Note: This proposal has been posted on behalf of the Arbitrum Incentives Working Group as a result of multiple community calls and workshops between multiple stakeholders. It does not exclude external incentive proposals from outside of the proposed structure.*

Abstract This proposal outlines a one-time, community-created program to distribute up to 75,000,000 ARB of DAO-funded incentives targeting active Arbitrum protocols. Aimed at fulfilling short-term community needs, the program plans to allocate DAO-owned ARB towards incentives while ensuring transparent consensus and distribution methods. It spans two voting rounds and provides incentives to eligible programs designed to fund incentives through the January 31, 2024. It asks all participating grantees to self report data, and dashboards, summarizing grant performance.

Motivation This provisional framework aims to distribute incentives fairly and effectively using transparent criteria agreed upon by the community, while a thorough system is developed (1 19, 2 7, 3 4, 4 5). The goals of the program 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.

Rationale By incentivizing the use of existing Arbitrum dApps through this proposal, we anticipate increased volume, transactions, users, and liquidity, laying the groundwork for a dynamic ecosystem. While the proposal acts as an experimental program, its primary goal is to ensure basic safeguards while promoting innovative incentive strategies.

Given that this proposal aims to be a one-time, short term incentive distribution, it lacks the accountability and operational rigor that a full program may provide. As such, we encourage protocols to consider that the use of funds will be both evaluated, and monitored by the community. Any misbehavior, or failure to comply with grant requests will likely result in ineligibility, or at the very least significant discernment, in future incentive or grant programs.

Specifications The Arbitrum Short-Term Incentive Program will comprise up to a 75,000,000 ARB budget earmarked for incentive grants for eligible protocols. In order to expedite the distribution of this capital to the ecosystem, the DAO will adopt a bifurcated process comprising two separate processes: the Financial Proposal and Application Process.

Steps to Implement

Following a successful Snapshot Temperature Check, the DAO will launch an expedited application and review process, allowing applicants to apply for grants concurrent with the on-chain vote to distribute DAO funds from the treasury.

The Snapshot Temperature Check will be designed to both achieve consensus and approve funding across four options, where each vote will distinguish support of up to X ARB through the end of January 31, 2024: • For up to 25M ARB through January 31, 2024. • For up to 50M ARB through January 31, 2024. • For up to 75M ARB through January 31, 2024. • Against.

Financial Proposal The Financial Proposal will comprise the following: • A ratification of the Arbitrum Short-Term Incentive Program and application template 37 as articulated in this document. • Approval of the eligibility criteria, grant budget parameters, distribution strategy, and evaluation requirements. • A 25,000,000, 50,000,000 or 75,000,000 ARB distribution to the program Multisig. • A 32,000 ARB operational budget for community/project facilitation. o 20,000 ARB to @tnorm as retroactive payment for conducting community moderation:  Draft and review of multiple iterations of incentive proposals.  Moderation of community calls and working group telegram.  Coordination individually across dozens of stakeholders and community members over the past three weeks. o 12,000 ARB Multisig Signers (A new version of the PL-ARB Grants Safety Multisig 17 - 2K per signer).

Multisig Setup A new multisig will be created with the signers from the original pl-ARB multisig, under the name of the Arbitrum DAO. The new multisig will include two features to ensure accountability of signers and grantees:

1. Clawback capability so the DAO can retrieve funds if the multisig violates the agreement.
2. Streaming of funds to grantees every second week for the grants duration using Hedgey. This allows for the halting of funds if misuse is discovered with the goal to stop bad actors, not punish bad designs.

What are the Eligibility Requirements?

Grant Requirements: • Grantees are required to keep distributions in ARB without converting to other assets. • Grantees must not farm their own incentive programs. • Grantees must outline a spending plan, provide a pro forma, and state the grant’s objective. • Grantees must commit to providing data on distributions, all ARB spending transactions, and key metrics like daily TVL, transactions, volumes, unique addresses, and transaction fees. This data should cover 30 days before, during, and after the Incentivization period, and be presented preferably in a Dune Spell/dashboard or alternatively in a report. • Grantees must agree to share all contract addresses being used to distribute incentive rewards. • Grantees must disclose the contracts being incentivized and denote any external contracts being incentivized as part of the program. • Grantees can only incentive contracts on the Arbitrum Network. • Grants are not to be used in DAO governance. • Grantees are expected to not encourage or partake in sybil attacks against the forum to sway community opinion. • Grantees must agree to KYC with the Arbitrum Foundation in order to receive funds. • Grantees must apply using the approved program application template 15.

By streaming grant payments, the multisig will be empowered to hold grantees accountable to their proposals by halting fund streaming for any of the following reasons:

• Any use of funds not explicitly described in the grantees application. • Failure to comply with data reporting standards. o Grantee recipients will be required to provide Dune dashboards uploaded and posted to the forum by eligible teams by December 15, 2023. • • Dashboard requirements are: Daily TVL, transactions, volumes, unique addresses, and transaction fees for incentivized protocols. This data should cover 30 days before, during, and after the Incentivization period. If a metric does not apply, or this is not achievable, it should be noted in the application. • • More granular dashboards (including pool-level and user analysis) will be noted by the community for future programs. o If dashboards are not posted by this date, the multisig will be empowered to halt incentive funding streams for protocols at their discretion. In that this proposal aims to be experimental, the multisig is not intended to provide quality control on the design of incentive programs. Rather, they are empowered to halt streaming in the event of negligence or misuse of funds.

Eligibility and Evaluation Guidelines Grants span two award cycles, but projects can only be awarded once. Projects rejected in the first cycle are invited to address delegate/community feedback and reapply for the second cycle. Protocols can submit grant applications for amounts they feel appropriate. While there’s no ARB limit, delegates and voters will assess each grant individually. As such, the Arbitrum Working Group has included four grant categories, as well as some recommended metrics by which the community might consider evaluating the grants:

• Beacon Grants (<= 200K ARB) o Recommendations:  Live on Arbitrum for at least 2 months.  Meets one of the following criteria:  .> $1.5M TVL.  .>$2M 30D cumulative Volume.

• Siren Grants (Up to 750K ARB) o Recommendations:  Live on Arbitrum for at least 4 months.  Meets one of the following criteria:  .> $4M TVL.  .>$40M 30D cumulative Volume.

• Lighthouse Grants (Up to 2M ARB)* o Recommendations:  Live on Arbitrum for at least 6 months.  Meets one of the following criteria:  .> $15M Arbitrum Network TVL.  .> $100M 30D cumulative Volume.

• Pinnacle Grants (> 2M ARB)* o Recommendations:  Live on Arbitrum for at least 12 months  Meets one of the following criteria  .> $30M Arbitrum Network TVL  .> $200M 30D cumulative volume

*Grants greater than $1M ARB will be asked to include milestone-based funding tranches in their application.

One could reasonably use the date of publication for this proposal to inform these metrics.

Steps to Implement (How does the DAO Approve Grants)? Grants will be approved via a three week process across two cycles.

Cycle 1

1. Application Period (1 Week): During the Application Stage of the program, eligible protocols will be invited to post proposals in the “Incentive Grant Applications” Category of the Arbitrum Forum using the official Application Template 20. Once posted, the community may provide feedback on the proposal through the end of the Review Period.

2. Review Period (1 Week): Delegates and network stakeholders will be asked to provide feedback on grant applications upon each specific forum post. Delegates should engage with the goal of ensuring the responsible use of funds. This means an application should represent a comprehensive strategy for incentive distribution, align with the program goals and requirements, and present their plan to adhere to the aforementioned data standards. Applicants are expected to adjust, amend, and update their proposals in line with community feedback over this time period. Due to the accelerated timeline of the program, feedback and communication between delegates and applicants will be critical.

3. Voting Period (1 Week): A delegate will sponsor the proposal throughout the governance process for each grant application. ARB holders and ARB delegates will be invited to vote on each submitted proposal via Snapshot Poll. To succeed, eligible applications must receive a greater than 50% majority in favor of the proposal, and receive greater than 71.51 million ARB in favor of the application. If successful, applicants will coordinate with the Arbitrum Foundation and the PL-ARB multisig to secure the completion of KYC, and receive funding to the address included in their application.

Cycle 2 Repeat the process outlined in Cycle 1, with the exception that the review period for the second round will comprise a 2 week review period.

Timeline [See image above] Sep. 01, 2023 - Forum Post Sep. 09, 2023 - Snapshot Vote Begins

Cycle 1 Sep. 16, 2023 - On-Chain Vote and Application Period Sep. 23, 2023 - Review Period Begins Sep. 30, 2023 - Voting Round Begins Oct. 07, 2023 - Funds Distributed

Cycle 2 Oct 07, 2023 - Application Period 2 Begins Oct 14, 2023 - Review Period 2 Begins Oct 28, 2023 - Voting Round 2 Begins Nov. 04, 2023 - Funds Distributed

Overall Cost Up to 75,032,000 ARB.

Outstanding Questions and Concerns

What happens if the budget is exceeded? We do not expect applications to exceed the funding budget of 75M ARB. However, if requested grants do exceed the allocated budget, funding will be allocated on a first-come, first-serve basis dependent upon the time the proposal was submitted to the Arbitrum Forum. In the event that the budget is exceeded, the DAO may choose to unlock further funds for a third round, or backfund successful incentive proposals.

What will happen to excess funds? Following Cycle 2, excess funds remaining in the multisig will be returned to the Arbitrum Treasury address by the multisig.

What is the plan after the Short Term Incentive Program? The Short Term Incentive Program is designed specifically as a one-time program, with the intention of allowing incentives while the DAO designs a more robust, sustainable program in the months throughout the end of the year. At the end of the year, if there is no program in place, protocols can put forth direct votes to on-chain governance to extend their programs. This program offers an opportunity for participating protocols to demonstrate mission-aligned conduct as justification for future funding.

What are the specific KPIs for this program - what determines its success? • Community Support: The primary KPI for this proposal is aligning with both delegates and protocols to agree on the distribution of funds through the end of 2023, with an agreement to work towards a more efficient, comprehensive, and effective program in 2024. • Network Activity: An increase in network metrics such as TVL, Volume, Users and Transactions on the incentivized protocols in addition to an increase in general network activity. • Community Awareness: Raised awareness, collaboration, and understanding of incentive distribution strategies and tactics. • Incentives Data: Increased data on incentives, grants, and protocol behavior to inform future Arbitrum incentive programs and iterations.

**Forum Link **

This snapshot is replication of the forum post. The forum post includes link to various reference material, forms, etc... which can be reviewed on the link below

https://forum.arbitrum.foundation/t/arbitrums-short-term-incentive-program-arbitrum-improvement-proposal/16131/