Synthetix is re-submitting our LTIPP proposal with the support of @coinflip from GMX. (He will post soon, but just sharing here for clarity to all)
We have reduced our ask to 2m ARB and made other core changes to the Proposal to align with council and delegate feedback.
We want to highlight that while our advisors provided valuable guidance, there was a discrepancy between the advisor and LTIP councilor feedback. Had we received the council feedback earlier, we would have promptly made the necessary adjustments to align with the council’s expectations.
Because of this discrepancy, we feel it is essential for delegates to reconsider the Synthetix LTIP proposal with the following edits:
Summary of feedback from Councillors/Delegates:
1. Grant Size:
- The requested grant size of 4.5 million ARB is notably large, and it may take a long time for Arbitrum to recoup the benefit.
- The grant size could potentially crowd out other grants to projects with fewer resources than Synthetix.
2. Incentive Design and Justification:
- More details are needed on the proposed trading competition and its contribution to the sybil resistance/wash trading score.
- The Proposal lacks clarity in justifying the requested grant size and outlining a comprehensive risk assessment and mitigation strategy.
- The Proposal would benefit from more concrete evidence and data supporting the expected impact on trading activity, liquidity, and user adoption within the Arbitrum ecosystem.
3. Long-term Alignment with Arbitrum:
- Given Synthetix’s planned chain as part of the OP Superchain, there is a risk that the Proposal may, in the long term, draw users/liquidity/etc. outside of Arbitrum and be detrimental to the broader Arbitrum market.
4. Collaboration and Ecosystem Integration:
- More detail is desired on the proposed candidates for collaboration partnerships with other Arbitrum proposals.
TLDR Changes
- Total grant request reduced from 4,500,000 ARB to 2,000,000 ARB
- Grant breakdown updated:
- 1,000,000 ARB for LP incentives (reduced from 1,600,000 ARB)
- 900,000 ARB for trading fee rebates (reduced from 1,800,000 ARB)
- 100,000 ARB for stablecoin liquidity (reduced from 500,000 ARB)
- Removed 600,000 ARB allocation for trading competitions and growth experiments
- Incentives distribution timeline updated:
- LP incentives will be utilized throughout the entire three months, with an initial ramp-up period during the first month, to ensure there is proper liquidity to support open interest once Perps trading scales up.
- Stablecoin liquidity incentives & trading/growth incentives will be the focus of the second and third months
- Milestones updated (scaled down due to reductions in grant sizing):
- Week 1-4: Reach 30m in LP collateral
- Week 4-8: Reach 5m in stablecoin liquidity
- Week 8-16: Achieve 5b in cumulative trading volume
Detailed Responses to feedback and Changes:
- Grant Size and Allocation:
- We have reduced the total grant request from 4.5 million ARB to 2 million ARB to better align with the LTIP Council & Delegate Feedback. This better aligns our proposal with the sizing in LTIP, and will provide valuable incentives to scale up Synthetix on Arbitrum.
- The revised grant breakdown is as follows:
- 1,000,000 ARB for LP incentives
- 900,000 ARB for trading fee rebates
- 100,000 ARB for stablecoin liquidity
- Justification for Grant Allocation:
1. 1,000,000 ARB for LP Incentives:
- This allocation will enable us to achieve a critical mass of LP collateral, supporting the following collateral growth over a 3-month period (excluding trading fee rewards) - We’ve added this information from the request of the CounciCouncil * 20% APY: $27.3 million TVL
- 15% APY: $36.4 million TVL
- 10% APY: $54.5 million TVL
- 5% APY: $109.1 million TVL
- A critical mass of LP collateral is essential to underwrite Perps Markets. Each $1 of liquidity provider capital allows Synthetix Perps to support $4 of major cryptocurrency open interest or $2 of longer-tail cryptocurrencies. This allocation will enable us to support approximately $70-100 million in OI caps, catering to whale traders and those transitioning from CEXs.
2. 900,000 ARB for Trading Fee Rebates:
- Capped at 75% of fees paid for users, this allocation serves two key purposes:
- Incentivize users to trade on Synthetix on Arbitrum for the first time, helping to market the product, onboard new traders, and ease them into our ecosystem.
- Incentivize LPs backing these markets, as they will receive a majority of the rewards.
- Based on the estimated fees rebated at 3-6bp and an ARB price of $1.10, the 900,000 ARB allocated for trading fee rebates translates to approximately $2.7-5.5 billion in fully rebated volume.
3. 100,000 ARB for sUSD Incentives:
- sUSD is a core component of our Proposal. Users can deposit LP collateral, delegate it to Perps V3 markets to underwrite trading and earn fees, and mint sUSD to pre-borrow against their trading fees. Ensuring deep liquidity for sUSD is critical to support this functionality and enhance capital efficiency.
- At 10% APY, the 100,000 ARB allocation can support a liquidity pool size of approximately $6 million.
- At 15% APY, the allocation can support a liquidity pool size of approximately $4 million.
- At 20% APY, the allocation can support a liquidity pool size of approximately $3 million.
- Long-term Alignment with Arbitrum:
- We understand the concerns regarding the potential impact of our planned OP Superchain on the Arbitrum ecosystem. Before anything else, we’d like to clarify that we see Arbitrum as a critical path of growth for Synthetix, and DeFi Derivatives as a whole. It has been the home of almost all onchain DEX Perps protocols, and we are excited to offer traders and LPs Synthetix V3 as another trading option. Additionally, we propose the following:
- We will prioritize the growth and development of Synthetix on Arbitrum, focusing on driving users, liquidity, and activity to the Arbitrum ecosystem.
- It is also critical to note that the Synthetix deployment on Arbitrum is exclusive in its usage of an Arbitrum native stablecoin to increase system capital efficiency, support for additional assets outside of USDC (like Ethena sUSDe/USDe), and existing integrators ready to support this deployment.
- We will work closely with the Arbitrum community and other projects to foster collaborations and integrations that benefit the entire ecosystem. There are ample opportunities for existing players, and due to the composable nature of Synthetix V3, we are excited to utilize these to increase the usage of Synthetix for Arbitrum native users.
- We’ve already passed a proposal with Ethena to support their stablecoin as collateral, and intend to onboard many more Arbitrum native assets as collateral types.
- Clarify that Synthetix does not intend to bridge users to another chain through this program. We see a critical pathway to grow on Arbitrum as a home for DeFi Perps, and we intend to grow alongside the chain to grow onchain DEX Perps on Arbitrum.
- Collaboration and Ecosystem Integration:
- We have identified several potential candidates for integration/asset support partnerships with projects on Arbitrum. These including existing ecosystem partners - Kwenta, Polynomial, Rage Trade, Infinex, and more.
- Additionally, at the asset level, Synthetix V3 can support any collateral type with an onchain oracle. Governance has already approved sUSDe/USDe as collateral on the platform and DAI/USDC/ETH/ARB.
- In the future, we intend to support yield-generating collateral types to increase the amount of composability, this will include (subject to governance) Lending Tokens (aave, comp, etc), sDAI from MakerDAO, LRT’s, LST’s, BTC on Arbitrum, and so on. We’ve listed this on our Proposal as well.
- Removed from the Proposal
- Trading Competitions/Growth Experiments - We’ve removed these from the Proposal due to council feedback.
