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

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 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:

  1. 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.
  1. Liquidity Retention:
  • Amount of liquidity remaining post-incentives
  • Capital efficiency of liquidity usage over time.
  1. Liquidity Utilization:
  • Types of tokens involved.
  • Trade volume through the incentivized pairs.
  1. 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.
  1. Outcomes and Recommendations:
  • Deriving key outcomes from successful strategies.
  • Providing actionable recommendations for future incentive programs based on these insights.
  1. 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.

Research Team Information:

  1. 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 -
  1. 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.
  • We ran a thorough independent case study on the Short Term Incentive Program that focused primarily on long-term value accrual, or lack thereof, within the program. Serious People: STIP case study - Beyond Incentives: Ensuring Long-term TVL Retention
  • We shared a bit of insight into how we analyze tokens at Serious People when we wrote this post on the forum (Serious People: Proposed KPIs for Arbitrum Grant Programs (LTIPP)) that is meant to propose potential KPIs for the DAO to adopt for grant programs in general. This led to us leading a KPI working group for about 2 months before sunsetting the group due to a lack of funding.
  • In preparation for the LTIPP program in the first place we also authored the following two opinion pieces to do our best to help steer the program in the most efficacious way that we know how:
  1. Proposed application template
  2. Proposed update to LTIPP advisor responsibilities

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

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!

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.

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.