Arbitrum

Deri Protocol has updated the incentive mechanism and justification based on the council’s feedback, applying only 30% of the originally proposed grant.

Link to Application https://forum.arbitrum.foundation/t/deri-protocol-ltipp-application-final/21566

Requested Grant Size:

USD equivalent: $230,769 ARB amount: 115,385 ARB at $2

Justification

To determine the size of the grant we should request, we chose to benchmark against the current TVL increases that we’ve seen so far with our DERI incentives program. As detailed below, we expect to see at least a 250% increase in TVL heading to Arbitrum during the lifetime of this grant. We target an average of 20% APR in ARB in our pool. To achieve this level of rewards for LPs on $5M TVL across 12 weeks, it would require the following: USD equivalent = $5M * 20% *12/52 = $230,769 ARB amount = $$230,769/$2=115,385 ARB at $2

Council Feedback:

GFX Feedback) We are supportive for 30% of the grant spend proposed. The remaining 70%, however, is to rebate users fees paid to the applicant. This is hard to support for several reasons. Firstly, the applicant hasn’t demonstrated that fee waivers worked to increase (and then retain) volume before asking for a large amount of funding. Secondly, rebating fees paid to the applicant, as opposed to gas or third party fees, is equivalent to governance directly giving the applicant funding. Thirdly, when fees are at or approach 100% and also are fees to the applicant, this creates a perverse incentive for the applicant to encourage wash trading, sybil farming, or steering the grant funds to rebate the highest margin trades. We recommend the applicant revise and resubmit in future grants cycles with either a different distribution mechanism or significant guard rails to address the concerns above.

Wintermute Feedback) his application was decent and scored well across various criteria. Their execution strategy was clear however, it lacked any form of justification or calculations on how they intend to reach their milestones and KPIs. Incentives for LPs were not benchmarked against market rates and they just targeted arbitrary numbers for TVL and daily trading volume. Their requested grant size is on the large end and is not sufficiently justified, this is further compounded by a lack of daily users. Lastly, we are not sure if spending 70% of this grant on trading rebates are the best use of DAO funds. We will not be supporting this application.

Karel Feedback)

Vote AGAINST Deri’s proposal.

Decent proposal but unable to endorse for following reasons: (i) 70% of grant is set to go to the applicant as a fee rebate vs. end users is outside of LTIPP scope and may lead to misaligned incentives to encourage wash trading/sybiling/etc.; and (ii) insufficient justification on how they will achieve target milestones/KPIs.

Consider resubmitting with just the 30% grant size focused on LP rewards and greater justification on the above.