DeFi Renaissance Incentive Program (DRIP)

Entropy · 2025-04-17T00:05:20.606Z

DeFi Renaissance Incentive Program (DRIP)

Non-constitutional

Abstract

Entropy proposes a new type of incentives framework focused on targeting specific assets and activities across Arbitrum rather than specific protocols. Incentives per specific assets/activities will run in 3-month seasons through the DRIP so that the program can be adapted and different assets and activities can be selected as learnings are taken into account. Each season must have a singular, specified goal. For example, Make Arbitrum One the best place to borrow USDT against wstETH or Ensure Arbitrum One Has the deepest liquidity for trading USDT/ETH.

A season selection committee made up of the Arbitrum Foundation, Entropy Advisors, and Offchain Labs will be tasked with creating eligible, viable seasons with ideation input from partner companies and key stakeholders. The committee will maintain the right to modify, extend, or discontinue a season during its lifecycle. The “3-month” timeline is somewhat arbitrary, and is open to change dependent on perceived program success and market conditions.

The DRIP seeks funding of 80M ARB for the first 4 seasons, with a maximum of 20M allocated per season and a portion set aside for operational costs related to vendors utilized by the season selection committee. The season selection committee will procure partners for distribution and evaluation at their discretion, and potentially other partners as it sees fit. For example, the distribution partner will check the chain for wallet eligibility and distribute rewards to the wallets that have met the mandated goals of a season and create a frontend through which all eligible protocols will be shown. The evaluation partner will host open data around the program and recommend optimization improvements to the committee throughout a season’s lifecycle; after a season is complete, the evaluation partner will provide a more holistic analysis to the DAO. The same partners will likely be utilized throughout all 4 seasons. 80M ARB is the maximum amount that can be allocated throughout the 4 initial seasons, but there is no requirement to use all funds. All remaining ARB not used as part of the program will be held for further seasons or returned to the DAO if further seasons are not approved by the end of the 1-year mandate.

Motivation and Rationale

As the Incentives Detox concluded on December 17th, 2024, and with many parties exploring the next phase of incentives, Entropy has decided to take a first-principles approach to redesign the DAO’s incentives framework. After analysis of Chaos’ and Blockworks’ incentives reviews, and in collaboration with Gauntlet and other stakeholders, we have identified that taking the approach of incentivizing specific activities that the DAO would like to increase Arbitrum’s market share in will deliver better results than more generalized programs that are harder to evaluate and adapt. This is especially true for activities where Arbitrum has not yet achieved an established, stable market share or where the underlying vertical will be experiencing a systemic shock.

The DRIP is purposefully simple, targeted, and measurable, and focuses solely on the goal of bringing popular activity taking place on other ecosystems to Arbitrum One in a sustainable manner. In past programs, by lumping together oracles, perps, lending, dex trading, dex liquidity, bridges, and more, evaluation and iteration became an impossible task. One reason for this is the fact that protocols across different verticals and long-tail vs. core assets inherently cannot be judged on an apples-to-apples basis. The DRIP focuses on a controlled experimentation approach.

Looking across the space at activities that real DeFi users are executing in practice where Arbitrum’s market share shows growth potential either through innovation/potential partnerships on the application layer or through changes to the underlying market, a few ideas come to mind. For example, borrowing against yield-generating ETH a.k.a. “Looping,” creating the deepest liquidity on specific high-attention assets (per IOSG), bringing a vibrant wrapped BTC ecosystem to the network, increasing Arbitrum’s RWA utility and dominance, or focusing on attracting liquidity to restaking and LRTs. These are just a few examples of activities through which Arbitrum One has substantial room to grow, but the list goes on. We believe that for an incentives program to succeed, even within these targeted activities, target assets need to be selected in order for the program to proceed smoothly. By limiting programs to category-leading assets, or the category’s highest-growth assets, Arbitrum can take an opinionated stance and bet on what areas of growth it envisions as crypto’s most valuable use-cases into the future. Notably, the DRIP focuses on quality activities and assets that the DAO views as high-growth and -retention, rather than attempting to create a program that treats everything equally. The program focuses solely on using incentives as a tool in more holistic strategies around promising verticals where Arbitrum’s penetration has room to grow sustainably in its competitive environment.

Another benefit of the DRIP is its value in business development and growth. Potential Arbitrum partners will see a program that could benefit them if they put a primary focus on Arbitrum. This will allow Arbitrum’s partnership teams, including Entropy Advisors and Offchain Labs, to use the DRIP as an incentive that makes Arbitrum more attractive to protocols exploring alternative/genesis chain deployments. This will create a frictionless path that effectively attracts new Arbitrum entrants while still supporting incumbents.

Upon ARDC analysis of our past incentives programs, a few findings are particularly notable:

STIP Analysis (ARDC Risk Deliverables) | Insights & Key Findings

Experiment and Iterate: Each of the studied protocols did this successfully in their own way. This was the clearest takeaway from the program and incentive programs should be thought of similarly to paid marketing campaigns in web2. The optimal design is constantly evolving and not always obvious purely to reasoning. There is no substitute for controlled experimentation.

Keep the Incentive Criteria Clear and Simple: Users need to know what to do to react optimally to incentives. If the criteria are too complex, education becomes an issue, and attention will go to easier-to-earn incentives. All three protocols made the incentivized activity and payoff extremely clear and easy to understand.

Use Incentives to Amplify New Features and Announcements: This was done by all three protocols studied and significantly impacts bootstrapping new markets, bringing visibility to new features and generally leaning into growth areas.

STIP Analysis (ARDC Risk Deliverables) | Insights & Key Findings

Do Not Interfere with the Natural Balance between Supply and Demand: Focusing too much on either side of the market can upset the state of equilibrium. This will likely correct once the program ends rendering this allocation of resources sub-optimal. This does not apply when the market under-compensates certain activities and require long-term subsidies.

ARDC Research Deliverables

To summarize, all of the analyzed protocols saw their top-line metrics increase during the STIP, but in the months following the program’s end, figures trended back toward September 2023 values. There was some variability in how much capital/volume each protocol had managed to capture per ARB spent at the end of the STIP, but in the long term, these multiples tended to converge to a tight range. There are a few exceptions to this—protocols that are on the younger side and generally offer differentiated products. These protocols have successfully reached notably higher “steady states” compared to the beginning of the program, with incentives likely amplifying market penetration deriving from intrinsic drivers and on a few occasions, leading to more robust collaboration between the outperformers and other Arbitrum protocols, creating additional synergies.

ARDC Research Deliverables

For the DEX category, protocols that enhance LP experience (i.e. increase LP returns) outperformed.

ARDC Research Deliverables

Protocols that formed partnerships during LTIPP generally saw better results.

ARDC Research Deliverables

TVL is an attractive vanity metric to optimize, the utilization of that capital is what ultimately determines the efficacy and success of lending protocols.

ARB's Wake-Up Call: A Critical Pivot is Necessary

established protocols have disproportionate influence

ARB's Wake-Up Call: A Critical Pivot is Necessary

The proposed distribution model shifts ARB token incentives from protocols to liquidity providers directly.

Taking these learnings into account, we believe that the DRIP’s ultra-targeted nature (controlled environment experiment), focused on high-value verticals where Arbitrum has high potential to increase its market penetration, is an ideal path forward as we continue to iterate and evolve over time. DRIP will also take advantage of the learnings to prioritize programs that focus on both supply and the efficacy of that supply through demand. Finally, marketing is a missing aspect from every past program, which the DRIP will address by having the foundation included on the committee and requiring eligible protocols to co-market.

Entropy encourages the whole community to participate in proposing new activities and assets for incentives and is happy to be the primary point of contact for community ideation. That said, the committee will have full discretion over all aspects of season planning and execution with help from the onboarded distribution & evaluation vendors.

Specifications

Rules of a DRIP Season

-The seasons must have a defined, singular goal. Specificity is required. As an example, “Increase trading activity”, is not a specific goal, but “create the deepest aggregate liquidity for the USDT/ETH pair across DEXs on Arbitrum One” would qualify as a specific goal.

-Seasons are intended to be ~3 months, though they can be cut short by the committee or extended at their discretion, with the goal of always tapering rewards instead of arbitrarily cutting incentives at once.

-Overlapping seasons running in tandem that may make evaluation more difficult should be avoided.

-Need to be chain-wide and protocol agnostic (minus security-related whitelisting or a TVL/protocol-maturity requirement). Depending on the vertical and ROI after a program starts, the committee can expand or restrict how broad the program is.

-Actionable and executable, including all details required.

-Target asset/activity should maintain room for Arbitrum to grow its market share with a goal of eventually hitting “critical mass,” where incentives are no longer needed.

-Eligible protocols must include marketing in their frontend and on their socials, coordinating co-marketing with Entropy Advisors and the Arbitrum Foundation.

Distribution Partner

Each incentive “season” is governed by a set of rules specifying which onchain actions or participants qualify for ARB rewards. An independent distribution partner is responsible for:

Receiving ARB for the Season
Identifying Eligible Wallets: The partner reviews network data to find wallets that meet the season’s eligibility criteria.
Distributing ARB Rewards: Once the partner confirms which wallets qualify, it distributes the ARB to each eligible wallet based on the season’s defined, and potentially changing, parameters. No distribution is sent directly to protocols; all ARB flows to qualifying wallets.
Frontend Creation: Shows all eligible protocols, effective APRs, and data from the evaluation partner.

Illustrative Example

If a season incentivizes borrowing USDT against wstETH, applying to all lending markets with >$X million TVL, the evaluation partner would examine eligible lending protocols on Arbitrum, identify the addresses meeting the criteria (e.g., required collateral ratio, borrowing amounts, etc.), and distribute ARB rewards to those addresses.

Examples of potential partners include RoyCo, Boost, Galxe, Brevis, Merkl, and others. All costs associated with this partner will be taken from the 80M ARB budget, but the season selection committee prioritizes keeping low OpEx, as the point of the program is user rewards. Although, we will note that our opinion is that previous incentive programs run by the DAO could have been notably more effective had more resources been allocated to the programs’ operations.

Selection Process:

The season selection committee will have full discretion on how the procurement is run; public or private application and evaluation, open or invitation only, who is selected, etc. The process will be fully facilitated by the season selection committee, and the decision of the partner will be fully at their discretion.

Evaluation Partner

Each incentive program requires ongoing monitoring and analysis to assess its impact and guide continuous improvements. An independent evaluation partner is responsible for:

Providing Continuous Public Data: The partner hosts a publicly accessible data dashboard that tracks relevant metrics throughout the program, such as DEX volumes, total incentives distributed, user participation rates, and more.
Program Assessment & Recommendations: The partner periodically reviews program performance, compiling findings into reports, and recommends changes to, e.g., return levels of incentivised actions and eligibility criteria during each season. After each season, they additionally provide recommendations on how the program could be improved. Analysis should include retention metrics in the following 2-3 months as well.

Entropy will take this role into our domain as well, but we believe having an additional outside party will be beneficial.

Illustrative Example
If a program incentivizes liquidity provision on DEXs with over $10 million TVL, the evaluation partner would track how many and what types of wallets participated, the total ARB distributed, changes in TVL and capital efficiency, overall volume growth, cost of capital for similar opportunities in other ecosystems, returns to users that are performing the incentivized action, retention after the program’s end, etc. The partner would then share these insights and recommend any adjustments (e.g., refining eligibility criteria, adjusting reward distribution thresholds) to the season selection committee. Holistic recommendations will be given publicly at the end of the program cycle.

The same selection process will take place for the evaluation partner as distribution. The same provider can apply for both evaluation and distribution.

Condensed Example of a Season:

Goal: Make Arbitrum One the best place to borrow USDT, USDC, and ETH against wstETH.

Select Collateral: wstETH

Select Borrowable assets: ETH, USDC, and USDT

Required LTV: 15%

Target yield boost for wstETH: 2% APR (increase over wstETH base yield)

Maximum collateral incentivized: $1B

Protocol Partner RFP: The program will be platform/protocol agnostic and target lending across Arbitrum One. With that said, protocols will be screened for security purposes before being included in the program. The thought process behind this decision surrounds not incentivizing (or appearing to endorse) Arbitrum’s users to deposit assets into protocols that have a higher likelihood of being hacked. The security provider selected in the ARDC will be in charge of whitelisting lending protocols or alternatively the committee enlists a firm that can do this. The lending platform partners must support wstETH as collateral and borrowing of USDC, USDT, or ETH against that collateral in order to be eligible. This creates a fair environment that should not negatively encumber any specific lending market.

In practice, this means that any borrower of USDC, USDT, and/or ETH on a whitelisted Arbitrum One-based lending platform will be eligible to receive 2% APR paid on the total value of their wstETH deposited into the lending protocol. Wallets will only be eligible if they have reached and sustained an LTV of 15%. Rewards will be paid out weekly by a distribution partner.

With a 3-month program, targeting a 2% yield, $5M will cover 3 months of runway on $1B in collateral participating in the program.

Season Selection Committee

Arbitrum Foundation
Entropy Advisors
Offchain Labs

⅔ votes are required for a season to be approved. The first 4 seasons that meet the rule requirements and are deemed valid by the committee will be enacted.

The committee also has the power to:

Kill the Program: If the program fails to perform, at the discretion of the committee, it reserves the right to terminate it.
Adjust the Program: Reward allocations or program parameters may be modified, guided by insights from the evaluation partner. All adjustments must remain within the scope of the original proposal, balancing agility with accountability to ensure the program continues to serve its intended goals.
Widen or constrict the apps eligible in a season
Any other changes: The season selection committee will be able to make any changes to the program as they see fit as long as it maintains the spirit of the DRIP proposal

Rough Timeline

Forum: April 16

Snapshot: May 1

Tally: May X (TBD)

Date For First Program Live: Targeting July 1

DRIP End Date (funds returned if not used or another proposal is not passed): July 1, 2026.

pedrob · 2025-04-17T03:21:38.799Z

First of all, thank you for the long-awaited DeFi program!

At first glance, it seems quite close to simply funding the Foundation or OCL to manage BD/incentives funds at its discretion (which the DAO has done recently). I’m happy to see more involvement from the AAEs, but is the plan for them to run all the DAO funded programs?

One of the unique (albeit sometimes chaotic and inefficient) strengths of the DAO has been the involvement of contributors in operations. That structure helped surface and highlight individuals (we all know who)—now active contributors and respected delegates. If programs had been this closed off from the beginning, the DAO might not have built the pool of engaged contributors it has today. I understand the goal of efficiency, and I think it makes sense in many ways. Still, I believe it’s worth exploring ways to balance that with contributors’ involvement.

Regarding the program itself: I do like the model of targeting specific assets. It seems like a valuable experiment worth trying.

Entropy:

The DRIP is purposefully simple, targeted, and measurable, and focuses solely on the goal of bringing popular activity taking place on other ecosystems to Arbitrum One in a sustainable manner.

What it’s still not clear to me is: why do you believe this model will lead to sustainable growth activity on Arbitrum? What mechanisms are in place to ensure user retention, long-term commitment from potential partners, or other indicators of sustainability?

The part of the proposal I’m still not fully convinced about: as presented, the program doesn’t offer an auditable structure. The committee decides how, when, and with whom to negotiate, and even the few defined rules can be changed at will. I understand the intention is to keep the program flexible so it can iterate based on successes and failures. But that makes me wonder: why not simply request funds for the Foundation to manage directly, without much additional structure?

Entropy:

This will allow Arbitrum’s partnership teams, including Entropy Advisors and Offchain Labs, to use the DRIP as an incentive that makes Arbitrum more attractive to protocols exploring alternative/genesis chain deployments.

These look like BD funds that could be used to secure deals or attract deployments, possibly by prioritizing certain verticals. I remember that in the LTIPP, we saw protocols like Synthetix deploy quickly due to incentives, only to leave shortly after. Is there a strategy in place to ensure more sustainable engagement? Could a particular deal lead to prioritizing one vertical over others for that single reason?

Entropy:

Finally, marketing is a missing aspect from every past program, which the DRIP will address by having the foundation included on the committee and requiring eligible protocols to co-market.

This is great. It’s important to ensure coordination with the Foundation’s social media channels. During LTIPP, getting that support to help amplify awareness of the program was quite a challenge.

MarkAntony · 2025-04-17T09:04:41.719Z

Friends, delegates, Arbitrum citizens—lend me your ears.
I come not to bury the proposal, but to contemplate our role.

They tell us “an evaluation vendor” shall be chosen to decide the key performance metrics—
Not we, the delegates entrusted with oversight,
But some yet-unnamed oracle, summoned after approval.
We may observe the metrics, perhaps applaud them—
Yet we shall not define them.
Is this the voice of a DAO, or the echo of its silence?

We are invited to suggest which “target activities or assets” should be considered,
To lend our insight, our vision, our hopes for the ecosystem.
Yet the committee retains “full discretion over all aspects of season planning and execution.”
Our suggestions are welcome—like flowers on a closed tomb.
Do we advise, or do we merely adorn?

Suppose we take issue with the timeline.
Suppose we say the seasons should shift,
That the cycles should follow the pulse of the chain, not the will of the few.
But no—the committee “will maintain the right to modify, extend, or discontinue a season.”
The calendar is theirs, unbound by our hands.
Are we stewards, or spectators?

And lo! 80 million ARB lies before us,
A sum vast enough to stir the treasury walls.
No justification, no model, no anchor—
No explanation why it is not 40, or 100, or 20.
But this is an AAE proposal, backed by might and mandate.
The votes are counted before we’ve spoken.
The ending is foretold.
Do we govern, or do we merely witness the AAE’s will?

Chris_Areta · 2025-04-17T09:27:43.906Z

Entropy:

The season selection committee will have full discretion on how the procurement is run; public or private application and evaluation, open or invitation only, who is selected, etc. The process will be fully facilitated by the season selection committee, and the decision of the partner will be fully at their discretion.

Entropy:

The committee also has the power to:

Kill the Program: If the program fails to perform, at the discretion of the committee, it reserves the right to terminate it.

Adjust the Program: Reward allocations or program parameters may be modified, guided by insights from the evaluation partner. All adjustments must remain within the scope of the original proposal, balancing agility with accountability to ensure the program continues to serve its intended goals.

Widen or constrict the apps eligible in a season

Any other changes: The season selection committee will be able to make any changes to the program as they see fit as long as it maintains the spirit of the DRIP proposal

The Season Selection Committee (SSC) holds unilateral power to approve, modify, or terminate seasons, including selection of Evaluation Partners. Will there be room for community input in shaping the decisions of the SSC? Will there be transparency in SSC’s decisions and voting?

While we are fully aware that the SSC comprises solely AAEs and assume they will act in the DAO’s best interests, we want to emphasize the need for transparency and community input.

Gabriel · 2025-04-17T15:41:52.271Z

Hi all,

I won’t be participating in the AAE discussions or commenting on the composition of the season committee, and will instead focus solely on the substance of the proposal.

Overall, I believe the core idea of targeting specific objectives rather than protocols is a powerful shift. By setting clear goals—like making Arbitrum the most cost-efficient place to borrow—we’re not just attracting short-term volume, but creating conditions that can bring back long-term, power DeFi users and encourage them to stay.

Incentivizing concrete use cases where Arbitrum has the potential to gain sustainable market share—such as borrowing against yield-bearing assets—is a step in the right direction. It aligns incentives with measurable outcomes and sets the stage for meaningful growth beyond temporary TVL spikes.

Entropy:

Providing Continuous Public Data: The partner hosts a publicly accessible data dashboard that tracks relevant metrics throughout the program, such as DEX volumes, total incentives distributed, user participation rates, and more.

Program Assessment & Recommendations: The partner periodically reviews program performance, compiling findings into reports, and recommends changes to, e.g., return levels of incentivised actions and eligibility criteria during each season. After each season, they additionally provide recommendations on how the program could be improved. Analysis should include retention metrics in the following 2-3 months as well.

I think this is great and it’s very important that there will be a publicly accessible data dashboard so everyone can monitor the program’s performance transparently.

what is the target OpEx as a percentage of the season’s allocated funds?

Argonaut · 2025-04-17T16:01:25.929Z

We see a high potential in the application of this approach, which we understand has been developed based on ARDC’s findings from past incentive programs. We definitely see this approach as valuable and feasible at the same time and still promising in terms of future results, but we are not quite sure if we understand correctly if the whole community will be involved in the selection process for the proposed committee that will choose the moments and goals for each season that is to begin, beyond Entropy, OCL, the Foundation itself, key stakeholders and partner companies. Maybe this has to do with the fact that the seasons are 3 months each and taking these members selections every 3 months period is overwhelming. Would you mind clarifying this?

We also have concerns about how much funding is being asked for, even though we see who the team is behind this proposal, who are all trusted parties, yet this is still, as indicated in the proposal, an initial program, so there have been no previous versions on which to build this beyond the lessons learned from ARDC’s experience with past programs. It is quite an ambitious start for something that has not been tested by the real-world experience of taking this into reality. Should this be a concern for us as a community if we greenlight this proposal? Considering the team behind it, we do not need guarantees that unused funds will be returned or reinvested in future seasons, but we do need a better explanation of the budget breakdown of such a number of requested funds. Why so much?

cp0x · 2025-04-17T17:39:16.212Z

Thank you for the long-awaited proposal.

First, I want to support the initiative, where the goals of the Arbitrum are put first, not the protocols. This time, the Arbitrum will voice the goals, and not the protocols themselves, saying what they need. This is good, however, why are you sure that in this case there will not be the same result as last time? Why in the same example about wstETH all the borrowing will not go to another chain when the season ends?
In this program, vesting of rewards was not announced in any way, which was used by some protocols in the past grant program and which showed the best result. In order not to reduce the cost of ARB once again due to high costs, it seems to me that vesting should be included in the distribution of tokens.
20 million ARB per month (and at the moment it is about $5.7 million, and I do not see any prerequisites for a significant change in the price in the near future) is a small amount to be distributed over 3 months. It is necessary to conduct the first season and possibly increase this figure.
There are still questions about the distribution of ARB. How often should a partner conduct such an analysis and how often, accordingly, will the funds be distributed? Previously, in previous programs, partners themselves distributed ARB automatically, but how it will be implemented here is not entirely clear.
Will there be information only on the partners’ website about the season, or will there be a separate website or a section on the official Arbitrum website about the progress of the seasons and their results?
Nowhere are any specific percentages announced, how much the management of this program can spend on operational activities. It seems to me that this needs to be added so that everyone understands that in fact we will not have 20 million per month, but a maximum of 18 (as an example).
I don’t think it’s a good idea to be able to stop or cancel the season - it will have a bad effect on the reputation of the Arbitrum. There will be a committee that will meticulously develop the new season, and if it is not sure about something, then it’s probably worth thinking about changing the committee to other specialists. What I mean is that it’s better to prepare in advance than to lose our reputation later. And also, it’s probably worth publishing these discussions in some preliminary results on the forum, so that the community can adjust the season to avoid problems in the future.

danielo · 2025-04-17T22:34:27.241Z

Thanks for the proposal.

This feels like an ideal pair with MATE proposal [non consitutional] to manage the number of acronyms in the DAO.

Jokes aside, I resonate with the intention of enabling a mechanism for a hyper targetted incentives, but the usual critiques to incentive programs still feel unaddressed

pedrob:

why do you believe this model will lead to sustainable growth activity on Arbitrum?

pedrob:

the program doesn’t offer an auditable structure

also echoed by

Chris_Areta:

Will there be transparency in SSC’s decisions and voting?

Perhaps most importantly,

when we compare what could be achieved with 80mn ARB in investments, why should we focus on Incentives instead? did we give up on the idea of DAO budget? or are we just approving things as they go? If this wasn’t such a large sum, this wouldn’t be an issue but at $80mn, we should have some planning on second order effects like eliminating our deployment capacity to fund other programs, no?
Why such a sum? couldn’t this be tested with 2mn ARB? or 10, or 20?
How will we know if this was successful? Any KPIs?

Tane · 2025-04-18T01:38:55.396Z

Thank you @Entropy, for presenting this comprehensive and well-structured proposal. We appreciate the effort to rethink Arbitrum’s incentives with a focus on targeted, measurable outcomes and controlled experimentation. The idea of running focused 3-month seasons with singular goals addresses many challenges observed in prior programs, especially the difficulty in evaluating broad, multi-vertical incentives.

That said, we have some concerns about the governance structure and operational details. The season selection committee includes entities with significant influence in the ecosystem, which raises questions about impartiality and potential conflicts of interest. Could you clarify what measures will be in place to ensure transparency and fairness in season and partner selection? Will there be public reporting or community oversight mechanisms?

Regarding partner procurement, the proposal leaves much discretion to the committee without specifying criteria or processes. Given the critical role of distribution and evaluation partners in program success, more detail on how these partners will be chosen and held accountable would strengthen confidence.

Furthermore, regarding the evaluation process itself, how does the proposal envision the DAO evaluating the overall success or failure of the DRIP program? Specifically, what is the planned frequency for these evaluations (e.g., per season, mid-season, annually)? What key metrics and criteria will be used to assess the program’s performance against its goals?

Relatedly, to ensure transparency and allow the community to monitor progress, is there a plan to provide a public dashboard? Such a dashboard would ideally display key performance indicators, incentive distribution data, and the results of the evaluation partner’s analysis in a timely manner. We believe these elements are fundamental for demonstrating accountability.

Finally, the proposal emphasizes marketing and partnership engagement, which is encouraging. However, marketing execution is notoriously challenging. How will the committee ensure protocols fulfill co-marketing obligations effectively?

Euphoria · 2025-04-19T09:39:28.306Z

The following reflects the views of the Lampros DAO governance team, composed of Chain_L (@Blueweb), @Euphoria, and Hirangi Pandya (@Nyx), based on our combined research, analysis, and ideation.

First off, we’d like to thank @Entropy for putting the much-awaited DRIP proposal. We see initiatives like DRIP as opportunities to rethink how incentive programs can better serve long-term ecosystem health rather than just short-term growth spikes like we had in our earlier incentive programs.

There are several strong design decisions in this proposal that stand out to us from the previous incentive programs.

Entropy:

a new type of incentives framework focused on targeting specific assets and activities across Arbitrum rather than specific protocols.

This shift in focus is important. Past programs sometimes led to concentrated allocations based on relationships rather than real impact. Targeting asset pairs and economic behaviors, like deepening a specific market or making Arbitrum the best place to borrow against wstETH, is more aligned with systemic growth.

Entropy:

marketing is a missing aspect from every past program, which the DRIP will address by having the foundation included on the committee and requiring eligible protocols to co-market.

We couldn’t agree more. Incentive programs without awareness campaigns often leave adoption potential on the table. Tying eligibility to co-marketing commitments is a smart move that aligns everyone toward reach and usage, not just TVL games.

Some delegates have already raised good points on which we have to add on to -

Tane:

What key metrics and criteria will be used to assess the program’s performance against its goals?

We’d like to build on this by asking, will these metrics vary seasonally based on the specific activity targeted, or will there be a core set of DAO-wide metrics to allow for comparison across seasons? Additionally, how will learnings from underperforming seasons be used to shape the design of the next?

Tane:

Given the critical role of distribution and evaluation partners in program success, more detail on how these partners will be chosen and held accountable would strengthen confidence.

We’d like to know, will the DAO receive public interim updates (e.g., at the 6-week mark) during a season to allow for mid-cycle feedback or adjustments? This would allow us to avoid a post-mortem only cycle and make the program more iterative and responsive.

Entropy:

marketing is a missing aspect from every past program, which the DRIP will address by having the foundation included on the committee and requiring eligible protocols to co-market.

Many protocols, especially newer or smaller ones, may not have a strong marketing infrastructure. Will DRIP offer templated assets, messaging guidelines, or any support for ad spend, content creation, or community campaigns? Beyond requiring participation, are there any expectations on performance metrics (CTRs, campaign reach, conversions) that protocols should report back? And as the program spans multiple seasons, will co-marketing quality be considered when evaluating protocols for participation in future rounds?

Entropy:

Each season must have a singular, specified goal.

Given that each season targets specific activities or pairs, when or how much before the start of the season will the goal be decided? And how will DRIP ensure that incentivizing one pair doesn’t drain liquidity from other critical trading pairs on Arbitrum? Is there a mechanism to monitor or correct fragmentation effects?

Entropy:

the distribution partner will check the chain for wallet eligibility and distribute rewards to the wallets that have met the mandated goals of a season and create a frontend through which all eligible protocols will be shown.

Could you share more specifics here? What mechanisms will be in place to ensure sybil resistance or prevent users from farming rewards in a way that doesn’t create real ecosystem value? Also, will wallet eligibility be uniform across all seasons or customizable based on the goal?

Entropy:

The evaluation partner will host open data around the program and recommend optimization improvements to the committee throughout a season’s lifecycle; after a season is complete, the evaluation partner will provide a more holistic analysis to the DAO.

Could you elaborate on which key metrics will be prioritized for analysis, beyond just raw usage? For example, are there plans to evaluate user retention after a season ends, or capital efficiency per ARB spent? Having a few shared metrics across seasons might also help the DAO compare performance longitudinally.

Entropy:

a portion set aside for operational costs

We’d appreciate a more detailed breakdown of the operational budget. How much is being allocated to distribution partners, UI development, evaluation, and potential protocol support? Could you specify the percentage of the 20M ARB per season that is earmarked for operational expenses versus direct incentives? Furthermore, what are the projected costs associated with each vendor (distribution, evaluation, etc.), and how were these estimates determined?

All in all, this proposal demonstrates strong evolution in how we approach ecosystem incentives. We see DRIP as a serious attempt to move from broad TVL farming to strategic and measurable activity growth.

DonOfDAOs · 2025-04-19T14:56:17.889Z

As a strong element of positive sentiment/confidence, I broadly support this initiative and the parties presenting/providing research for it (Entropy, Gauntlet, Blockworks, Chaos, Foundation, OCL, etc…). I also support the general approach of

Entropy:

The season selection committee will have full discretion on how the procurement is run; public or private application and evaluation, open or invitation only, who is selected, etc. The process will be fully facilitated by the season selection committee, and the decision of the partner will be fully at their discretion.

I echo many of the delegates, such as @pedrob here in saying that assurances along the lines of transparency would be valuable. I know below there is mention of public data provision, but this seems more in line with an explanation of outcomes. I’d want to see a report on admissions decisions. I’m reluctant to say fully private admissions is ideal, but if it ends up that way, at minimum a thorough post-admittance report would help.

cp0x:

In this program, vesting of rewards was not announced in any way, which was used by some protocols in the past grant program and which showed the best result. In order not to reduce the cost of ARB once again due to high costs, it seems to me that vesting should be included in the distribution of tokens.

I believe @cp0x raises a strong point about vesting being a needed and beneficial addition to the structure.

cp0x:

20 million ARB per month (and at the moment it is about $5.7 million, and I do not see any prerequisites for a significant change in the price in the near future) is a small amount to be distributed over 3 months.

@cp0x I am curious why you say this is a small amount though? I don’t say this to disagree with you, I am genuinely curious on identifying proper sizing and I am open to being convinced of higher or lower amounts.

Finally, marketing is a key addition which I strongly support. It’s also a component which should be added to proposals more broadly. That said, I would be interested in seeing the program track the actual conversion rates of the marketing strategies used. In this regard, it also serves as experimentation and data on marketing / marketing approaches more broadly which can then be generalized to future, even entirely unrelated, proposals. This has yet to be mentioned, but this form of metrics capturing should be added to the proposal requirements.

TodayInDeFi · 2025-04-20T02:56:40.786Z

A group of AAEs administering monitoring and managing this does make more sens than delegates managing every minute detail

But the current description does leave a lot of questions: Are delegates just approving this with no input?

We certainly dont need or want to manage every detail , but general seasonal guidelines, goals, at the very minimum, shoudl have delegate input. This could be split between calls (for detailed discussion) and votes for higher level selection of goals or guidelines.

The general idea of AAEs administering an incentive program is great, but the Current version of this proposal is a bit too vague and doesnt clearly have any synergy between the DAO and AAEs.

Many of us do have experience - we’re LPs and farmers, traders ourselves, and we know other delegates have experience running or analyzing incentive programs, which could provide a lot of value.

SEEDGov · 2025-04-20T16:36:45.922Z

Hi @Entropy! Thank you very much for this long-awaited proposal.

Entropy:

Entropy proposes a new type of incentives framework focused on targeting specific assets and activities across Arbitrum rather than specific protocols. Incentives per specific assets/activities will run in 3-month seasons through the DRIP so that the program can be adapted and different assets and activities can be selected as learnings are taken into account. Each season must have a singular, specified goal. For example, Make Arbitrum One the best place to borrow USDT against wstETH or Ensure Arbitrum One Has the deepest liquidity for trading USDT/ETH.

We believe this approach is on point. From our perspective, incentive programs should be protocol-agnostic, as long as user safety is properly accounted for.

In that regard, we noticed there is a “minimum threshold of security and maturity” required for a protocol to be eligible:

Entropy:

-Need to be chain-wide and protocol agnostic (minus security-related whitelisting or a TVL/protocol-maturity requirement). Depending on the vertical and ROI after a program starts, the committee can expand or restrict how broad the program is.

This raises a question: in the event a protocol is excluded, is there any mechanism to appeal or revert that decision? We understand the Season Selection Committee has discretion to exclude, but it is still composed of humans, and errors or oversights may occur. Therefore, there should be a transparent mechanism for an excluded or omitted protocol to request inclusion.

Entropy:

Condensed Example of a Season:

Goal: Make Arbitrum One the best place to borrow USDT, USDC, and ETH against wstETH.

Select Collateral: wstETH

Select Borrowable assets: ETH, USDC, and USDT

Required LTV: 15%

Target yield boost for wstETH: 2% APR (increase over wstETH base yield)

Maximum collateral incentivized: $1B

Protocol Partner RFP: The program will be platform/protocol agnostic and target lending across Arbitrum One. With that said, protocols will be screened for security purposes before being included in the program. The thought process behind this decision surrounds not incentivizing (or appearing to endorse) Arbitrum’s users to deposit assets into protocols that have a higher likelihood of being hacked. The security provider selected in the ARDC will be in charge of whitelisting lending protocols or alternatively the committee enlists a firm that can do this. The lending platform partners must support wstETH as collateral and borrowing of USDC, USDT, or ETH against that collateral in order to be eligible. This creates a fair environment that should not negatively encumber any specific lending market.

In practice, this means that any borrower of USDC, USDT, and/or ETH on a whitelisted Arbitrum One-based lending platform will be eligible to receive 2% APR paid on the total value of their wstETH deposited into the lending protocol. Wallets will only be eligible if they have reached and sustained an LTV of 15%. Rewards will be paid out weekly by a distribution partner.

With a 3-month program, targeting a 2% yield, $5M will cover 3 months of runway on $1B in collateral participating in the program.

We understand this is just an example, but something that concerns us is that the ARB token is not mentioned at all throughout the proposal. While we’re not suggesting to preset specific goals, part of strengthening the native token involves ensuring deep liquidity.

We suggest initially focusing on ARB + stablecoins + ETH. Greater depth in ARB/stablecoin or ARB/ETH pairs is a win-win for the ecosystem. This is especially relevant when assessing ARB’s risk profile as lending collateral.

Entropy:

Season Selection Committee

Arbitrum Foundation

Entropy Advisors

Offchain Labs

⅔ votes are required for a season to be approved. The first 4 seasons that meet the rule requirements and are deemed valid by the committee will be enacted.

The committee also has the power to:

Kill the Program: If the program fails to perform, at the discretion of the committee, it reserves the right to terminate it.

Adjust the Program: Reward allocations or program parameters may be modified, guided by insights from the evaluation partner. All adjustments must remain within the scope of the original proposal, balancing agility with accountability to ensure the program continues to serve its intended goals.

Widen or constrict the apps eligible in a season

Any other changes: The season selection committee will be able to make any changes to the program as they see fit as long as it maintains the spirit of the DRIP proposal

As we’ve mentioned in the thread A Vision for the Future of Arbitrum, it not only makes a lot of sense to have Arbitrum Aligned Entities involved in key proposals like this, but it’s also virtually impossible for any other proposer to gain enough consensus to pass a competing incentives proposal. We’ve already seen this play out with ARB Incentives: User Acquisition for dApps & Protocols, where the DAO made it clear that the incentives strategy must come from entities such as OCL, AF, or Entropy.

That said, although the current committee already partially represents the DAO via these entities, we see potential value in incorporating two additional members selected from the current pool of independent DAO contributors. The AAEs could even appoint these two additional members after the proposal is approved.

This aligns with what we outlined in our SOS Submission: If the DAO already has talented contributors, and the main challenge is better coordination, then the best alternative is to ensure that talent is integrated into the execution of proposals.

We emphasize this because, since this is a DAO-funded initiative, delegates will naturally expect some diversity in who holds decision-making power. We believe the structure we’re proposing could help ease those concerns. Otherwise, we risk swinging from a model where initiatives were 100% executed by external contributors to one where execution is entirely in the hands of the AAEs (excluding the two vendors they plan to hire), which could lead to future issues—as @pedrob pointed out:

pedrob:

One of the unique (albeit sometimes chaotic and inefficient) strengths of the DAO has been the involvement of contributors in operations. That structure helped surface and highlight individuals (we all know who)—now active contributors and respected delegates. If programs had been this closed off from the beginning, the DAO might not have built the pool of engaged contributors it has today. I understand the goal of efficiency, and I think it makes sense in many ways. Still, I believe it’s worth exploring ways to balance that with contributors’ involvement.

A good example—one that we believe has been working well—is the Stylus Sprint Committee: there’s a strong mix of contributors (OZ, Jojo, and SEED) and AAEs (Entropy, OCL, and AF) working together, each bringing unique skills to the table for effective proposal execution and having Entropy’s management of task allocation based on each member’s strengths. A similar approach could work here—for example, assigning DAO communications to one of the additional members, thereby reducing the operational load on the AAEs so they can focus on more strategic matters like designing the next seasons.

Ignas · 2025-04-21T08:28:54.656Z

Entropy:

Condensed Example of a Season:

Goal: Make Arbitrum One the best place to borrow USDT, USDC, and ETH against wstETH.

Select Collateral: wstETH

Select Borrowable assets: ETH, USDC, and USDT

Required LTV: 15%

Target yield boost for wstETH: 2% APR (increase over wstETH base yield)

Maximum collateral incentivized: $1B

Protocol Partner RFP: The program will be platform/protocol agnostic and target lending across Arbitrum One. With that said, protocols will be screened for security purposes before being included in the program. The thought process behind this decision surrounds not incentivizing (or appearing to endorse) Arbitrum’s users to deposit assets into protocols that have a higher likelihood of being hacked. The security provider selected in the ARDC will be in charge of whitelisting lending protocols or alternatively the committee enlists a firm that can do this. The lending platform partners must support wstETH as collateral and borrowing of USDC, USDT, or ETH against that collateral in order to be eligible. This creates a fair environment that should not negatively encumber any specific lending market.

In practice, this means that any borrower of USDC, USDT, and/or ETH on a whitelisted Arbitrum One-based lending platform will be eligible to receive 2% APR paid on the total value of their wstETH deposited into the lending protocol. Wallets will only be eligible if they have reached and sustained an LTV of 15%. Rewards will be paid out weekly by a distribution partner.

With a 3-month program, targeting a 2% yield, $5M will cover 3 months of runway on $1B in collateral participating in the program.

This is fresh thinking. I like that DRIP sets clear, trackable DeFi goals instead of vague ecosystem growth :).

So I’m all for:

Setting specific targets like “make Arbitrum the best place to borrow USDT/USDC/ETH with wstETH.”
Short 3 months test seasons we can tweak and learn from.
Partnering with strong DeFi protocols to push healthy borrowing behavior.

Looking forward to seeing how this plays out!

jameskbh · 2025-04-21T10:47:26.915Z

Hello!

Thanks for the proposal!

I have a few questions:

Entropy:

The security provider selected in the ARDC will be in charge of whitelisting lending protocols or alternatively the committee enlists a firm that can do this.

Was this already brought to the security provider? What would this screen entitles? Is this within the ARDC scope for this member?

While I do agree that would be the best solution cost-wise, the current v2 mandate is only 6 months (ending in June), so it probably will not be feasible.

Entropy:

Selection Process:

The season selection committee will have full discretion on how the procurement is run; public or private application and evaluation, open or invitation only, who is selected, etc. The process will be fully facilitated by the season selection committee, and the decision of the partner will be fully at their discretion.

Having that in mind, I want to echo some previous comments regarding the procurement process for service providers for this initiative. As the DAO is funding the initiative, it is in the best interest to have a transparent process for selecting all partners (Distribution, evaluation, and probably security/whitelisting). We should expect a full disclosure of costs and reasoning for each selection.

Program ending

We need to be more specific in here, as the DAO can’t be a mere spectator in the process, and some sense of accountability must be created for the Season Selection Committee.

Entropy:

Kill the Program: If the program fails to perform, at the discretion of the committee, it reserves the right to terminate it.

It is missing KPIs in this section. What does “fails to perform” mean?

Entropy:

The evaluation partner will host open data around the program and recommend optimization improvements to the committee throughout a season’s lifecycle; after a season is complete, the evaluation partner will provide a more holistic analysis to the DAO.

Will the DAO be able to claw back funds/end the program? What is the process to do so?

Overall, this is a great initiative, but my understanding is that the proposal would benefit from the refinements several delegates are presenting to make it more robust, with proper checks and balances.

emjicy · 2025-04-21T13:40:19.089Z

Just a quick note from the trenches: there was a previous DRIP program on Arbitrum - this one here - focused on delegate redelegation mechanics. That DRIP’s wrapped, archived, and no longer dripping, but with this new DRIP entering stage left, we are, technically speaking, now touching acronyms, from across incentive epochs.

To avoid any mix-ups, figured it was worth flagging. Different focus, different goals, same four letter word. That said, really appreciate the clarity in this doc, especially around the evaluation role. Always heartening to see funding programs lean toward measurability rather than vibes-per-min.

Wishing you clarity in metrics, minimal future acronym collisions, and dashboards that never. stop. updating. Godspeed.

GFXlabs · 2025-04-21T22:22:42.633Z

Entropy:

Season Selection Committee

Arbitrum Foundation

Entropy Advisors

Offchain Labs

At the risk of asking a silly question, is there a reason why this program cannot already be done out of the 250,000,000 ARB that the Foundation was given last autumn? They haven’t divested of any of it, and as of the end of 2024, only 11,200,000 ARB of future commitments had been made, so the 80,000,000 for DRIP would be easy for them to cover.

The AF also has a vesting budget it can draw from.

If this is an effort led primarily by AF/OCL, it seems like AF/OCL should provide all, or at least a proportionate part, of the budget.

That would also have the benefit of being able to move quickly, rather than waiting for July. Market conditions right now seem well suited to quick deployment of tightly targeted incentives, rather than waiting until July.

0xDonPepe · 2025-04-22T00:01:19.012Z

Thanks for pulling DRIP together. I’m generally in favor, but I see some blind spots that could be improved. Below I outline lightweight tweaks that could keep the timeline intact while adding stronger accountability.

1. Add a narrow “community veto window” around SSC changes

“The Season Selection Committee (SSC) may change parameters or terminate a season at its discretion.”

Speed is great, but absolute discretion invites drama. A simple safeguard:
• Whenever the SSC publishes a parameter change or early‑terminates a season, open a 24‑hour veto window.
• If four top 100 delegates trigger an emergency veto, the change pauses until the DAO weighs in.

You keep agility; the DAO keeps a scalpel‑sharp check on edge cases.

2. Bring the community into vertical selection, before capital is deployed

“The SSC will decide which vertical receives incentives each season.”

Why not tap the hive mind? I recommend a one‑off signalling round where delegates rank the SSC’s short‑list. The SSC still owns the final call, but now it has a data layer showing which themes the ecosystem believes can move the needle. Cheap, fast, and boosts buy‑in.

3. Hard‑code retention into the reward math

We all watched STIP liquidity sprint in and out. To avoid a sequel:
• Require ≥50 % of user rewards to vest linearly for 60 days after the season.
• If users yank liquidity/volume during the vest, they forfeit the locked portion.

Vesting changes the game: it moves the incentive away from short-term extraction, where users farm rewards and immediately exit, toward a model where participants are encouraged to stay engaged over time. It rewards commitment instead of quick profit.

4. Cap OpEx at 8 % per season

“Program OpEx will be funded from the 80 M ARB allocation.”

OpEx creep is real, especially when everyone’s flush with ARB. A hard 8 % ceiling on non‑reward spend (vendors, marketing, bounties) keeps incentives front‑loaded where they belong. Anything unspent rolls over into the next season, rewarding frugality.

Why these tweaks matter

• Transparency without gridlock: the veto window and voting signal are guard‑rails, not speed‑bumps.
• Sticky, not mercenary, liquidity: vesting flips the incentive from “farm and bounce” to “farm and stick around.”
• Fiscal discipline baked in: an OpEx cap ensures the DAO’s 80 M ARB fights for growth, not overhead.

0xyohei · 2025-04-22T03:01:12.459Z

Thank you for putting forward this proposal and for the significant effort involved. I appreciate the ambition behind this initiative.

I’ve reviewed the details and have several key questions and concerns regarding execution and underlying strategy. I would like to raise these points for discussion in this public forum:

1. Executing Protocol Agnosticism & Selection Criteria:
The proposal emphasizes a “protocol agnostic” approach targeting users and activities, yet the design requires screening/whitelisting protocols for eligibility, mandates co-marketing from eligible protocols, and explicitly positions the program as a tool to attract new protocols. This design appears to incentivize user activity on specific, selected protocols, which contradicts the stated principle of not focusing on protocols themselves.

How will the team execute on this dual approach – being agnostic in principle while requiring protocol selection in practice?
Consider assets like wrapped LSTs, each representing a different product from a distinct provider. How will the team decide which provider to incentivize, using what criteria, and based on what rationale? (e.g. why wstETH over cbETH etc.). This goes beyond the protocol but the tokens themselves
If the program incentivizes an ETH/USD pair, will all protocols supporting this pair (e.g., DEXs, perps) qualify, or will selection criteria apply? If criteria apply, greater clarity on what these selection criteria are is essential to understanding how the program remains ‘agnostic’ to the user’s choice of eligible protocol.

2. Defining and Driving Retention:

How does the team intend to measure and track ‘retention’ within the context of this program? The program length is fairly short and retention can be determined in an experimental manner. We need to review after S1.
Have we clearly identified the specific behaviors that drive long-term retention on Arbitrum, and confirmed that the proposed incentives directly align with encouraging these behaviors?
Could incentivizing already established, top pools be less effective for increasing overall retention given that they are already huge in size which suggests retention?
Conversely, will incentivizing smaller pools effectively contribute to overall retention?

3. Program Goals - Acquisition vs. Engagement:

Is the primary objective acquisition of new protocols/users, or deepening engagement with existing ones and activities?
Focusing strongly on attracting new protocols might dilute the effort required to make Arbitrum the “best/deepest” in specific, existing areas as this requires a focused effort. Could pursuing both acquisition and engagement simultaneously dilute the program’s overall impact and effectiveness?

I laud the effort, but it is “outsourcing” the hard parts of business strategy to the protocols which if they had knew better, we wouldn’t be facing this issue. It reads off like it’s throwing money at the problem but in a different form. We need to be sure of what are the areas we want to lock down, what drives retention, and then incentivizing that all while maintaining credible neutrality.

cp0x · 2025-04-22T16:26:30.421Z

Hi,
Regarding funding -
I simply compared it to the previous LTIPP.
At that time, 45 million ARB were initially allocated, which amounted to $81 million for 3 months

The current request is 80 million ARB, which amount to $24 million per year

Here, a significantly smaller budget is clearly visible, approximately 13 times less in dollars.

(80/24 * 4)=13.3

	Monthly Amount	Duration	Total Amount
Designer	$5,000 USD	3 months	$15,000 USD
Developer	$5,000 USD	3 months	$15,000 USD
Governance Analyst	$1,000 USD	1 month	$1,000 USD
Servers and Hosting	$500 USD	24 months	$12,000 USD

	Kick-off	Milestone #1	Milestone #2	Milestone #3	Milestone #4
Deadline	Day 1	Day 30	Day 60	Day 90	Day 120
Payment	$0 USD	$10,000 USD	$15,000 USD	$15,000 USD	$3,000 USD

DeFi Renaissance Incentive Program (DRIP)

DeFi Renaissance Incentive Program (DRIP)

Non-constitutional

Abstract

Motivation and Rationale

Specifications

Rules of a DRIP Season

Distribution Partner

Evaluation Partner

Condensed Example of a Season:

Season Selection Committee

Rough Timeline

Arbitrum Proposals App

Abstract

Motivation

Rationale

Specifications

Steps to Implement

Timeline

Milestone #1

Milestone #2

Milestone #3

Milestone #4

Overall Cost

Payment schedule