TL;DR
The Arbitrum DAO has allocated a portion of its governance token (ARB) to protocols that have built on and contributed to the growth of the Arbitrum ecosystem. As part of this allocation, Uniswap will receive ~4.4m ARB tokens. The tokens will be sent to the DAO’s alias address on Arbitrum; spending them is subject to a normal governance vote. There are otherwise no constraints on how the DAO should use these tokens.
A link to the transaction will be added here when the tokens have been sent.
This post serves as a call for proposals on how to best allocate this token grant. If you are an individual or team with ideas about ways that this ARB could be spent to drive long-term value to the Uniswap protocol, the DAO wants to hear from you.
The proposal period should run for two weeks (till Wednesday, 7 June). At that point, proposals that have garnered community feedback should incorporate it in new Temperature Check posts in accordance with the approved governance process. Delegates with enough voting power are also encouraged to reach out and help proposals they support to launch Snapshot polls. The UF will also be available to help in this capacity.
Proposal considerations
Proposals should provide a clear rationale for how they will add value to the Uniswap ecosystem and they should be focused on the Arbitrum deployment of the protocol. If you are writing a proposal you should be prepared to go into detail about operational concerns and methodology. Delegates are encouraged to read proposals with a critical eye, engage in good faith, and be open to creative and non-traditional uses of the tokens.
Next steps
If you are interested in making a proposal to use the DAO’s ARB, create a new topic in the forum in the Proposal Discussion category. To increase discoverability, we recommend that you title your post [RFC] - Your Team Name - Your Proposal Title and link to the post in a comment below. If you have any questions, feel free to reach out to me in DM here or on Twitter @eek637.
It’s great to see the Foundation facilitate discussions around allocating Uniswap’s ARB airdrop. Our team has covered nearly a dozen DAO proposals discussing similar strategies for utilizing their ARB airdrop. @ajs and I put together a quick summary of some of the proposed approaches below:
A mix of distribution that includes delegating ARB tokens to participate in Arbitrum governance, funding a Liquidity Mining program, and a token sale to support the Aave DAO treasury.
Award 25% retroactively to game developers who’ve made meaningful contributions to Treasure DAO and earmark 75% for future strategic treasury swaps, investments, or grants.
Allocate 1 million ARB tokens towards an incentive matching program for Arbitrum pools and deploy 2 million of protocol-owned liquidity (PoL) by pairing the ARB with BAL. `
Taking inspiration from the proposals above, we examined a few ideas for Uniswap to consider:
Allocating ARB to Uniswap PoL: Balancer’s approach of pairing its ARB airdrop with its native token (BAL) for ARB/BAL liquidity might not provide the same benefits for Uniswap, considering <1% of circulating UNI is on Arbitrum and Uniswap’s tokenomics demand less UNI L2 liquidity than Balancer’s veBAL. Pairing ARB with ETH or USDC makes more sense but might not be optimal since Uniswap already dominates two of the top three ARB DEX pairs on Arbitrum.
Earmark the ARB to Fund Future Deployments: A mutually beneficial strategy for Arbitrum and Uniswap could involve designating a portion of ARB to a Uniswap Deployment Fund. This fund would support the implementation of Uniswap on forthcoming Arbitrum L2/L3 chains, enabling Uniswap to expedite deployments, seed liquidity, or fund incentives on these new chains.
Establish an Arbitrum/Uniswap Grant Program: Uniswap, in collaboration with the Foundation Grants Lead, could allocate ARB (and even match UNI) to fund grants for development on Arbitrum, or L2s in general. Since L2s provide a more efficient execution environment, builders might find avenues for innovation atop the Uniswap V3 protocol. Projects to fund could include deploying derivative protocols or liquidity management strategies (e.g., Infinity Pools, Gamma Strategies) on Arbitrum chains atop Uniswap V3.
Delegation to Uniswap Stakeholders: Uniswap benefits from its delegate ecosystem, a handful of which are active delegates in both Uniswap and Arbitrum. One approach to establishing a Uniswap presence in Arbitrum governance could be to delegate a portion of the ARB towards prominent delegates active in both ecosystems. At a glance, we identified six delegates sitting in the top 100 delegate addresses in Arbitrum and Uniswap.
Alternatively, Uniswap could use its allocation to improve delegate diversity by supporting more minor Arbitrum delegates or establish a meta-governance committee, similar to the proposed approach to Optimisms Protocol Delegation Program, to represent Uniswap as a single voice.
Delegation Now, Allocate Later: Inspired by Hop DAOs recent proposal, Uniswap could also choose to claim and delegate the tokens in the intermediate while empowering the DAO to utilize those tokens later.
We hope these ideas can help spur discussion and look forward to hearing what other community members think!
Distribute at least one-third of the $ARB as liquidity incentives to select liquidity pools on Uniswap (Arbitrum). Use Angle Merkl to distribute the rewards proportionate to the depth of liquidity provided by the LPs. All LPs who provide directly to Uniswap (LP NFT) or through an active manager like Gamma Strategies, Arrakis Finance, and DeFiEdge will be rewarded according to the same criteria. The pools selected will depend on (1) importance to the ecosystem and (2) amount of co-incentives from partners.
Why Liquidity Incentives?
Given the importance of liquidity, we believe that at least a one-third allocation of the total $ARB DAO airdrop towards liquidity incentives would be prudent. It directly benefits the Uniswap ecosystem to have more liquidity and volumes.
Facilitating more volumes towards Uniswap will encourage more builders to Arbitrum and Uniswap. More liquidity would allow other projects to build off Uniswap more easily and increase its reach within the ecosystem. Examples of projects benefitting from deeper Uniswap liquidity include lending projects using Uniswap liquidity pools for liquidations, projects leveraging the Uniswap v3 TWAP oracle which requires liquidity for safety, projects building derivatives on top of Uniswap pools.
The main benefits to using Merkl are the following:
Inclusivity - Anyone who provides directly to a Uniswap pool whether thru an LP NFT via the Uniswap frontend, or an active liquidity manager like Gamma Strategies, Arrakis Finance, and DeFiEdge will be included
Fairness - The same criteria will be used to reward all positions (LP NFTs, Gamma ERC-20 LPs, Arrakis ERC-20 LPs, etc)
Capital efficiency/Flexibility - Rewards will only be distributed to active liquidity providers in accordance to depth of active liquidity and trading fees accrued, and preservation of liquidity.
Merkl is based on an off-chain script that computes the rewards for all LPs of these pools according to specific preferences. For example, Uniswap can determine to weight rewards as 90% by fees accrued, 5% by preservation of Token A liquidity, and 5% by preservation of Token B liquidity.
The script aggregates onchain LP NFTs, Gamma LPs, Arrakis LPs, and other Uniswap LP positions and records eligible rewards based on a uniform criteria. It then compresses this information into a Merkle root and posts on-chain allowing LPs to claim their rewards.
Precisely speaking, for a given pool with two tokens (A and B), the script looks into the swaps that took place on the pool during the period for which it is ran and computes a reward score for each position according to:
the fees earned by the position during the period, which represent the liquidity of the position used by the pool
the amount of token A held by the position during swaps on the pool compared to the total amount of token A in the pool
the amount of token B held by the position during swaps on the pool compared to the total amount of token B in the pool.
The pools selected should depend on (1) importance to the ecosystem and (2) amount of co-incentives from partners
For pairs important to the ecosystem:
WETH / USDC - 0.05%
WETH / USDT - 0.05%
WETH / ARB - 0.3%
Potential partners for co-incentives:
Lido Finance - wstETH pairs
Rocket Pool - rETH pairs
GMX - WETH / GMX - 0.3%
Radiant Capital - RDNT/WETH 0.3%
Treasure - MAGIC/ETH 0.3%
Gains Network - GNS/WETH 0.3%
About Us
Gamma is a protocol designed for non-custodial, automated, and active management of concentrated liquidity.
Gamma uses its automated infrastructure to manage over $100m in assets and 400 liquidity positions. Gamma’s vaults are deployed on six different networks and four different decentralized exchanges.
Gamma has previously worked with the Uniswap Foundation in a liquidity mining program on Optimism. The program is currently in its third phase and distributing 165,000 OP to Gamma as rewards for liquidity providers to select liquidity pools.
While we do aim to be active participants in this proposal, this proposal is designed to reward all LPs equally in accordance with the same criteria. The general rule is that the deeper liquidity provided, the more rewards earned.
Gamma will also reach out to its partners Lido Finance, Rocket Pool, and others for potential co-incentives.
Hey yall this just came across my desk a few days ago. I have been thinking and I wanna make sure you are aware of what we do at Bunni.pro. We should be able to help in a few different ways.
We are a liquidity engine built on top of Uni v3. In its own rights Uni v3 is very powerful ofc! Our goal is to make LPs and projects as efficient as possible. The main two ways we do this is by lowering gas fees on L1 and adding gauges to the equation for L1 and Soon L2s! Think Curve but for your ecosystem
Before incentives, we start saving LPs right away by allowing LPs on Bunni to mint ERC20s instead of the less gas efficient Uni v3 NFTs. Providing valuing from day 1! Next we offer LPs on bunni incentives on top of Uni trading fees! Incentives are paid in oLIT which is an option to buy LIT at a discount. Rn its a 50% discount this can be changed by the community. The other 50% comes from WETH. These are transferable & do not expire. We also have an interesting feature where holders of our gov token get up to 10x boost on those incentives. This is Curve math but with a 10x boost instead of a 2.5x. (TLDR is if your % of the total supply of veLIT matches your % of the LP pool you get max boost). This is subject to change and certain folks would like to see it lowered to increase the non boosted APY (onboarding more TVL). Holders of our gov token direct these incentives via our gauges.
Protocols can bribe voters on Hiddenhand & Warden this is extremely efficient for the protocols participating! As of last epoch it was $1 in bribes = $3 in emissions!
veLIT holders also get 50% rev share including oLIT redemptions which has been pretty profitable
We have a Dune page that you can also see a lot related to us competing with Curve even with much less TVL due to Uni v3 concentrated liquidity.
So imo we could help here by using the ARB to incentivize a UNI pool on Arbitrum! We can do all this on top on Uniswap.
I am here if yall wanna do a community call or just talk shop! Hmu!
Hey everyone - Alastor and Web3 Studios are collaborating on an ARB Distribution proposal. Abstract below and link with the rest of the details here!
Abstract
We propose the establishment of the UNI-ARB Working Group, leveraging a substantial allocation of 2.2 million ARB tokens intended to enhance the Uniswap ecosystem within the Arbitrum Protocol. WG0 will work along two major sub-working groups focused on:
Protocol Delegates: Active participation in Arbitrum governance through a delegation committee
Ecosystem Fund: Management of grant program and research for projects fostering the Uniswap-Arbitrum ecosystem
I saw some proposals by liquidity managers here, notably this one by Arrakis or the comment from Bunni above.
I expressed my support in the Gamma proposal about the use of Merkl, but I just wanted to highlight the fact that with Merkl there is no need to choose one liquidity manager over another: all of them can naturally be supported within the system. If you provide liquidity through Arrakis on Uniswap V3, then you can be rewarded without having to stake your liquidity anywhere. That’s the same as if you provide liquidity on Uniswap directly.
So rather than having liquidity managers competing here, I think Merkl provides a fairer and more inclusive way to deal with ALM competition. There will be no discrimination or no choice to make between different solutions. ALMs will just have to make a difference through the efficiency of their management algorithms, which I think will turn in a healthy and efficient way to boost the efficiency of Uniswap liquidity efficiency.
Hey guys, I’m seeing a few different proposals for liquidity mining with $ARB (Bunni, Arrakis, Angle Merkl). Although I proposed the Angle MERKL proposal under Gamma Strategies, it’s not proposing that Gamma be the sole distribution mechanism, but allowing all liquidity providers and managers on Uniswap v3 to be equally eligible for rewards.
How Merkl can be beneficial to Bunni
So with Merkl, those who provide to Bunni will be eligible for the same rewards based on the same criteria as every other liquidity provider (ALM or LP NFT provider).
Out-of-range gauges will not receive any $ARB rewards → There’s no need to kill out-of-range gauges (as mentioned here) and potentially waste $ARB rewards on out-of-range positions and no need to depend on others to initiate the process of killing a gauge. Only LPs who provide in-range gauges will be rewarded with $ARB based on the capital efficiency of their positions.
Dynamic incentivization → Those with the highest earning LP positions will automatically be given more rewards. It reduces the dependency on relying on veLIT voters to rationally make the decision to incentivize according to capital efficiency. Also because each Bunni epoch is 10-days long, it would be impossible to dynamically change the incentives within a 10-day epoch if some gauges perform better than others. With Angle Merkl, the rewards distribution automatically adjusts to the capital efficiency and depth of liquidity of the gauges, without having to relying on the next epoch to adjust the incentives.
How Merkl can be beneficial to Arrakis
With Arrakis’s proposal, I haven’t seen the methodology of the distribution of 500k $ARB or the pairs that will be incentivized; however, Angle Merkl would be inclusive of their positions regardless.
There’s no need to have a separate Arrakis allocation, Gamma allocation, or Bunni allocation or LP NFT allocation. Everyone is incentivized according to the same criteria.
So long as Arrakis provides the deepest liquidity for a pair, they will receive more of the $ARB distribution.
Also a more concrete timeline of how long incentives last would be helpful.
With account abstraction use cases beginning to take shape it would be advantageous to not use up the ~4.4 million ARB as quickly as possible. As additional incentive structures may emerge that would benefit from ARB distributions.
