Image: Arbitrum

Earlier on, we gave a detailed explanation of how blockchain technology has revolutionized the organizational structure of companies from a traditional top-down—hierarchical structure to a decentralized and democratic one.

This is a continuous series that seeks to analyze top DAOs across all industry verticals (gaming, DeFi, NFTs, etc) and to keep us up-to-date with their recent activities in governance proposals and the impact of these decisions on the blockchain ecosystem.

Today, we’ll be looking at Arbitrum DAO's Short-Term Incentive Program (STIP) in detail.

Off we go …

First off, What is Arbitrum? Arbitrum is a layer-two (L2) scaling solution developed by Offchain Labs for the Ethereum blockchain. Arbitrum powers fast smart contract transactions while reducing transaction costs, making it more efficient and accessible for users. It is designed to overcome the scalability challenges faced by Ethereum, whilst inheriting Ethereum's security. This is done by using optimistic rollups as scaling technology. It processes transactions on its proprietary sidechain and relays the new chain state to the Ethereum mainnet. The ARB token is used for governance within the Arbitrum DAO

- What is the proposal trying to convey?

Proposed by the Arbitrum Incentive Working Group, this proposal from its Abstract outlines a one-time, community-created consensus framework to distribute up to 50 million worth of ARB tokens as incentives to projects building actively on Arbitrum via a transparent (consensus) distribution method. The fund will be distributed to the grantees at the end of January 31, 2024. According to the proposal;

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The goals of the framework are to:

Support Network Growth: Accelerate the distribution of incentives to Arbitrum dApps to drive network and ecosystem growth.
Experiment with Incentive Grants: Experiment with grant distribution to uncover new incentive strategies that increase user engagement and increase volume, transactions, and liquidity in the Arbitrum ecosystem.
Find new models for grants and developer support that generate maximum activity on the Arbitrum network.
Create Incentive Data: Generate data on the efficacy of distributed grants to inform future incentive programs and incentive design.

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KEY DETAILS OF THE PROPOSAL

1. Grant Duration and Project Eligibility:

- Grants span two award cycles, providing incentives to eligible programs designed to fund incentives through January 31, 2024.

- Projects can only receive a grant once.

- Projects rejected in the first cycle are encouraged to address feedback and reapply in the second cycle.

2. Evaluation Criteria:

- Protocols can decide on the grant amount they believe is appropriate.

- Delegates and voters will assess each grant application individually.

3. Grant Categories, Amounts, and Metrics for Evaluation.

- There are four grant categories viz; Beacon, Siren, Lighthouse, and Pinnacle. Each category has a recommended maximum amount of ARB tokens and Metrics for Evaluation. These are outlined below;

- Beacon Grants.

These are grant requests that do not exceed 200K ARB. The metrics for evaluation included;

The project has been live on Arbitrum for at least 2 months and meets one of the two criteria of having a Total Value Locked (TVL) of over $1.5 million and a 30-day cumulative trading volume of over $2 million.

- Siren Grants.

This grant category awarded up to 750K ARB to grantees. Projects in this category must have been building on Arbitrum for at least 4 months. One of the following criteria where to be met in order to get this grant; TVL of over $4 million and a 30-day cumulative trading volume of over $40 million.

- Lighthouse Grants.

Up to 2 million, ARB was set aside for projects that have been live on Arbitrum for at least 6 months. The eligibility criteria for this category. One of the criteria to be met included; Arbitrum Network TVL of over $15 million, and a 30-day cumulative trading volume of over $100 million.

- Pinnacle Grants:

Grant proposals exceeding 2 million ARB were found in this category. Just like the other lower categories, Pinnacle grants had its eligibility criteria which included that it must be Live on Arbitrum for at least 12 months, one of Arbitrum Network TVL of over $30 million, and a 30-day cumulative trading volume of over $200 million

BENEFITS TO THE COMMUNITY.

There has been a decline in the activities in the Arbitrum ecosystem. This proposal came up as a result of Arbitrum’s bid to incentivize builders in its ecosystem, thus increasing innovation, development, and growth in activities in its ecosystem. By incentivizing the use of existing Arbitrum projects through this proposal, an increased volume, of transactions, users, and liquidity, and a thriving ecosystem is anticipated. The intention is to support projects at various stages of development and adoption within the Arbitrum ecosystem.

IMPARTS AND RESULTS.

Almost 100 projects applied for the proposal, out of which 29 were successful. Some projects passed but were unable to get the requested grants because their budget exceeded the grant limit. Some of these projects included Stargate Finance, Pancakeswap, WOOFi, and DeFiEdge, while some top projects like LidoFinance, CurveFinance, and Beefy amongst others had failed proposals. Arbitrum Foundation Grant Program Dashboard by Inspex gives a detailed list of all projects that participated in the Arbitrum Short-Term Incentive Program (STIP).

With positive market sentiments springing up in recent times, following the speculations that the bear season is coming soon, we hope to see how this move will be beneficial to the growth of Arbitrum and its ecosystem.