Umami Finance STIP Round 1 Final Update 4/5/24
Overview
Umami extends its sincere gratitude to all contributors who have fueled the growth of the Short-Term Incentive Program. Within the Arbitrum ecosystem, participants experienced a dynamic period fostering DeFi innovation. The Umami DAO was tasked with spearheading the creation of innovative GMX-based vaults for the ecosystem and is delighted to announce the successful achievement of all objectives and KPI targets:
- Increase Arbitrum and Umami user base by leveraging partnerships with other Arbitrum projects to cross-promote.
- Increase liquidity for GMX traders by incentivizing further deposits into Umami’s vaults.
- Boost vault performance with optimized internal netting due to increased deposits.
- Boost user growth and retention
- $10m TVL target achieved
Since the November launch of our STIP initiatives, here is the progress we have made:
GLP Arc
Initially, Umami’s flagship product focused on developing single-sided exposure vaults for the assets within GLP, emphasizing optimal internal netting strategies to achieve best-in-class capital efficiency. By leveraging exposures across all vaults, users accessed the most cost-effective means to hedge their positions against underlying tokens. Umami’s GLP vaults executed their strategy effectively, fulfilling their intended purpose.
The performance of our USDC vault’s PPS accurately reflects the true market performance of individual assets within GLP. Traders’ profit and loss is illustrated with the volatility, showing true PnL performance, complemented by the compounding effects of direct ETH yield. This successful scaling demonstrates the efficacy of our vault positions, where users retained their beta, and USDC served as an ideal hedging tool, accruing compounded ETH yield even during bullish market conditions and trader’s winning.
Although the current iterations of the vaults have been discontinued, the underlying technology driving these strategies has not been forgotten. Instead, it continues to be utilized and optimized within our expanding ecosystem.
oARB
To scale the GLP Vaults and ensure alignment with Arbitrum, we implemented an oARB emissions tool, inspired by Dolomite’s system. This strategy provided a vested 2.5% weekly ARB yield on users’ ARB deposits, boosting liquidity and securing the ARB supply. Users had the flexibility to choose their vesting duration, ensuring a locked ARB supply and reducing the impact of emission farming. Initially, a maximum 16-week vesting period required purchasing ARB at a maximum 40% discount using ETH. In response to community feedback, we extended the vesting period to 40 weeks and introduced an option to opt out of purchasing ARB.
It’s crucial to emphasize that the ETH earned serves as a robust mechanism leveraging capital invested in the emissions program and our vault products. Requiring users to invest ETH, stake ARB, and provide liquidity to Umami’s products enables the market prove value of ARB incentives which is then used to recycle the ETH raised for expanding TVL growth in alignment with Arbitrum.
While the requirement for increased ETH and ARB investment faced backlash from farmers accustomed to direct emissions, it was a critical aspect that contributed to the success of our oARB over-emissions strategy. Mandating a vesting ARB and ETH investment commitment reduces the number of users taking advantage of the high emissions rate, allowing savvy users to achieve increased yield in a shorter timeframe. With 800,490 oARB distributed 702,775 ARB claimed this gamified system provided valuable insights for future iterations.
A total of 533,298 ARB tokens vested for the maximum 40 weeks, with maturity scheduled between September 2nd and November 25th. To date, 38.63877 ETH has been accumulated. Subsequently, a DAO proposal was approved to utilize the accumulated ETH for incentivizing Umami vault products through a discounted UMAMI vesting system. Drawing inspiration from the oARB system, users will have the opportunity to earn vUMAMI weekly, which can then be used to purchase discounted UMAMI tokens using ETH. The ETH proceeds will be compounded back into purchasing UMAMI, further extending the UMAMI emission incentive runway. This approach ensures that Umami vault products maintain sustainable incentives beyond the ARB system, aligning incentive farmers with the UMAMI protocol.
What we learned:
While the oARB system was manageable, we encountered an issue with the availability of ARB from the vesting contracts. Rapid issuance of oARB tokens led to exceptionally high yields for early depositors. However, towards the end, we faced the challenge of needing to taper emissions as more depositors opted for the non ETH investment 40-week option. This resulted in delays as users awaited replenishments.
One additional lesson learned was the importance of closely monitoring token availability and adjusting emissions accordingly to ensure a sustainable and consistent user experience.
New GMX GM Pool vaults
The launch of Umami’s GM Vaults introduced a new set of needs for our incentive program, prompting us to prepare for a smooth conclusion to the oARB campaign after 12 weeks. By providing the community with ample time to adjust and prepare through STIP updates and community engagement, we simplified the task of migrating GLP users to a superior liquidity-providing product. Thanks to GMX and their generous grant of 100k ARB, we were able to postpone ARB yield from the STIP and utilize direct ARB emissions with the GMX grant for 45 days. As a result, all engaged GLP users could migrate seamlessly and continue to earn maximum potential yield as we scaled to $9m TVL.
The remaining 47,225 ARB that was not claimed through the oARB over-emissions was allocated to our GM vaults. Our strategy implemented a keeper that dynamically adjusted emissions to direct investment flow into our new gmusdc(BTC) vault, creating optimal capital efficiency within the vaults and was the final push that brought us to our $10m TVL target.
GMX’s GM Pools offer superior liquidity provision opportunities due to the implementation of negative funding rates. This mechanism reduces trader profit and loss effects, enabling short sellers to earn fees while demand for long positions remains high. As a result, this creates a much more stable PPS for our vaults, which has proven to perform extraordinarily well even in a bull market—a feature the GLP vaults did not possess.
The STIP Dune dashboard has been updated to reflect the recent adjustments to our emission strategy.
https://dune.com/umamidao/stip1-umami-incentives
GMX’s Grant Program Dune Dashboard:
This shows the masterchef contracts used to distribute ARB
https://dune.com/umamidao/gmx-grant-incentives
Final emission schedule
All 750,000 STIP ARB tokens were distributed within the designated timeframes. Specifically, 702,775 tokens were distributed through the scaling GLP vaults with the oARB emissions program, which concluded on January 26th (Final oARB redemption date February 17th). The remaining 47,225 tokens were allocated to GM Vault emissions between March 17th and March 29th, facilitated by a standard master chef contract. This approach ensured an efficient and transparent distribution of incentives.
ARB Received Last Disbursement: 0
ARB Utilized as Incentives since March 17th: 0
STIP Contracts incentivized since March 17th:
MasterChef Contract: 0x52F6159dCAE4CE617A3d50aEb7fAB617526d9D8F
$gmUSDC (WETH) Vault Token - 0x959f3807f0Aa7921E18c78B00B2819ba91E52FeF
$gmUSDC (WBTC) Vault Token - 0x5f851F67D24419982EcD7b7765deFD64fBb50a97
$gmWETH Vault Token - 0x4bCA8D73561aaEee2D3a584b9F4665310de1dD69
$gmWBTC Vault Token - 0xcd8011AaB161A75058eAb24e0965BAb0b918aF29
Contract address label Form 7 completed for all addresses: Yes
ARB left over: 0
Plan for leftover ARB: N/A
Summary of incentives:
Direct ARB incentives were used to incentivize our GM Vaults and scale our newly launched BTC. The same masterchef contract was used for the GMX Grant incentives allowing stakers to remain staked. The total distributed was 100k ARB from GMX Grant + 47,225 ARB left over from the oARB STIP program.
Additional Info / Disclosures to Multisig: No changes to the multisig have been changed to this date.
GLP Vault STATS - (Depreciated)
GLP vaults were depreciated due to the under performance compared to our new GM vaults. It is in the best interest of the protocol to offer the best products so for that reason we allowed all GLP vault holders to migrate to the more efficient GM Vaults to take advantage of our incentives and TVL scaling efforts.
GM Vault Stats (3/17 - 3/29)
Average daily TVL: $8,883,081.92
Average daily users: 32
Average daily volumes: $637,509.07
Number of unique user addresses: 2377
Transaction fees: $7524 (over 13 days)
Link to Dashboard showing metrics: https://dune.com/umamidao/stip1-umami-incentives
Plan For the Next Two Weeks
Amount of ARB to be distributed: N/A
Contracts that will be incentivized: N/A
Contract address label Form 7 completed for all addresses: Yes
Mechanism for distribution incentives: N/A
Remarkably, the effectiveness of the STIP ARB incentives enabled the Umami treasury to generate a 45k ARB yield from the liquidity it provided to the Arbitrum ecosystem. To prolong emissions for our vaults, we have decided to allocate the ARB earned from our deposits into GMX’s GM Pools during the STIP incentive period. Presently, the treasury is distributing the ARB emissions through the same masterchef contract allowing users to stay staked. With the program scheduled to conclude on April 30th. This initiative will help us bridge the gap between incentive programs and maintain attractive APRs.
We look forward to sharing our vision for the ARB STIP Bridge program soon.
Cheers