Arbitrum

Please refer here for the entire proposal.

Kwenta, a prominent DeFi application in the Optimism ecosystem, is set to expand to Arbitrum, utilizing Perennial V2, an Arbitrum-native protocol. This joint proposal requests 1.9 million ARB to fund targeted onboarding incentives, aiming to bring Kwenta users to Arbitrum.

• Full LITPP format
• Ask of 1.9M ARB, down from 4.5M
• Detailed onboarding incentives methodology & model: quest-style incentives, one targeting a broad base of users, one specifically scaling CAC to target the highest value users
• Matt from Stable Lab & LTIPP multisig confirmed to handle accountability, in line with STIP.b requirements

Objectives:

1. Onboard New Users to Kwenta on Arbitrum: Target existing Kwenta users from Optimism and Base, sidelined Kwenta community members eager to trade on Arbitrum, and new DeFi or centralized exchange (CEX) traders. The focus is on attracting a large number of users from other ecosystems.
2. Retain High-Value Users: Encourage recurring usage from the highest value users from other ecosystems (power users), delivering significant value for Kwenta, Perennial, and the broader Arbitrum ecosystem.
3. Mutual Growth: Utilize the combined strengths of Kwenta and Perennial to attract a substantial number of new users to Arbitrum beyond the duration of the grant.

Execution Strategy:

• Flexible Distribution Methods: Utilize both on- and off-chain data, with off-chain rewards distribution for flexibility, adjusting methods based on effectiveness.
• Kwenta’s Frontend Application: Leverage Kwenta’s active user base to serve direct incentives through customized notifications within the application, facilitating a higher conversion rate.
• Seamless Migration Experience: Develop a top-tier user experience for migrating to Arbitrum, minimizing costs, clicks, and time required for users to switch chains.

Incentive Model:

1. Targeted Trader Onboarding Incentives:

• Quest 1 (Mass Onboarding): Aim to onboard up to 2,200 users from the past year, offering a reward of up to $50 to cover migration costs and encourage initial trading on Arbitrum. Users must open at least two trades of at least $1,000 each to qualify for the reward.
• Quest 2 (Active Trader Incentivisation & Retention): A 12-week quest targeting high-value users. Rewards are divided into tiers based on trading volume, with higher rewards for more active users. Weekly multipliers incentivize consistent trading, and users can opt to vest their rewards for higher future multipliers.

2. Targeted Fee Rebates:

• Allocation: 66.6% for existing Kwenta users and 33.3% for non-Kwenta Arbitrum users.
• Structure: Rebates are pooled and capped at fees paid, preventing wash trading. Distributed weekly, with options for users to vest their rebates for higher future rewards.

3. Liquidity Bootstrapping Incentives:

• Initial Focus: Primarily on ETH and BTC markets, with expansion to other assets based on trader demand.
• Approach: Incentives to attract efficient liquidity providers, reducing reliance on retail liquidity, aiming for professional market makers with higher leverage to ensure deep liquidity at lower costs.

Incentive Mechanisms:

• Upfront Onboarding Incentives: Help users overcome switching costs with initial rewards, aiming for conversion to recurring users.
• Weekly Rewards and Loyalty Multipliers: Encourage users to return regularly and increase their rewards through consistent participation.
• Tiered Rewards and Vesting Options: Provide higher rewards for increased usage and incentivize users to lock their ARB for additional benefits.

Key Performance Indicators (KPIs):

• Onboarding KPIs: Measure net-new volume and users onboarded.
• General KPIs: Track trading volume, open interest (taker), total liquidity (maker), and total value locked (TVL).

Grant Timeline and Milestones:

• Month 1:
  • Focus on onboarding new users.
  • Target $10M average daily volume and 250 net-new users.
• Month 2:
  • Scale up growth in volume and open interest.
  • Target $25M average daily volume and 400 net-new users.
• Month 3:
  • Retain growth and volume.
  • Target $50M average daily volume and 500 net-new users.

Justification for Grant:

• Net-New Capital and Users: Kwenta aims to onboard hundreds of users and over a billion in monthly volume to the Arbitrum ecosystem, providing significant value compared to other incentive programs.
• Arbitrum Perps Proliferation: Kwenta’s perps aggregator will enhance the existing perp ecosystem on Arbitrum, fostering competition and efficiency.
• Distribution for Innovation: Utilize Kwenta’s user base to introduce Arbitrum-native innovations, such as NFT perps and power perps, directly to the market.

Accountability Details:

• Program Manager: Matt from Stable Labs.
• Multisig Oversight: A 5-out-of-7 multisig team confirmed to handle funds and ensure accountability.
• Transparency and Reporting: Regular bi-weekly updates, a final closeout report, and adherence to OpenBlock Labs’ data requirements, ensuring detailed tracking and analysis of program metrics.

Commitment to Arbitrum:

• Alignment with Arbitrum Ecosystem: Kwenta and Perennial demonstrate strong commitment through actions such as launching the Kwenta token on Arbitrum, introducing Arbitrum-native products, and maintaining Arbitrum as the core of their ecosystem.
• Further Actions: Kwenta plans additional initiatives to deepen its relationship with Arbitrum, including innovative product launches and ecosystem participation.

Conclusion:

This proposal seeks a one-off grant due to its unique potential impact, aiming to onboard significant new capital and users to Arbitrum by leveraging Kwenta’s existing user base and Perennial’s infrastructure. The proposed incentive mechanisms and detailed execution strategy aim to maximize user onboarding and retention, ensuring long-term benefits for the Arbitrum ecosystem.