StakeWise LTIPP Application - FINAL

SECTION 1: APPLICANT INFORMATION

Applicant Name: Jordan Sutcliffe, @Jstar: Telegram and Twitter.

Project Name: StakeWise

Project Description: StakeWise was the first non-custodial liquid staking solution to launch on Ethereum in early 2021. Following the launch of StakeWise V3, the protocol has transitioned into a fully white label liquid staking solution enabling any entity to leverage the StakeWise smart contract infrastructure to offer trustless, non-custodial staking-as-a-service. Alongside the V3 upgrade, osETH was launched as the protocol’s primary liquid staking token, creating a single-layer of composability across the StakeWise ecosystem. Whether it is a commercial operator offering liquid staking directly to their institutional clients or a solo staker liquid staking on their own node, osETH provides access to the DeFi ecosystem for everyone.

Team Members and Roles: Dmitri Tsumak (Founder & CTO) and Kirill Kutakov (Co-Founder).

Project Links:

Do you acknowledge that your team will be subject to a KYC requirement?: Yes

SECTION 2a: Team and Product Information

Team experience

Dmitri Tsumak (Founder) - Dmitri worked for several years as a Full Stack Engineer at OpenNode and Ericsson, before training in Solidity. He started the development of StakeWise in early 2019, is responsible for the entire solidity code-base of the protocol, and leads a full-stack engineering team in-house. In September 2021, Dmitri identified a critical bug in both Lido and Rocket Pool and was awarded the highest-level bug bounty from both protocols.

Kirill Kutakov (Co-Founder) - Kirill joined StakeWise as the non-technical co-founder in November 2020 following a transition from a European asset manager. Kirill helped pivot the protocol towards liquid staking and has led the go to market strategy for StakeWise over the past 3+ years.

What novelty or innovation does your product bring to Arbitrum?

The architecture of StakeWise is unique compared to traditional liquid staking solutions. The protocol consists of many isolated staking pools that are launched fully permissionlessly, with stakers in any pool capable of minting the main liquid staking token, osETH, that StakeWise DAO provides the liquidity and integrations for. The architecture of StakeWise unlocks some powerful use-cases, such as allowing solo stakers to mint a liquid staking token against their own nodes, allowing any staker the ability to specify their preferred node operators via a staking marketplace, and providing institutions/regulated capital the ability to ring-fence their capital in private staking pools whilst still providing access to DeFi through osETH. The osETH token is overcollateralized, creating in-built slashing protection, and accrues yield from a highly diverse, fully permissionless set of node operators, making it a gold-standard LST.

StakeWise has commercial operators, DeFi protocols, wallets, exchanges and custodians leveraging its smart contracts to offer liquid staking-as-a-service. By creating an osETH ecosystem on Arbitrum, Arbitrum will gain exposure to stakers from all entities that launch a staking solution through the StakeWise platform. As StakeWise is the only place solo stakers can mint a liquid staking token against their own nodes, any incentives provided by Arbitrum will actively encourage the decentralization of the Ethereum network and help give the most important stakers in the ecosystem utility for their staked capital.

Is your project composable with other projects on Arbitrum? If so, please explain:

Yes, by integrating osETH across various DeFi protocols on Arbitrum, StakeWise will allow stakers to utilize the value of their staked capital to borrow against and yield farm. For example, just as osETH is already onboarded/onboarding to lending markets on Mainnet such as Morpho and Aave, osETH should also be integrated to Aave, Radiant and Silo on Arbitrum. StakeWise is partnered with Cian and Sommelier to ensure such money market integrations are heavily utilized through their leveraged staking strategies. StakeWise is also closely partnered with Gravita protocol, which will allow osETH holder to borrow the GRAI stablecoin on Arbitrum.

Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?

Whilst the architecture of the StakeWise protocol is unique, the osETH token is comparable to the main liquid staking tokens of other staking protocols, like Lido’s stETH and Rocket Pool’s rETH.

How do you measure and think about retention internally? (metrics, target KPIs)

The main goal at StakeWise is to maximize the number of staking solutions that leverage the StakeWise smart contract infrastructure. These solutions can be launched by anyone, from node operators, to wallets, exchanges, custodians, DeFi protocols, etc…, combined with the goal to create maximal utility for the osETH token.

The metrics tracked by the team are:

  • Number of StakeWise Vaults created - showcasing how many entities are offering staking through StakeWise.
  • Total TVL across StakeWise Vaults - representing the overall success of the StakeWise protocol and the effectiveness of the entities offering staking through StakeWise.
  • Total TVL on osETH - osETH is optional, stakers only need to mint and pay for osETH if they want to access DeFi, thus the TVL of osETH is < TVL of StakeWise Vaults. This metric determines how popular osETH is across StakeWise users and whether there are relevant use-cases in DeFi.
  • osETH Trading Volumes - this signifies the prevalence of the token within the ecosystem and how often it is used to stake, farm, etc…

Relevant usage metrics - Please refer to the OBL relevant metrics chart 36. For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section:

General

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 Count: A time series metric representing the daily number of transactions interacting with the protocol’s contracts.

Daily Protocol Fee: A time series data representing the daily total protocol fee generated. For example, swap fees, borrowing fees, etc., comprising all economic value generated through the protocol, contracts, apps, etc., by users.

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.

LST Specific

TVL: A daily time series, expressed in USD.

Trading Volume: A daily measurement of the trading volume of the LST in USD.

Total Circulating LST Tokens: A daily time series tracking of the circulating amount of the LST token.

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.

List of Traders: A comprehensive record of individuals or entities that have engaged in trading activities. This list should include trader addresses and the volume of trades executed.

List of Holders: A comprehensive record of entities that are holding the LST tokens. This list should include holders addresses and the amount of tokens.

Staker Retention Rate: Measures the percentage of stakers who continue to stake tokens beyond the initial period, assessing long-term engagement.

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

Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? No

SECTION 2b: PROTOCOL DETAILS

Is the protocol native to Arbitrum?: No, native to Ethereum mainnet.

On what other networks is the protocol deployed?: StakeWise is deployed on Ethereum Mainnet and Gnosis Chain.

What date did you deploy on Arbitrum mainnet?: osETH is live on Arbitrum, deployed in early March.

Do you have a native token?: Yes, SWISE is the StakeWise DAO governance token, more details can be found on the protocol’s Token Terminal page.

Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?

StakeWise has been running incentivized liquidity programs for its tokens over the past 3 years. Prior to StakeWise V3 and the launch of osETH, liquidity for the protocol’s old liquid staking tokens sETH2 and rETH2 were incentivized using SWISE emissions on UniV3 via a custom-built merkle distributor. These incentives ensured the sETH2-ETH liquidity pool was the largest on UniV3 and pioneered the use of concentrated liquidity for LSTs.

Current Incentivization: How are you currently incentivizing your protocol?

Ahead of the launch of StakeWise V3 and osETH, StakeWise DAO created a Liquidity Committee consisting of several liquidity experts from the DeFi ecosystem to help structure and advise the DAO on its liquidity and incentivization strategies for osETH and SWISE. StakeWise DAO now uses a combination of Aura and Convex bribing alongside direct SWISE emissions to incentivise ~$100M of osETH liquidity on Mainnet across Balancer (osETH-ETH), Curve (osETH-rETH), and UniSwap (osETH-USDC).

Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?

No

Protocol Performance

StakeWise has grown steadily over the past 3 years reaching just over 100k ETH staked. Over 30 commercial node operators were live ready for the launch of StakeWise V3 and that number has continued to grow, with many leading operators like Chorus One embedding the StakeWise smart contracts as part of their core product offering. As well as operators, DeFi protocols, wallets and custodians have launched, or are in the process of launching, staking solutions through StakeWise V3.

Protocol Roadmap

  • Long-awaited L2 expansion now that osETH is live and the bridging development complete.
  • Tokenomics revamp to better position the StakeWise DAO governance token within the StakeWise V3 protocol.
  • Restaking (details yet to be released publicly).

Audit History & Security Vendors

StakeWise V1 and V2 were audited several times, audits can be found here. The V3 contracts were audited by Sigma Prime, Halborn, and underwent a public bounty competition via Hats Finance. All V3 audits can be found here. Stakewise also has a $200k bug bounty with ImmuneFi.

Security Incidents: None

SECTION 3: GRANT INFORMATION

Requested Grant Size: 500k ARB.

Grant Matching: StakeWise will at least match the $ value of the Arbitrum grant with its native token, currently ~16.5M SWISE at current market prices. The StakeWise incentives will be committed over 12 months to ensure that osETH liquidity on Arbitrum is maintained following the initial 12 week bootstrapping period. It is highly likely that StakeWise DAO will also commit further capital to help bootstrap the osETH DeFi ecosystem on Arbitrum, just like it is doing on Mainnet alongside partner projects like Aave and Morpho.

Justification of grant (breakdown)

300k ARB is to be used to bootstrap osETH liquidity across multiple DEXs and liquidity pairs over a 3 month period (more details below). These liquidity incentives will ensure efficient trading of osETH on Arbitrum and enable osETH integrations across the DeFi ecosystem.

200k ARB is to incentivise participants of the upcoming StakeWise Tokenomics revamp to specifically deploy capital on Arbitrum.

Funding Address: StakeWise Liquidity Committee (SLC) Safe - 0x189Cb93839AD52b5e955ddA254Ed7212ae1B1f61

Funding Address Characteristics: The SLC Safe is a nested 2 of 2 multi-sig, meaning both the signers are themselves Safe multi-sigs. The diagram below shows this architecture. One of the signers of the SLC Safe is a multi-sig controlled by the core team, where only 1 team member is required to sign. The other signer of the SLC Safe is a multi-sig controlled by the community members - a 2 of 5 multi-sig.

Treasury Address: DAO SWISE Treasury (0xF0d99D5d1D5E06CdAd4766503Cb82213B5E1d1bE) and DAO Protocol Treasury (0x144a98cb1CdBb23610501fE6108858D9B7D24934).

SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES

Objectives:

~$20M of quality liquidity across stable (e.g. osETH-ETH) and volatile (e.g. osETH-SWISE) pairs, enabling trading into and out of osETH in reasonable size with minimal slippage. This liquidity will also enable robust price feeds to be generated for osETH on Arbitrum and allow for osETH to be integrated into top DeFi protocols such as Pendle, Aave V3 and Radiant.

Execution Strategy:

300k for osETH liquidity
The 300k of ARB tokens will be used exclusively to incentivise the primary osETH liquidity pools: osETH-ETH on Balancer and osETH-wstETH on Ramses, with a target liquidity depth of $15M and $2M, respectively.

The below charts showcase the distribution of funds from both StakeWise and Arbitrum, and the expected APY of the Balancer pool over the 12 month period. Both pools will be incentivised in this manner, with 88% of the total monthly incentives going to the Balancer pool, and the remaining 12% going to the Ramses pool.

The high APY during the first 12 weeks will help bootstrap initial osETH liquidity and is designed to compete with existing liquidity pools, such as the wstETH-ETH pool on UniV3 providing ~13% APY, and to account for the expected increase in incentives across Arbitrum due to the LTIPP grant distribution. During this 3 month bootstrapping period, osETH will be integrated across the Arbitrum DeFi ecosystem and further incentives deployed by StakeWise specifically targeting integrations that have a track record for sticky liquidity, such encouraging leveraged staking on Aave alongside our partners at Cian and Sommelier. Because StakeWise can partner with many projects across the ecosystem, providing this ARB grant to StakeWise will also help bolster many other projects.

To ensure liquidity is sticky, even after the initial bootstrapping phase is complete, StakeWise will continue to provide incentives but at a level that is more in-line with the market standard for LST pairings on Mainnet and will be willing to increase incentives to adjust to ongoing demand.

The 300k ARB tokens will be sent directly to the liquidity gauges of the respective AMMs, directly benefiting the liquidity providers in the pools.

200k for Arbitrum Tokenomics
The new StakeWise tokenomics will allow stakers to receive a boosted staking yield if they provide osETH-SWISE liquidity. The osETH-SWISE liquidity pools will be 80/20 pools on Balancer, hosted on Mainnet and Arbitrum. The 200k ARB will be distributed directly to users who bridge and deploy their liquidity on Arbitrum ONLY, providing them with an increased boost to their staking yield over 3 months. As there are no extra incentives planned for the Mainnet osETH-SWISE pool, it is expected that Arbitrum will become the preferred liquidity revenue for LPs, migrating the primary liquidity for SWISE away from Mainnet and securing Arbitrum as a cornerstone of the StakeWise protocol. This part of the grant will actively encourage existing and new StakeWise users to bridge to Arbitrum and ensure Arbitrum benefits directly from StakeWise protocol growth.

The boosted staking rewards provided by StakeWise for tokenomics participants will be a multi-year program, with StakeWise incentivising Arbitrum users with significant capital that will exceed those provided by the LTIPP grant over several years.

The StakeWise tokenomics revamp is due to go live around mid-April (exact date is not yet public) and in time for the initial ARB distribution. Should there be any delay to the tokenomics launch, StakeWise will return unused ARB back to the foundation.

The 200k ARB tokens will be allocated to LPs in the osETH-SWISE pool on Arbitrum via a custom-built Merkle distributor by StakeWise.

Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy.

The following KPIs will be used to measure the effectiveness of the liquidity bootstrapping campaign: depth of liquidity, osETH trading volumes, number of active osETH users on Arbitrum, number of osETH integrations specific to Arbitrum DeFi, and the amount of osETH actively used in Arbitrum DeFi. A Dune dashboard will be created to track these metrics using all on-chain data.

For the 200k ARB specific to StakeWise tokenomics, the TVL of the Arbitrum osETH-SWISE pool will be compared against the respective Mainnet pool.

Grant Timeline and Milestones:

The aim of this grant is to position StakeWise as a long-term partner of Arbitrum and provide incentives over a sustained period of time to ensure osETH becomes embedded in the Arbitrum ecosystem. Milestones will include at least $10M of osETH liquidity on Arbitrum 1 month into the program. At least 2 major DeFi integrations (such as Radiant and Aave) and ~$20M of liquidity after 2 months of the program.

How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?

It is clear that yield is the number one metric that drives user adoption - this has been true for previous market cycles and is proving true in the early stages of this bull market - with liquid (re)staking tokens providing the foundation for DeFi ecosystems. This grant will dramatically increase osETH farming opportunities specifically on Arbitrum when paired with incentives from StakeWise and provide competitive yields to ensure growth and adoption of osETH on Arbitrum.

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

SECTION 5: Data and Reporting

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?

StakeWise is happy to comply with OBL’s data requirements and there are no special considerations.

Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard?

Yes

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?:

Yes

2 Likes

Hello @Jstar ,

Thank you for your application! Your advisor will be @JoJo.

Please join the LTIPP discord and ping your advisor in the general chat so they can create a new channel and start communicating with you.

2 Likes

@cliffton.eth / @raam - Could you please assist with updating the title of this thread to FINAL? :pray:

Hey there I’ve amended the title post to reflect that this proposal is FINAL. All the best!

1 Like

Upon reviewing the Stakewise LTIPP Council Recommended Proposal, we find it noteworthy. Therefore, based on these factors and the potential benefits for Arbitrum, we support Stakewise’s matching ARB rewards with their native token and incentivizing migration to Arbitrum is commendable. While there are suggestions for an earlier expansion to Arbitrum, the justification for the grant size appears reasonable. Stakewise’s plan to prioritize staked ETH and deepen liquidity in the osETH/SWISE market aligns with Arbitrum’s objectives.

Therefore, based on these factors and the potential benefits for Arbitrum, we support Stakewise’s proposal.