SECTION 1: APPLICANT INFORMATION
Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name: @juanbug / @AbdullahUmar / @gauntlet
Project Name: Uniswap
Project Description: Uniswap is the largest decentralized exchange on Arbitrum by TVL. It enables users to swap tokens and provide liquidity permissionlessly. The DEX is implemented as a set of persistent, non-upgradable smart contracts; designed to prioritize censorship resistance, security, self-custody, and to function without any trusted intermediaries who may selectively restrict access.
Team Members and Roles:
- Juanbug & Abdullah: Uniswap Arbitrum Delegate Program leads
- Gauntlet (Governance and Applied Research team)
Project Links:
Contact Information
Point of Contact: @juanbug, @AbdullahUmar
Point of Contact’s TG handle: @juanbugsun, @aumar7
Twitter: @juanbugeth, @abdullahbumar
Email: pgovteam@gmail.com, abdullah@arana.ventures
Do you acknowledge that your team will be subject to a KYC requirement?: Yes
SECTION 2a: Team and Product Information
Provide details on your team’s past and current experience. Any details relating to past projects, recent achievements and any past experience utilizing incentives. Additionally, please provide further details on the state of your product, audience segments, and how you expect incentives to impact the product’s long-term growth and sustainability.
Team experience (Any relevant experience that may be useful in evaluating ability to ship, or execution with grant incentives. Please provide references knowledgeable about past work, where relevant. If you wish to do so privately, indicate that.):
Uniswap has grown to be the largest DEX in all of DeFi and Arbitrum. Since launch, there have been no security hiccups and no major issues for the Arbitrum community. Please visit the following links to look more closely at how Uniswap has been involved in the community in the past few months alone:
- Gauntlet has shipped out a Dynamic Incentive Optimization for Uniswap V3
- Set up a Uniswap-Arbitrum Working Group
- Funded a ~$2m Uniswap-Arbitrum Grants Program
- Created an active metagovernance group (Uniswap-Arbitrum Delegate Program)
What novelty or innovation does your product bring to Arbitrum?: Uniswap was a pioneer across the board from V1 to V3. Being the first customizable concentrated liquidity DEX and V4 on the horizon, Uniswap continues to strive to innovate.
Is your project composable with other projects on Arbitrum? If so, please explain: Yes, many projects build and incorporate Uniswap.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?: Yes, Camelot, Balancer, Curve, Sushiswap
How do you measure and think about retention internally? (metrics, target KPIs): Sticky liquidity and all of the major DEX related KPIs are important. We’ll run experiments during the incentive periods to test the stickiness of liquidity if incentives are removed.
Relevant usage metrics - Please refer to the OBL relevant metrics chart 6. For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section: Metrics Overview
Active users for Uniswap on Arb has been very stable over the past 3 months, with ~20k unique traders daily
Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan: Yes
Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest (Note: this does NOT disqualify an applicant): No, this proposal was created by the above authors: the UADP and Gauntlet.
SECTION 2b: PROTOCOL DETAILS
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the protocol native to Arbitrum?: No, Uniswap is not native to only Arbitrum, but it’s the most prominent DEX on the L2 by trading volume, TVL, and DAUs.
On what other networks is the protocol deployed?: Uniswap is multichain and currently has official deployments on Ethereum, Arbitrum, Optimism, Polygon, Base, Celo, BSC, Avalanche C-chain, Moonbeam, Scroll, zkSync, Linea, Gnosis chain, Rootstock, Filecoin VM, Linea, and Zora.
What date did you deploy on Arbitrum mainnet?: Uniswap V3 was deployed on the Arbitrum network on June 2, 2021, following a community snapshot vote, and the network officially opened to the public on August 31, 2021. The contracts can be viewed here.
Do you have a native token?: Yes, the $UNI token.
Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?:
The Uni DAO received an Arbitrum airdrop on June 7, 2023—the entirety of 4.4M aidropped ARB was utilized to further engrain Uniswap’s relationship with the Arbitrum ecosystem. The Uni DAO ran an RFP process to decide how to best put this ARB to work. 2M ARB tokens were granted to Gauntlet and Merkl for incentivizing Uniswap liquidity providers on Arbitrum. Angle, Arrakis, Open Block Labs, and 0xPlasma contributed to designing and advising this effort. The goals of this program were to “increase volume, capture market share, and create a self-sustaining flywheel effect.” So far, $1,018,839,492 of incentive-related volume & a ~629% increase in TVL has been achieved. This initiative took effect in Summer 2023 and reached its 6-month midpoint in January 2024. You can review the effects of this program so far here. Gauntlet has also published various time series dashboards to monitor volume, TVL, and market share relative to DEXs like Balancer here.
The UADP also did not apply to the first two rounds of incentives (STIP 1 & 2). We do believe that native DEXs and smaller protocols deserve a chance to make a name for themselves and perhaps offer unique protocols for trading. However, since many native DEXs–and non-native ones–have already had the chance to apply for ARB incentives, we believe that it’s now the right time for Uniswap to also partake in these programs.
Current Incentivization: How are you currently incentivizing your protocol?:
Uniswap isn’t exactly known for paying out incentives. Most of the protocol’s growth has been organic. In 2023, however, the DAO deployed v3/v2 on numerous EVM chains. Bootstrapping liquidity and establishing a user base on these chains is challenging, so the DAO recently passed a proposal to incentivize growth on the given chains. The DAO will be distributing approximately $4M worth of UNI to these protocols. Given the recent price action, this distribution is now set to be over $6M of possible incentives if fully allocated.
The DAO determined which chains to incentivize via a handful of Snapshot votes. Arbitrum, and other L2s on which Uniswap is already dominant, were not included. The UADP will, however, post a vote to potentially match a portion of the incentives from the LTIPP. It is ultimately up to the discretion of UNI delegates to decide if and how much to match. The options we will post are $250k, $500k, $750k, or $1M.
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?:
No. Uniswap has not previously received any grants or funding from Arbitrum associated entities. However, Uniswap has been actively involved in administering a grant and metagovernance program to simultaneously better the Arb and Uni ecosystems. From the previously mentioned airdrop, 1.1M ARB have been used to administer the UAGP, and the other 1.1M ARB were delegated to a Uniswap DAO-led multisig (UADP) responsible for partaking in Arbitrum governance.
- The UAGP’s mandate has been to provide funding to projects that best align the interests of Uniswap and Arbitrum. The committee is composed of folks from both ecosystems. So far, the team has selected 5 companies for funding–details here.
- The UADP is one of the earliest instances of a meta governance initiative–it has been actively participating in the Arbitrum DAO since October 2023. We have maintained a 100% onchain and offchain voting record; you can see our delegate platform here.
Protocol Performance:
Defi Llama
Dune Dashboards
Protocol Roadmap:
Uniswap has three associated entities: Uniswap Labs, Uniswap Foundation, and the Uni DAO
Each of these entities has separate functions, which, at the end, collectively align towards ensuring the success of Uniswap, the protocol. UL is primarily focused on product development and innovation. Their roadmap is currently comprised on safely and effectively rolling out Uni v4 + UniswapX, as well as wallet development. The DAO is tasked with ensuring prudent utilization of the treasury, deploying Uniswap across multiple markets, and protocol fees. The UF acts as a steward for the DAO, aiding delegates in their decision making processes. Grant programs, research, education/awareness continue to be primary objectives of the foundation.
This present program is facilitated by the Uniswap DAO. The two UADP members are also Uniswap delegates and will be stewarding the LTIPP process. Since Arbitrum has established itself as a DeFi hub, it’s our responsibility to ensure that users in the ecosystem have a safe, reliable, & battle tested protocol to serve their trading needs.
Audit History & Security Vendors:
Uniswap V3 underwent a comprehensive audit process before its mainnet launch on May 5, 2021. The audit reports for both the core and periphery contracts of Uniswap V3 can be viewed in the hyperlinks.
Uniswap operates a Bug Bounty program to encourage the community and security researchers to review their code and report any potential security issues. Details about reporting vulnerabilities can be found on the protocol’s official website.
Security Incidents: Uniswap has never experienced an exploit.
SECTION 3: GRANT INFORMATION
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size: 1.0M ARB
Justification for the size of the grant: Prior to this application, Uniswap passed a DAO vote to use 2M of its Arbitrum airdrop to instantiate liquidity mining on its Arbitrum deployment. Since then, Gauntlet has been actively managing this incentive program, resulting in an increase of ~$1.01B in volume and ~629% in TVL attributable to incentives. Based on the success of this program and the continued partnership with Gauntlet, we expect similar/greater results with the requested amount. For a full breakdown, see Gauntlet’s mid-point retrospective.
Grant Matching: The Uniswap DAO has been voting on incentive packages since February 2024. The goal of this program is to increase liquidity providers to Uni pools, thereby providing depth for users swapping between assets. We have so far passed incentive programs to 8 different chains, representing ~$4M worth of $UNI. The members of the UADP are also prominent Uniswap delegates and are therefore able to post a temperature check to the Uni DAO to include Arbitrum in the incentive program. So, during March, the UADP will request the Uni DAO to decide whether or not it wants to partially match this 1.0M ARB ask. The options the DAO has to vote on are four: $250k, $500k, $750k, and $1M. We cannot guarantee that the DAO will vote to match incentives, but we will make a best effort attempt and report the results of the temperature check in this forum post.
Grant Breakdown:
- 900k ARB for incentives:
- 882k ARB: The bulk of these funds will be used to incentivize liquidity providers on Uniswap using Gauntlet’s dynamic optimization engine. Gauntlet takes a quantitative approach to determining which pools should be incentivized. Their simulation models predict the changes in a pool’s liquidity and volume market share across DEXs for a given level of incentive spend. Gauntlet has already integrated Uniswap V3’s Arbitrum deployment into their incentive recommendation engine. Integration and analysis ensure the pools selected offer the most ROI for the incentive program.
- 18k ARB: For Merkl to distribute the funds. Merkl charges based on a percentage of the incentives distributed. We were able to negotiate a discount to a 2% fee since Abdullah and I also helped with Uniswap’s Growth Incentive Packages for new chains, and Gauntlet uses Merkl for their prior mentioned Dynamic Incentive Optimization for Uniswap V3.
- 85k ARB for Gauntlet
- Gauntlet will dedicate part of its Applied Research team, the same team currently managing the Uniswap/Arbitrum liquidity mining program, to this initiative. This team will focus on active management of incentive allocations, bi-weekly updates, and an external facing dashboard.
- 15k ARB for UADP
- These funds will be sent to the UADP multisig with the goal of making this meta-governance initiative a self-sustaining program. This will allow Uniswap DAO to maintain its voting participation in the Arbitrum DAO.
Funding Address: We will create a multisig with respective and appropriate members.
Funding Address Characteristics: To be added–but will be at least a 3/5 multisig
Treasury Address: Overview of Uniswap’s Treasury/Foundation assets
Contract Address: We will distribute incentives through Merkl Tech (address TBD–will be added soon)
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
Clearly outline the primary objectives of the program and the Key Performance Indicators (KPIs), execution strategy, and milestones used to measure success. This helps reviewers understand what the program aims to achieve and how progress will be assessed.
Objectives:
- Optimize Incentive Budget and Allocations: The benefits of an incentive program should outweigh its cost. In the case of Arbitrum, the primary cost is the token budget set aside for distribution. Gauntlet aims to set optimal budgets and allocate incentives to LPs based on the value they contribute. By incentivizing LPs to bring and maintain meaningful liquidity and volume, we look to operate an incentive program that creates value for all stakeholders.
- Drive Network Effects: Implementing a well-designed incentive program will attract LPs and encourage deeper liquidity pools, attracting volume. This will help Arbitrum bolster its market competitiveness among L2s. Enhancing this can lead to a flywheel effect of liquidity, trading volume, and platform growth.
- Generate Sustainable Growth: A successful incentive program should incentivize LPs who continue to provide liquidity and contribute to Uniswap’s growth and utility. With this strategic goal in mind, Gauntlet approaches our work for Arbitrum with the view of supporting growth beyond the immediate time frame of the incentive program.
Execution Strategy:
Gauntlet has built a simulation engine for understanding the effects of changing yield conditions on pool liquidity and volume. It consists of a liquidity model that determines how LPs would react to increased yield (in the form of liquidity mining incentives) and a volume model that determines at the per-swap level how historical swaps would be redirected or changed in size based on counterfactual updates to liquidity. Gauntlet is currently applying the simulation engine to our analysis of Uniswap’s fee switch, as a protocol fee works as a negative incentive for LPs that decreases yield. More information about our simulation can be found in our fee report.
When it comes to determining incentive allocations to pools, Gauntlet will be using our simulation to determine projections of liquidity and volume given various levels of incentive spend. From those projections, Gauntlet will optimize the choices of incentive allocation across available pools in order to maximize the program ROI. Gauntlet will balance this optimization against considerations of the strategic benefits that certain token pairs provide to the Arbitrum ecosystem as a whole. In order to adjust to changing market conditions and improve our allocations through experimentation, Gauntlet will be providing updates to incentive allocations.
What mechanisms within the incentive design will you implement to incentivize “stickiness” whether it be users, liquidity or some other targeted metric?:
In our prior Uniswap Incentive Design Analysis, Gauntlet identified the Liquidity → Volume bootstrapping flywheel as the best way to generate lasting liquidity mining impact. This works as follows:
- Liquidity mining incentives begin
- LPs add liquidity to the pool, which improves execution quality for traders
- Traders route more of their swaps through the pool and thus pay more fees to LPs
- Fees from traders further attract liquidity to the pool until a stable equilibrium between liquidity and LP returns (fees + incentives) is reached.
- Liquidity mining incentives end
- Some liquidity is removed due to the reduced LP returns
- The final equilibrium level of liquidity is higher than initially because of the greater fee incentives enabled by sustained trading volume.
In order for this flywheel to work, the following must hold true:
- Liquidity must increase as a result of liquidity mining incentives
- Trading Volume must increase as a result of the increase in liquidity.
Therefore, it is necessary to allocate incentives to pools for which LPs are elastic to incentive yield, and traders are elastic to increases in liquidity. It is for this reason that Gauntlet is taking a simulation-based approach to incentive allocation and projecting the lasting impact of incentives as opposed to simply spending incentives on blue-chip trading pairs.
Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy?:
While we will ultimately optimize incentive allocation via a data-driven process and results may vary with market conditions, we are targeting about $200M in additional volume due to incentives and a 2X increase in TVL for incentivized pools. We believe our prior incentive program’s performance allocating 2M ARB over 7 months and driving $1B+ of additional volume and 6X+ increasing TVL justifies these targets.
The two main KPIs we will be tracking are:
- TVL gained per incentive spend
Across all incentivized pools, we will track the dollar value of change in TVL from the start of the incentives divided by the dollar value of incentive spend. Both TVL and ARB spend will be normalized based on token prices at the start of the incentive distribution for the pool. This metric will ensure that LPs are elastic to incentives, and that the incentives are effective in deepening Arbitrum liquidity.
- Volume gained per incentive spend
Across all incentivized pools, we will track the dollar value of change in average daily trading volume from the start of the incentives divided by the dollar value of incentive spend. To normalize for changing market demand, this value will be benchmarked against the Arbitrum trading volume of the pool’s token pair. This metric will ensure that traders are elastic to incentives, and that the incentives are effective in bolstering trading demand.
Grant Timeline and Milestones:
- We will provide a midpoint retro report like we did for the current Arbitrum LM program: Uniswap Arbitrum Liquidity Mining Midpoint Retro - Gauntlet
- Any more milestones you can think of/want to do?
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:
As highlighted above with the data we provided, we believe this will provide long term sticky liquidity and ecosystem wide incentives for Arbitrum, particularly with the depth and use of native tokens and projects which we intend to emphasize.
Additionally, we have primarily been incentivizing a diverse set including a few majors and larger Arbitrum-native projects (including MAGIC, VELA, GMX, RDNT, and others). Improving liquidity for these Arbitrum-native projects will be beneficial for the larger Arbitrum ecosystem.
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?: Yes
SECTION 5: Data and Reporting
OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL 9. Along with this list, please answer the following:
Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?
Yes. Note that Gauntlet is in the process of building a new dashboard for its current engagement with the Uniswap DAO (also focused on Arbitrum liquidity mining). We’d like to request that this be used to avoid duplicitous work in the form of standing up a second dashboard. This dashboard will be live by the time this program starts.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard?: Yes, UADP will work with Gauntlet, Merkle, and other data providers to ensure that the requested data is displayed on Gauntlet’s dashboard or queryable by OBL. Gauntlet is already reporting on relevant liquidity mining metrics through their current initiative with the Uniswap DAO, and Merkle captures LP and rewards data. Their new dashboard will include additional features and metrics.
Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.): Yes
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?: Yes