Executive summary
In this proposal, we suggest that StakeWise DAO commits to incentivizing liquidity for osETH on Arbitrum from August 2024 until May 2025 in order to receive the 300K $ARB grant, and matches the dollar value of incentives provided by the Arbitrum Foundation (~$350,000) over this time period.
Motivation
Anyone who has ever interacted with DeFi apps on Ethereum mainnet knows the bitter feeling of paying upwards of $100 to enter or exit a farm, thinking “is this really the future of finance?”, and calculating the yield that was lost to high fees.
The experience ranges from just acceptable to utterly poor. It is widely recognized that the cost of transactions on mainnet eats a ton of profit for non-whale users, and stops many from interacting with DeFi applications in the first place.
Luckily, the issue is well-known and has been appropriately addressed through both L2 ecosystem developments and core protocol changes like blobs. Finally, DeFi has become usable again, and significant profits are being made by applying even the smallest amounts of crypto across farms and lending protocols on L2s, without cost ever being a concern.
One of the busiest L2 ecosystems out there is Arbitrum. With over $13 billion in bridged assets and several hundred thousand active wallets, it represents a bustling DeFi hub known for having the largest LST usage across all L2 networks.
Link: LSTs flow to L2s
It is therefore the prime destination for osETH if our goal is to provide all StakeWise users, no matter how small or large, with yield maximization opportunities, and capture new mindshare in the staking market.
Specifically, we believe that osETH deployment on Arbitrum will:
- expose StakeWise to many new users and protocols, increasing our reach and unlocking more growth opportunities;
- create new DeFi strategies involving the token and make them much cheaper to use; and
- increase the appeal of osETH to solo stakers, DAOs, and other user categories who benefit from the unique value prop of StakeWise V3.
With this in mind, we have successfully applied for and were granted 300K $ARB tokens by the Arbitrum Foundation, to be used over 3 months for bootstrapping osETH liquidity.
Application: StakeWise LTIPP Application - FINAL - Long Term Incentives Pilot Program - Arbitrum
Approval: LTIPP Council Screening Period Results - DAO Grant Programs - Arbitrum
According to our calculations, this is sufficient to bootstrap ca $20M of liquidity for osETH - enough to establish a strong liquidity profile from the get-go and pursue valuable integrations in the ecosystem from day 1.
However, the grant has an important condition attached - namely that StakeWise match the dollar value of the grant (~$350,000 at current prices) via its own SWISE incentives, over the 9-month period starting August 2024. At the current SWISE price, this means ca 11,500,000 extra SWISE emitted over the 9-month period.
The decision on the commitment for this amount of incentives is solely in the hands of the StakeWise DAO.
Given the additional incentives contributed by the Arbitrum Foundation, and the growth prospects unlocked by an aggressive osETH expansion to Arbitrum, the team believes that matching the incentives would be the right move.
The deployment and the grant provide StakeWise with a new growth impulse, and an extra 3 months for restoring momentum and helping reduce the incentives burden on the SWISE token. Without the grant, StakeWise would need to pursue expansion to Arbitrum with its own efforts, which is likely to be significantly more costly.
In light of these considerations, we believe that accepting the grant and matching the incentives is a great way to get osETH started on Arbitrum, and urge DAO members to vote in favour of the proposal.
Implementation
At this time, no technical implementation is necessary. Deploying SWISE incentives on Arbitrum would involve bridging the token there alongside osETH, but does not need to happen immediately.
Incentives requests for Arbitrum will be handled through the StakeWise Liquidity Committee starting in August if this proposal is approved.
Vote
Link to the Snapshot vote: Snapshot