Stella STIP addendum

DAO Grant Programs STIP Bridge Addendum
1

Information about STIP/STIP Backfund

1. Can you provide a link to your previous STIP proposal (round 1 or backfund)?

2. How much, in the previous STIP proposal, did you request in ARB?

  • 186,000 ARB

3. What date did you start the incentive program and what date did it end?
STIP incentive Started 3st of November 2023, ended 29th of March 2023

4. Could you provide the links to the bi-weekly STIP performance reports and Openblocks Dashboard?

5.Could you provide the KPI(s) that you deem relevant for your protocol, both in absolute terms and relative change, for the first of each month starting from October 2023 until April 2024, including the extremes? If you don’t know what KPI might be relevant for you or how to properly define them, please refer to the following document: [Arbitrum DAO] OpenBlock Labs Incentive Onboarding Spec

TVL

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
TVL ($M) 1.8 2.2 5.8 6.5 6.03 9.3 6.6
TVL % 0% 22.2% 163.6% 12.1% -7.2% 54.2% -29.0%

DAU

DATE 01/10/23 01/11/23 01/12/23 01/01/24 01/02/24 01/03/24 01/04/24
DAU 30 50 70 75 20 20 21
DAU % 0% 66.7% 40.0% 7.1% -73.3% 0.0% 5.0%

6.[Optional] Any lessons learned from the previous STIP round?

  • The STIP program enabled us bootstrap lending side liquidity to add many new integrations like leverage LP on Pendle, leverage LP on Camelot, add support for LRT tokens, add support for native arbitrum projets like $GRAIL, $XAI, $SILO etc. We want to double down on leveraged yields for new assets/ integrations in the Arbitrum ecosystem.
    The lesson learnt for us was to tweak protocol mechanics to make lending more attractive, since we were always maxxed out on borrow capacity, and not keep up with the lending liquidity. To to mitigate this to a certain extent, we shipped an “airdrop points shraing” system - as a part of which, lenders earn 50% of the points from EigenLayer points/ LRT points. This is done to make lending attractive too, and make the status quo appealing to all stakeholders.

New Plans for STIP Bridge

  1. How much are you requesting for this STIP Bridge proposal?
  • 186,000 ARB
  1. Do you plan to use the incentives in the same way* as highlighted in Section 3 of the STIP proposal?
  • Yes, we will keep the incentive program unchanged from last time.
  1. [Only if answered “no” to the previous question] How will the incentive distribution change in term of mechanisms and products?
  • N/A
  1. Could you provide the addresses involved in the STIP Bridge initiative (multisig to receive funds, contracts for distribution, and any other relevant contract involved), and highlight if they changed compared to the previous STIP proposal?
    The address will be:
  • Multisig to receive the incentives: 0x2e39fbb069accd1959d003297250129879eb20a1 (same as last time)
  • Contracts that will distribute the incentives
    • Strategy Gateway: 0xDc6c3dFb237D5202a8eE4d8472A52A94F9282053
    • ysETH.h: 0x092d4BEe60B9F8904918bA7b0341c0B45f16FB55
    • ysETH: 0x5ecb93b3ef882bf42fee65541942d50a7dab4b33
    • ysUSDC.e: 0x3251f402Cc06b33E742f08E1ADbE0D2E4C1ea2FA
    • ysUSDC: 0x97a57663491ba1f0464d587b4b01ed58e49e4109
    • ysUSDT: 0x36569fbc5a9d4c59d71e81d46db24256a09d1ad6
    • ysARB: 0xab416E57ec74e87295B8a1507745a954B0bB9
    • ysWBTC: 0x8e57143d14bae132210cfeec58d0c48875f7d415

The multisig used to receive the incentives will be the same, while the incentive distribution contract changed compared to STIP

  1. Could you share any feedback or suggestion on what could be improved in future incentive programs, what were the pain points and what was your general evaluation of the experience?
  • Overall experience was quite positive, with no specific feedback.

Other points added on advice of our advisor (SeedGov)

Overall, Stella was able to overachieve all the KPIs set at the start of STIP. Also, Stella was ranked 6th in the notional TVL growth per $ of $ARB spent according to Openblocks - making Stella one of the most capital efficient STIP incentive programs.

Some info on how incentives were given out each week for lending pools and leveragoors

For leveragoors, the incentives were fixed to 20% top up on profitable positions in incentives. If the leveragoor’s position was negative, no incentives were given. This was done to incentivise good behaviour and prevent sybil.

For lending pools, we had to play the incentive amount to each pool by the ear, esepcially since a lot of trends that we had not forseen came into the picture (ex LRTs).

For ex : At peak, LST/LRT based Pendle pools were contributing ~70% of the strategy TVL. To meet up with the demand, we had to divert incentives to ETH Hyperlending pool which was maxxed out to 100% utilization for weeks!

Thus, it was a bit hard to predict demand for lending pools in advance. Also, we wanted to direct incentives towards lending pools that fulfilled actual demand, rather than just inflating TVL with lending pools that had no borrow demand.

The key learning is simple - we have to be flexible with incentives on lending pools depending on what is seeing more demand to best serve the users.

Conclusions regarding liquidity stickiness, analysis of TVL drop post incentives, and how to mitigate that

From our analysis, there are two key reasons the TVL dropped post incentives :

  1. The LRT and EigenLayer narrative has faded out, so the borrowing activity in these pools have reduced significantly over past weeks. This was more due to market conditions.

  2. The second and more fundamental reason is that no wants to lend, more people want to leverage farm the points. Thus, lending is not that attractive without incentives.

To solve that, we have recently enabled points sharing with lenders, which will help lenders help get points on top of the passive lending APYs with no liquidation risk. Hopefully this should drive more lending activity and stickiness.

KPIs for STIP bridge

  1. Cross the TVL high set in the previous STIP program ($9.5M).
  2. Cross 400 MAU on consistent basis.
  3. Enable new asset integrations on Arbitrum, like USDe and others. Drive the best leveraged yield strategies on Arbitrum towards the hot asset categories like LSTs, LRTs, new stablecoins etc.
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Hello @apoorv9 ,

Thank you for your application! Your advisor will be SeedLatam Gov @SEEDGov

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.

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Hi @apoorv9 we are waiting for you in the discord !

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Hi @SEEDGov! I am unable to find the channel for Stella discussions, possible to share the link of the channel please?

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Following feedback on the proposal to establish the STIP Bridge, it was agreed to involve the LTIPP Advisors in this process with the mission to “help applicants gain insights into their proposals. This not only guides applicants through the process but also ensures that the DAO will review better proposals.”

Despite the inclusion of Advisors, this process does not involve the Council, leading us to believe that this addendum places a significant burden on the delegates who must review all the proposals. One of the reasons for the LTIPP was precisely to avoid this excessive burden. Moreover, the optimistic model adopted in this phase could raise concerns about the real control the DAO will have over these proposals, as reviewing six months of data for each applicant is time-consuming.

For this reason, we decided to accompany each application we reviewed with a brief report. We ask the delegates not to take this as an in-depth or definitive basis for deciding your vote, but rather as a high level overview that can potentially raise questions for your own analysis.

Regarding Stella, their KPIs were:

According to their final report and the metrics provided by OBL, the outcomes in the distribution of incentives were good. They achieved the targets for TVL, leveraged positions, and user engagement.

When reviewing the addendum, our main concern was stickiness, given the significant drop in TVL after incentives ended. They explained that:

1- The LRT and EigenLayer narrative has faded out, so the borrowing activity in these pools have reduced significantly over past weeks.

2- They realized that lending is not that attractive without incentives

Something interesting is that, despite not including it in their bi-weekly reports, they informed us that for “leveragoors”, the incentives were fixed to 20% top up on profitable positions. If the leveragoor’s position was negative, no incentives were given. This was done to incentivise good behaviour and prevent sybil.

For more data and their answers, please review the Discord.

For lending pools, they managed incentives discretionally, considering the need of adapting to market trends and conditions (such as LRTs narrative).

Finally, we believe that it’s good that they set KPIs for this addendum.

Conclusions

Stella showed good results during incentives distribution. Acknowledging the stickiness issue, they enabled a points strategy. It’s quite early to determine the reasons for the drop in TVL, but more research is needed to avoid incentivizing strategies that bring mostly mercenary liquidity.