Arbitrum Short-Term Incentive Program (STIP) Round 1 Note
In relation to Arbitrum’s Short-Term Incentive Program (Arbitrum Improvement Proposal).
We were pleased as DAO contributors to see the amount of activity on this proposal and the increased awareness that came to the ecosystem as a result. To evaluate these requests as fairly as possible and due service to the amount of time it took to submit a proposal, we constructed a framework for on-chain metrics to guide our evaluations.
For the complete list of votes, see our profile on Snapshot.
- Arbitrum native or, if non-native, included Arbitrum as a major part of its strategy in addition to mainnet
- Total volume, both historical and recent: we considered both factors and evaluated each project as pragmatically as we could given the impact that the bear market has had on projects further in their token life-cycle while younger projects benefit from increased token speculation even during such conditions. We tried to account for the total value that projects have brought to the ecosystem and their likelihood to thrive and provide continued value in the years ahead.
- Accounted for differences in trade volume for perp protocols which generally have higher trade volumes due to leverage (notional values).
- TVL: we looked at the TVL of protocols as a metric but tried to also evaluate the purpose that this TVL serves in each instance.
- Where possible, we look to Dune dashboards to get a more normalised picture of project usage over time (self reported metrics over arbitrary or selective time periods can paint a different picture).
- Evaluated gaming and social projects by a different framework: Gaming has lower financial metrics. We evaluated DAUs, retention metrics, and activity over time instead. For example, some gaming projects that submitted a proposal have DAUs multiples higher than DeFi protocols that dwarf these games in TVL. However, in regards to on-chain activity and value to Arbitrum, we regarded them as equal.
- We also evaluated projects based on how likely they were to help bring value to all Arbitrum projects, for instance bridge, quest, and community loyalty projects that lowered friction for user acquisition and proposals could help with user retention for all Arbitrum projects as a whole.
“Against” vs. “Abstain” vs. Not Voting.
We deliberated the implications of voting “against” versus “abstain” versus not participating at all with the understanding that the votes functioned differently at different stages of the voting period. This latter point was somewhat confusing which has led to some misunderstandings.
The vote effectively went through 3 stages:
- Stage 1: Did the proposal pass the 71.5mil quorum?
- Stage 2: Did the proposal pass 50% approval? (for / (for + against))
- Stage 3: If over 50 mil is allocated, prioritise proposals with highest count of “for” votes (tiebreak with FCFS)
In the first stage of the vote, Treasure only voted “for” on proposals which we had high conviction in. Initially we had focused only on the projects we strongly felt would improve the Arbitrum ecosystem and meaningfully attract and retain new users according to the criteria outlined above.
Stage 2 + 3
As the dollar value of proposals that reached quorum began to exceed the $50mil cap, it became clear that we could better express our opinion and support our existing “for” votes by enacting “against” votes.
This isn’t to say that those projects aren’t doing interesting or valuable experimental work. Rather, these were projects that (in our opinion) appeared too early in development, a poor fit for user acquisition incentives at this stage of the market, or niche and complex products that would likely only enrich existing users of the project.
Other “against” votes were presented for projects and proposals which we felt were either overbearingly large relative to their stage and potential, or potentially risky to the Arbitrum ecosystem from both a user and builder’s perspective (second order implications where we may inadvertently discourage new projects choosing Arbitrum as a homebase).
On Abstaining vs. Not Participating
Since “abstain” votes matter only in the first stage in helping a proposal reach quorum, they were effectively votes that merely expressed our opinion without necessarily influencing outcomes.
Abstain votes were a way for us to express that we felt a proposal wasn’t quite ready for incentives or a right fit for increasing user acquisition and retention on Arbitrum (for a multitude reasons listed above), but also that we didn’t feel so strongly as to vote down a project and influence the outcome of the vote.
Treasure runs a games publishing ecosystem that depends on collaborating with other projects. We receive daily requests to look at various Arbitrum proposals, some of which we may not necessarily agree with, nor think helps the Arbitrum ecosystem and gaming in general. Ignoring requests to look at proposals can lead to tension and it isn’t the responsible answer either. Our primary responsibility is to prioritise TreasureDAO and remain diplomatic and express opinions tactfully in a way that doesn’t undermine future collaborations with projects in the Arbitrum ecosystem. An “abstain” vote helped us express this viewpoint more thoroughly.