Thank you for reviewing our STIP Addendum application and giving us this opportunity to address the concerns raised.
As a DeFi Options protocol, we need to have a minimum amount of Protocol-owned Liquidity (“POL”) as part of the liquidity process for market making on our option vaults. We disclosed this in our original Arbitrum STIP application, which can be found here: [Thetanuts Finance] [FINAL] [STIP - Round 1]. We further specified that any rewards attributable to the protocol would be later distributed through additional incentive programs.
This is the relevant section from our original Arbitrum STIP application:
We intend to perform a 1:1 matching of the ARB grant received, with this matching amount to be used as Protocol-Owned Liquidity (“POL”) for our Basic Vaults, AMM, and Lending Market. We will acquire these assets (either ARB or ETH) through open market operations.
The initial breakdown of this 1:1 POL will be as follows:
- Basic Vaults (Sell-side): ARB (12.5%) & ETH Call Vaults (22.5%)
- AMM (Buy-side): ARB-Call / ARB Pool (20%), ETH-Call / ETH Pool (30%)
- Lending Market (Short Options): 10%
- Borrowing Market (Long Options): 5%
Grant Breakdown:
- 100% of grant proceeds will be used for the Thetanuts Finance v3 deployment for TVL incentives.
- TVL Incentives are expected to be distributed to LPs in the Basic Vaults, AMM, and Lending Market – in order to bootstrap liquidity and kickstart the v3 flywheel.
- The incentives will be split linearly across 3 months until 31 Jan 2024. Distribution of rewards for the AMM and Lending Market will commence upon deployment at a later date (estimated launch of Oct 2023).
- All incentives from POL will be used for a future incentive program.
During the STIP, we farmed a total of ~15,761 ARB through our POL at this address: Address 0x4a4c7c5549359b9fff0137bb3ec4d48c4aa79cc7 | Arbiscan. We also created API endpoints for reference. The breakdown is as follows:
1st Week - 0 $ARB (https://thetanuts.finance/v3/incentives/ARBITRUM_USER_INCENTIVE_DATA_JAN_29_FEB_02.proof.json)
2nd Week - 0 $ARB (https://thetanuts.finance/v3/incentives/ARBITRUM_USER_INCENTIVE_DATA_FEB_02_FEB_09.proof.json)
3rd Week - 2925.135053336962 $ARB (https://thetanuts.finance/v3/incentives/ARBITRUM_USER_INCENTIVE_DATA_FEB_09_FEB_16.proof.json)
4th Week - 2691.997527338879 $ARB (https://thetanuts.finance/v3/incentives/ARBITRUM_USER_INCENTIVE_DATA_FEB_16_FEB_23.proof.json)
5th Week - 2628.988826947951 $ARB>
(https://thetanuts.finance/v3/incentives/ARBITRUM_USER_INCENTIVE_DATA_FEB_23_MAR_01.proof.json)6th Week - 2655.08734776001 $ARB>
(https://thetanuts.finance/v3/incentives/ARBITRUM_USER_INCENTIVE_DATA_MAR_01_MAR_08.proof.json)7th Week - 2452.826848962343 $ARB
(https://thetanuts.finance/v3/incentives/ARBITRUM_USER_INCENTIVE_DATA_MAR_08_MAR_15.proof.json)8th Week - 2407.5659568001565 $ARB
(https://thetanuts.finance/v3/incentives/ARBITRUM_USER_INCENTIVE_DATA_MAR_15_MAR_22.proof.json)
All POL rewards have been redirected into our incentive program which began after March 31 (i.e. the end of Arbitrum STIP). We have been running this program for 7 weeks thus far. We plan to end this program after 3 additional weeks, with the final day being 7th June 2024.
We have been distributing 5,000 $ARB per week to our Arbitrum users, totalling 35,000 $ARB — meaning that we have exceeded the amount farmed through our POL.
To ensure we have sufficient $ARB throughout the program, we have been using market-bought $ARB out of our own treasury. We believe that this is a show of our commitment to the Arbitrum community and to our users on Arbitrum.
Once our incentive program concludes, any leftover unclaimed $ARB (including from our own POL) will then be swept and redistributed one last time to active users, thereby fulfilling our obligations under the STIP.
Moving forward, if the incentive distribution structure of our original proposal remains a concern, we will be happy to exclude our POL from receiving $ARB rewards for the STIP Bridge should we pass.
Thank you.