The full proposal exceeds Snapshot’s 20K character limit. A brief summary has been provided below. The full proposal can be seen HERE.
Summary
This proposal establishes a Long Term Incentives Pilot Program for the DAO to test new incentive designs and answer the necessary questions to ensure we are ready to commit to the long-term program. This Pilot Program will distribute 25-45M ARB to protocols building on Arbitrum. The exact amount will be determined by the DAO via Snapshot vote and will be ratified via Tally vote. The program will distribute ARB to protocols for 12 weeks.
The specifications of the Pilot Program were designed to remedy the 3 largest complaints regarding STIP Round 1. The Pilot Program hopes to be a test run for these additions for the DAO to determine if they should also be included in the long-term framework.
Problem #1: Too large a burden placed on delegates
In the original STIP, delegates voted on each incentive proposal individually, with almost 100 snapshot votes. This was extremely tiring for delegates and left many feeling they could not make informed decisions on every proposal.
Solution #1
To remedy this problem, the Pilot Program will have a 5 person council elected by the DAO responsible for evaluating applications and selecting which protocols will advance to a snapshot vote to receive ARB. This will ensure all applications are thoughtfully evaluated with only the most deserving receiving incentives. Not only will this help to reduce the burden on delegates, but it will also help expedite the process and allow protocols to receive incentives quickly and efficiently.
Problem #2: Protocols did not receive adequate feedback on their proposals
A major gripe from protocols was they struggled to get feedback from delegates before the deadline. This left many feeling as though the better-connected protocols had an advantage as they were able to modify their proposals based on feedback to make them more competitive during the vote. Many protocols were willing to make changes to their applications to make them more appealing to the DAO but never received the proper feedback necessary to do so.
Solution #2
The Pilot Program introduces Application Advisors. This will be impartial organizations tasked with providing each applicant with detailed feedback and guidance on how to improve their applications. This ensures each applicant can iterate on their proposal so they can put forward the best possible incentive plan for the council.
Problem #3: Strict Limitations on Incentives Mechanisms
STIP Round 1 had strict limitations on how the ARB could be used as incentives. This was done to protect the DAO and prevent misuse of funds. However, the strict rules resulted in the stifling of many innovative incentive designs. Many protocols had interesting designs that used the ARB in ways that increased alignment, improved cost efficiency, or helped to limit the dumping of ARB. However, these designs were not permitted in Round 1 leading to almost all protocols resulting in generic liquidity incentive models.
Solution #3
The Pilot Program provides more flexibility to protocols to create innovative incentive structures. With the addition of the Council and Application Advisors, the Pilot Program does not require the rules to be as stringent. Malicious or inefficient designs will be first filtered out by the Application Advisors and then rejected by the council. Allowing protocols to innovate on incentive distribution mechanisms will allow Arbitrum protocols and community members to get a better idea of which designs work and which don’t work. This will help everyone as we prepare for a longer-term incentives program.
Flow of V2
Application Period (2 week)
Protocols will have 2 weeks to apply using the Pilot Program application template. The application template will be created by the Council and the Application Advisors to ensure everyone has the same goals and make it easier for the council to process applications. Applications will be posted in the Pilot Program section of the Arbitrum forum. Protocols only need to post the initial draft of their application during this period. They will then have 2 additional weeks during the feedback period to edit their applications. No late submissions will be accepted.
Feedback Period (2 weeks)
During the feedback period, the Applications Advisors will provide feedback and guidance on all proposals. Protocols will be assigned an Application Advisor who will provide feedback and guidance on applications on a rolling basis. Protocols will then use this time to work with the Advisors to edit their proposals before applications lock at the end of the 2 weeks.
StableLab will also read all submissions during this period and highlight any rule violations to allow applicants to edit their submissions to ensure they comply with all program rules.
Screening Period (1 week)
During this period, the council will use the pre-determined rubric to grade each protocol and decide which protocols will advance to the voting period to receive ARB. The Council will use the rubric to select which applications will progress to a snapshot vote. The protocols that the council selects to advance to a snapshot vote must have a total funding amount that is equal to or lower than the incentives budget. This will ensure the DAO does not overspend should all Snapshot votes pass. Any unused funds will be returned to the DAO.
The rubric will be created by the Council and Application Advisors during the Tally voting period and will be publicly available by the time protocols begin to apply. The council will be required to publish a brief reasoning for all of their decisions on the forum to create transparency and accountability.
The council must judge applications as they are and cannot accept protocols at lower amounts than their application states. For example, if an application asks for 200,000 ARB the council can not fund them with 100,000 ARB
EXAMPLE: This is a hypothetical example using a budget of 10 ARB with 50 applicants that each request 1 ARB
50 protocols apply requesting 1 Arb Each -> Councils grades all 50 applications using the rubric and narrow the selection down to the top 10 applicants to not exceed the budget -> 10 snapshot votes are created to allow the DAO to confirm the council's decisions -> 9/10 Snapshot votes receive a majority of “fund” votes -> 9 protocols are funded with 1 ARB each and 1 Arb is returned to the DAO
Voting Period (1 Week)
Upon completion of the preliminary applicant screening process by the council, the selected applications will be formally presented for consideration. Each application will then be subject to a voting process via Snapshot, allowing Arbitrum delegates to vote on the allocation of funds. In the event that the Snapshot vote is favorably concluded, the respective protocol will commence receiving its funding through an Hedgey stream, facilitated by oSnap execution pending the protocol successfully passing KYC.
Incentives Period (12 weeks)
Selected protocols will receive their requested ARB using bi-weekly Hedgey streams for 12 weeks. During this time, protocols will be required to provide bi-weekly updates on the progress of their incentives using this template. Protocols will be required to finish their incentive distributions or return any unused funds two weeks after their final disbursement is available.
During this period Application Advisors will continue to work with the protocols to help them analyze and improve their distribution mechanisms. Protocols will be allowed to adjust their incentive plans as long as they do not violate any rules and provide their updated plans in their next bi-weekly update.
Overall Cost
Total Cost: 25,815,000 - 45,815,000 ARB
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Incentives: 25,000,000 - 45,000,000 ARB. The exact amount will be determined by the DAO through a Snapshot vote. The entire budget does not need to be spent by the council. Any unused funds will be returned to the DAO
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Council Members: 125,000 ARB - 25,000 ARB each
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Application Advisors: 105,000 ARB - 35,000 ARB each
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Research Bounties: 200,000 ARB Total - the exact amount and sizes of specific bounties will be selected by the Council and can be vetoed by delegates.
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Data and Analytics Provider: 150,000 ARB for data monitoring and reporting
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Program Manager: 100,000 ARB for program design, organization, management, research report, and continuing development of the Long Term Incentives Framework. See the full list of responsibilities above.
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Proposal Creation Assistance: 15,000 ARB - 10,000 ARB for Alex Lumley and 5,000 ARB for Bobby Bola for their time spent assisting with proposal design, hosting proposal office hour calls, and communicating with delegates to gather feedback.
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Retroactive Community Funding: 100,000 ARB
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Multisig Signers: 20,000 ARB - 2,500 ARB each
