Team 13: Orbit Ecosystem Development Fund

[WaveDigitalAssets]

Track Name: Orbit, Stylus & Infra

Challenge Statement: Orbits chains lack ecosystem support: specifically TVL, project token liquidity.

Members: @A_W Anne Winston and Nauman Sheikh of @WaveDigitalAssets

Team Lead: Anne Winston

Pitch Video

Orbit Ecosystem Development Fund

Abstract

This proposal seeks to support and scale Orbit chains by providing liquidity and TVL through the establishment of an Ecosystem Development Fund for projects; in partnership with Arbitrum DAO.

Motivation

Orbit chains allow developers to create customizable blockchains that are not only powered by Arbitrum’s technology, but also can be tailored to specific application/project needs.

The Orbit ecosystem is experiencing growth with the emergence of new projects, such as Sanko and Degen chain. Defi projects in particular face major challenges in terms of initial liquidity support to help them attract new users, and further incremental liquidity (liquidity begets liquidity). This is a problem across all DeFi verticals, and requires initial boot strapping.

Established liquidity pools on day 1 is an important piece of a toolkit that is currently missing for Orbit projects, both existing and upcoming. Through strategic liquidity provisioning / TVL, we can solve the zero-to-one problem projects face, and one of the top reasons they fail.

Rationale

Orbit chains represent a new frontier in blockchain development that “foster open, permissionless innovation”, attracting builders and users. This initiative reflects Arbitrum DAO’s commitment to provide a pathway to support and grow the Orbit ecosystem.

Primary Goal

Support the growth of Orbit chains by providing sticky, long-term, anti-mercenary liquidity to select projects. Initial long term liquidity serves as a positive flywheel to attract additional TVL and users to Orbit projects, as well as provide support to new builders.

Steps to Implementation

Central to this proposal is the strategic deployment of ARB paired with other token assets to enhance liquidity across the Arbitrum Orbit ecosystem. Targeted liquidity injections foster a robust trading environment that supports stability and growth for both Orbit-native tokens and blue-chip assets. Our approach is designed to optimize ecosystem scalability in both existing and emerging Orbit chains.

1. Liquidity Provision

• Objective 1: Deploy ARB tokens paired with the following assets into protocols building on Orbit

  1. Assets:

  2. ETH

  3. WBTC

  4. USDC

Amount to Dedicate: 10 million ARB

• Objective 2: Deploy ARB tokens paired with select Orbit-native tokens into Orbit Chains

Amount to Dedicate: 5 million ARB

• Objective 3: Deploy ARB tokens paired with select Orbit-native tokens into Arbitrum Mainnet

Amount to Dedicate: 5 million ARB

• Objective 4: Provide ARB token liquidity for bridging between Orbit Chains and Arbitrum Mainnet

Amount to Dedicate: 1 million ARB

Orbit Chain Project Qualification

We take a VC lens to project selection. Projects are evaluated on some of the following criteria (not an exhaustive list).

• Orbit Chains and dApps will be evaluated based on various factors:
  • Bridged TVL: How much liquidity has been bridged to the chain?
  • Growing user base and product market fit
  • Number of wallets: How many wallets exist on the chain?
  • Number of transactions: How many transactions are being executed on the chain or dApp?
  • Volume: How much volume has the protocol/chain done?
  • Audits: Has the chain/protocol been audited? Who conducted the audits?
  • Community: Does the protocol/chain have an active user base or community?
• Implementation of a manual risk review process to assess and qualify each Orbit Chain and dApp up for consideration. This review process includes the aforementioned factors but also includes the following:
  • A detailed risk analysis memorandum
  • A review of audit documentation
  • Meetings with founders and team members

Governance and Oversight:

Performance Metrics/ KPI’s: (How we measure success)

1. Number of quality projects that are provided liquidity
2. Yield generated per project and for the fund as a whole
3. Growth in TVL

Reporting and Accountability:

• Quarterly data transparency reports will be posted in the forum. Reporting will include aforementioned metrics on performance, adhering to predefined timelines. A 12 month impact report to be shared in the forum, and in relevant community channels.
• If there is interest from the DAO, we invite a small committee of DAO members to serve as advisors, and performance metrics validators.
• 1 year clawback clause: Following the 12 month impact report, the DAO can decide to continue the fund or clawback the investment

Fund Structure

Team & Track Record

Wave Digital Assets is a crypto native SEC registered investment advisor, licensed in the US and Switzerland. Since 2018 Wave has managed over $1bn in assets, developing bespoke strategies for DeFi, derivatives, staking, and more. Wave works closely with some of the top protocols in three ways 1) Launching Ecosystem Development Funds, similar to this proposal 2) Active Treasury Management 3) VC Funding for emerging projects building on the chains we support / service.

Specifications

• Investment Advisor: Wave Digital Assets LLC
• Separately Managed Entity Structure registered in BVI
• Limited Partner: Arbitrum Foundation (legal signatory)
• Custodian: Zodia Custody, Bitgo, Coinbase, Komainu
• Fund Administrator: NAV Consulting

Timeline (from the time funds are allocated)

• Weeks 6-8; BVI entity construction
• Weeks 8-10; Liquidity pools set up
• Weeks 10-ongoing; Orbit project evaluation and liquidity provisioning
• Quarterly data transparency report production
• 12 month impact report & DAO review
• 12 month clause enacted or waved

Budget

• Total Amount:
  • 30mm ARB tokens
• Traunching
  • 75% of the ARB tokens will be allocated on day 1 and the remainder will be disbursed in quarterly tranches to ensure efficient and strategic deployment of funds.
  • This approach will also allow for periodic reassessment and adjustment based on performance and evolving ecosystem needs.
• 20% Performance on net yield* generated after accounting for ARB Price movement
• 2% management fee on AUM

*Yield generated by the pools will be reinvested into the fund.

[milk-cash]

We appreciate the comprehensive proposal presented by Anne Winston and Nauman Sheikh of Wave Digital Assets for the Orbit Ecosystem Development Fund.

The proposal addresses a significant challenge faced by Orbit chains, specifically the lack of ecosystem support in terms of TVL and project token liquidity.
The motivation behind the proposal is well-articulated, highlighting the potential of Orbit chains as a new frontier in blockchain development and the need to support and grow this ecosystem.
The primary goal of providing sticky, long-term, anti-mercenary liquidity to select projects is a strategic approach to foster a robust trading environment and support stability and growth for both Orbit-native tokens and blue-chip assets.
The steps to implementation are detailed and include specific objectives for liquidity provision, project qualification criteria, and a risk review process.
The governance and oversight structure, including performance metrics, reporting, and accountability, are also well-defined.
The team’s track record and experience in managing crypto assets and working with top protocols add credibility to the proposal.The budget allocation of 30mm ARB tokens, with 75% allocated on day 1 and the remainder disbursed in quarterly tranches, ensures efficient and strategic deployment of funds.
The performance fee of 20% on net yield generated after accounting for ARB price movement and a 2% management fee on AUM are reasonable and align with industry standards.

However, we would like to suggest a few improvements to further strengthen the proposal:

Clarify the selection process for the Orbit Chain projects and dApps, including the weightage given to each criterion and the decision-making process. This will help ensure transparency and fairness in the project selection process.
2. Consider including a provision for regular communication and updates to the DAO community, in addition to the quarterly data transparency reports and the 12-month impact report.
This will help maintain engagement and trust with the community throughout the fund’s lifecycle.
Explore the possibility of integrating a feedback mechanism from the Orbit Chain projects and dApps to continuously improve the fund’s operations and impact.

Overall, we believe that the Orbit Ecosystem Development Fund proposal is well-thought-out, addresses a critical need in the Orbit ecosystem, and has the potential to significantly contribute to the growth and success of Orbit chains.
With the suggested improvements, we recommend moving forward with the proposal. Positive support .