to regular updates and reporting.
    • Specified that the final deliverables will include detailed data analysis, case studies, a comprehensive report, a webinar, and a summary document.