Fund Combined Liquidity Incentivization Program

Summary

This joint proposal combines the Gauntlet and Gamma Strategies’ responses to an RFP published in May 2023. It was written with input from the Angle, Arrakis, Open Block Labs, and 0xPlasma teams; the DefiEdge and BrincX teams have reviewed and approved and will join as liquidity managers. All active liquidity management protocols are welcome to review and participate.

Broadly speaking, Gauntlet will perform the analysis to determine which pools receive how much $ARB rewards and for what duration. Angle Protocol will use its Merkl root solution to distribute those incentives to all liquidity providers, including those who provide to an LP NFT or to active liquidity managers.

Proposal Details

This proposal passes three messages through the Arbitrum Delayed Inbox, each of which calls the transfer function on the ARB token.

• 15,000 ARB will be sent to OpenBlock Labs for work described below
• 150,000 ARB will be sent to Gauntlet for work described below
• 1,835,000 ARB will be sent to a 3/4 multisig for distribution of rewards via Angle's Merkl contracts, as described below.

Signers on that multisig include:

• Erin Koen, Uniswap Foundation
• BP, Gamma Strategies
• Matt Dobel, Gauntlet
• Pablo Veyrat, Angle Protocol

A description of the Delayed Inbox can be found here. A more human-readable description of the functions called in this proposal can be found here. Simulated results of this proposal passing will be available here by navigating to the latest successful Governance Check workflow and downloading the Uniswap artifact at the bottom of the page.

Methodology

Gauntlet has built an optimization engine which takes in both on and off-chain data to generate recommendations for incentive distributions which aims to generate long-term benefits to the incentivizing protocol. In the case of Uniswap, it will aim to choose parameters which will maximize expected future protocol benefit per $ of incentive spent. Market data used for their models include historical price trajectories, competitor data, and user level cohort data.

Angle Protocol developed Merkl which is based on an off-chain script that computes the rewards for all LPs of these pools according to specific preferences. The script aggregates onchain LP NFTs and active manager LP positions and records eligible rewards based on a uniform criteria. It then compresses this information into a Merkl root and posts on-chain allowing LPs to claim their rewards.

ARB held in the multisig will be used to fund a Merkl contract for distribution to eligible liquidity providers on a cadence determined by Gauntlet's recommendations. For in-depth discussions on Gauntlet's methodology and the Merkle distribution solution please see the proposals linked above.

Liquidity Manager Analytics

Additionally, OpenBlock Labs will leverage their data intelligence platform to deliver comprehensive analytics for the liquidity management protocols participating in Uniswap’s incentive management program on Arbitrum. These analytics will offer detailed insights into the user base of each liquidity manager, assessing the distribution of their liquidity providers (LPs) and capturing important attributes regarding their behavior. The analysis will further evaluate the stickiness of these LPs, thereby gauging the effectiveness of the rewards system. Armed with this data, liquidity management protocols could tweak their parameters to increase their efficacy.

Details

Distribution amount: 2M $ARB
Gauntlet Fee: 150k ARB
OpenBlock Fee: 15k ARB
Angle Merkle Fee: 3% of distributed ARB
Total ARB used for liquidity incentives: (2m -150k - 15k * .97) = 1,779,950
Liquidity Manager fees: Vary, charged to depositors Duration: 8 months