Applicant Name: Steven T
Project Name: Umami DAO
Project Description: Umami Finance operates exclusively within the Arbitrum ecosystem, specializing in yield-generating vault products built on foundational protocols like GMX. We aim to provide low-risk, high-sharpe ratio strategies in easy to understand packaged products and exposure profiles, helping to onboard users into the ecosystem as well as bolster the liquidity on the network.
Team Members and Qualifications:
- 0xWenmoon: Treasury Manager & Lead Business Development
- Toki: Lead Smart Contract Engineer
- StevenT: Market & Liquidity Strategist
- Edis: Social Media & Marketing
- OxDapper: Smart Contract Engineer
- Greypixel: Lead Frontend Developer
- ClonesCody: Fullstack Developer
KYC Acknowledgement: Yes
Requested Grant Size: 750,000 ARB
Grant Matching: N/A
- GLP Vault Incentives: 750,000 ARB
- Vesting Distribution: ~187,500 ARB/Month
- Vesting Period: Incentives will be distributed evenly from the day they are granted to the end of the short-term incentives program, 31st January 2024.
The incentivisation mechanism we plan to use takes inspiration from Dolomite’s oARB mechanism in their Forum Proposal, with minor changes being made to better fit our protocol. We find this method of incentivisation best protects Arbitrum from instant dumping of rewards, and instead favors longer term incentive alignment for liquidity farmers, creating a better outcome for both Umami and Arbitrum.
- Users can stake their Umami vault receipt tokens for oARB emissions.
- oARB is continuously emitted and can be vested on a first-come, first-serve basis.
- We will use a simple MasterChef or Gauge contract for the emissions
- oARB that’s emitted can be staked for x duration (in increments of 1 week up to 4 months) and must be paired with the same amount of ARB (1:1 ratio).
- For example, vesting 100 oARB requires you pair it with 100 ARB in the contract
- We’ll represent each stake a user takes as unique NFT locks so popular DeFi dashboards can track them
- After the vesting period, the underlying ARB can be obtained for a y% discount to the oracle price
- The discount will depend on how long the oARB is locked for and will be linear from 1 week to 16 weeks with each additional week adding 2.5% to the discount. This is subject to change pending feedback.
- 1-week is a 2.5% discount
- 2-weeks is 5% discount
- 15-weeks is 37.5% discount
- 16-weeks is 40% discount
- As demonstrated with this discount schedule, staking to achieve the max discount requires users hold the paired ARB for longer, a positive result for the Arbitrum ecosystem as users have their interests aligned for longer.
- The price will be determined via Chainlink oracle at the time of purchase
- This guarantees fair pricing and that farmers will make money when they execute the options.
- Keep in mind, oARB must be paired with ARB on a 1:1 basis to begin vesting. This should help offset ARB sell pressure and constrain users from vesting oARB too quickly if they accumulate a large amount (similar to esGMX and GMX vesting). It also helps align incentives of farmers with Arbtirum
- If the ARB rewards pool is depleted, all remaining oARB tokens expire worthless
- Staked ARB (that’s paired with oARB) will be deposited in Dolomite to improve capital efficiency for farmers
- We want to avoid giving the tokens away for free since it encourages dumping at the expense of ARB in exchange for boosting Umami’s TVL. That would be a bad outcome for Arbitrum, and we would rather be positive sum for the ecosystem!
- Users will receive their exercised oARB as ARB tokens in their wallet
- How lucrative is this for farmers?
- Suppose we emit $333k worth of ARB over 2 months ($2M annualized). The max discount is 40%, which means $800k worth of annualized value is emitted
- If Umami gets $10M in TVL to stake (more than doubling our current TVL), the max reward APR would be 8% - why?
- $2M annualized * 40% discount = $800k in value delivered to farmers.
- $800k / $10M = 8%
- Note: this program will be even more lucrative when staked deposits are lower, encouraging more yield farmers to participate
Funding Address: 0x8E52cA5A7a9249431F03d60D79DDA5EAB4930178
Funding Address Characteristics: 3/6 multisig controlled by Umami DAO team. This is the multisig used for our current ARB airdrop allocation.
Contract Address: 0x8E52cA5A7a9249431F03d60D79DDA5EAB4930178
- Increase Arbitrum and Umami user base by leveraging partnerships with other Arbitrum projects to cross-promote.
- Improve Umami Vaults’ TVL efficiency by incentivizing equal TVL distribution between vaults.
- Increase liquidity for GMX traders by incentivizing further deposits into Umami’s GLP vaults
- Boost vault performance and yields, including real yields through more internal netting thanks to more deposits.
- Educate users on Umami product offerings by leveraging social media for maximum reach.
- TVL growth - 10M TVL by end of January (250% increase)
- User growth and retention (Analytics page)
- Vault APR performance (Measure internal netting efficiencies due to incentives)
Innovation and Growth:
The grant will amplify our vaults’ yields and draw attention to both Umami and Arbitrum as the home of the highest single asset exposure yields in DeFi… Umami is a highly symbiotic protocol; as well as offering the clearest view on the actual performance of GMX’s GLP, increasing vault TVL is mutually beneficial to GMX and the Arbitrum ecosystem: as users come to appreciate the benefits of our vaults all parties will see a healthy increase in the coveted "sticky TVL”.
Looking ahead, the credibility that Umami has garnered from the overwhelming technical success of the GLP vaults puts the protocol in excellent standing for the upcoming launch of its GMX v2 vaults. We believe these vaults will offer an incredibly compelling value proposition for prospective GMX v2 LPs seeking a simpler and easier to track alternative to the perhaps overwhelming choice of depositing into GMX v2 directly.
Justification for Grant Size:
Umami has shown consistent innovation since its October 2021 inception and has evolved from Olympus DAO-like tokenomics to generating real revenue through our products. As an OG project with over $4m TVL, Umami is leading Arbitrum in real yield ETH, USDC and wBTC products. The proposed grant size is in line with the grant guidelines for a project of our TVL and OG status. The grant will help bring more liquidity to GMX and bring more “real yield” to arbitrum. Umami offers the best risk-adjusted returns in real yield for any of the provided assets on any chain and the grant would help highlight this and attract new users to Arbitrum as a result.
Resources and Products: Our team comprises experts in Solidity, Frontend and Webstack Development, Market and Liquidity Strategy, Treasury Management, and Social Media Marketing. We are prepared to allocate these resources effectively to fulfill the objectives set out in this grant proposal.
Use of Funds: The 750,000 ARB will be wholly allocated to incentivize our GLP vaults on Arbitrum. This is aimed at bringing more users to both the Arbitrum ecosystem and our innovative Umami vaults.
Incentive Allocation: Our aim is to strategically weigh incentives to maximize total value locked (TVL), thereby optimizing internal netting performance. To start we will target:
40% to glpUSDCb
30% to glpETHb
28% to glpBTCb
1% to glpLINKb
1% to glpUNIb
This allocation is informed by current demands and liquidity trends on the Arbitrum network, as well as our overarching strategy of balanced risk and diversified yield.
Adaptive Weight Adjustments: As we analyze the responsiveness of the market to these incentives, we will be ready to adjust the weights to optimize deposits where they are most needed, thereby refining our APY and attracting a broader set of users.
Risk Management: To mitigate risks associated with smart contracts and fund management, we will rely on contracts with already comprehensive third-party audits. These tested and proven contracts for token emissions and reward distribution will allow us to regularly update our community on progress and any changes through transparent reporting.
Performance Metrics: KPIs will be monitored closely to ensure that our strategy is yielding the desired results. This will include TVL, incentives per vault/% of total distributed, user growth, individual vault performance.
Operational Milestones: We will adhere to the grant timeline, which involves multiple phases such as auditing, internal testing, and public releases of new products or versions.
By executing this strategy, we aim to foster increased adoption, innovation, and liquidity in both Umami’s products and the broader Arbitrum ecosystem.
- The ARB will be distributed within 2 weeks of receipt. The incentives will be distributed within 16 weeks.
Funding Terms Acceptance: Yes
Is the Protocol Native to Arbitrum? Yes
Other Networks: None
Deployment Date on Arbitrum: October 31, 2021
- Umami Finance has rapidly scaled, growing its product’s Total Value Locked (TVL) from $0 to $2.8 million in July 2023 alone. In August the TVL further increased to $3.2 million, followed by its current TVL of $4,008,795 (9/25/23). With the current USDC and ETH strategy APR sitting at 16% and 15% respectively, this proves the efficacy of our vault products even in a weak market.
- Umami boasts an impressive treasury of over $4m
- 1.7k Addresses holding >1 UMAMI
- $193m cumulative token trading volume
- $1.8m UMAMI locked in marinate
- V2 Vaults Auditing Phase: November 1, 2023
- V2 Vaults Internal Testing: November 15, 2023
- Dolomite Vault integration: December 1, 2023
- V2 Beta Public Release: January 1, 2024
- Detailed in our gitbook
Dune Dashboards: Yes, our team can provide an in-depth performance dashboard.
Bi-weekly Program Updates:
Yes, we plan to submit bi-weekly updates on the Arbitrum Forum to keep the community informed.
Non-compliance Consequences: Yes