Arbitrum Key Metrics Grow by 25%+ Following Incentive Program
Arbitrum DeFi Gets a Boost from $50M Incentive Program
Arbitrum is closing 2023 with strong momentum fueled by its incentive program. Just a few weeks after incentives began to be distributed to protocols on Arbitrum, there are already positive signs of more users and capital flowing into the layer 2 network.
The Arbitrum Short-term Incentive Program (STIP) was coordinated by the Arbitrum DAO and ARB token holders. Token holders first voted to decide on the amount of ARB tokens distributed in the program, settling for 50M distributed throughout three months. Afterwards, protocols interested in participating applied for the STIP, and engaged in feedback from the community, prior to moving to a vote deciding whether or not they would receive the ARB amount they applied for.
Following the governance votes, the ARB tokens ended up being distributed to a total of 28 protocols across a series of different use-cases. Here are the top 10 largest ARB incentives and how they will be used:
ITB Perspectives
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Analyzing the Impact of Arbitrum’s Incentive Program
Votes on the STIP concluded on September 17 and after undergoing a KYC process with the Arbitrum Foundation, incentives began being claimed by the protocols in early November.
The total value locked (TVL) in Arbitrum began increasing shortly after the approval of the incentive program, likely in anticipation of higher yields. As the distribution began the growth has continued to accelerate, leading to Arbitrum’s TVL growing by 25%.
DeFi protocols on Arbitrum have seen net inflows of capital most days since the STIP began. The largest day of TVL growth was on November 10, where nearly $80M was deposited into Arbitrum protocols, driven largely by the beginning of incentives in GMX, Arbitrum’s largest derivatives trading exchange, and Radiant, Arbitrum’s main lending protocol.
Even though larger protocols received larger amount of ARB incentives, the program appears to be benefitting all. All of the protocols that have begun distributing incentives have seen a growth in their total value locked.
Moreover, it appears that many protocols have been able to attract more capital with less.
Above we can see the amount of dollar inflows that protocols have been able to attract per dollar amount allocated to incentives. Here Silo Finance and Gamma stand out, with both being able to gain a 50x multiple per dollar.
To further clarify, let’s look closer at Silo’s liquidity mining program: Silo is a lending protocol with isolated pools, where users can borrow ETH and USDC against a wide range of tokens, like wstETH for example. Isolating risk to each pool means that every pool needs their own liquidity necessary to carry out loans. Silo was granted 800k ARB tokens (worth $800k at the time the grant passed) and decided to allocate 100% of these to bootstrap the supply-side of their pools.
Just two weeks after they began their ARB liquidity mining incentives, Silo has been able to attract $41.9M in TVL. Dividing that over the $800k allocation, we see that Silo has seen a 52x multiple in growth per dollar allocated, making it the protocol that has seen the largest relative impact in TVL.
Similarly, we track the impact that protocols have seen in their revenue relative to their grant amount. Here Gamma and Balancer lead the way, growing 3x and 1.72x respectively. These metrics can be very helpful to identify how efficient protocols are being at taking advantage of the subsidy-like program Arbitrum is providing.
Another way to look at how effective the program is performing is by tracking the amount of new users it is attracting.
The number of new addresses on Arbitrum has been growing consistently, often spiking upon the initiation of incentives from large protocols. Since the STIP program was approved the number of daily new addresses making their first ETH transaction has grown by 27%.
Overall, it is still early since the STIP began, but there are clear signs of growth in the Arbitrum ecosystem. TVL and new daily users have grown over 25% within two weeks of launching. Many protocols are seeing even larger increases in their TVL and revenue figures as a result of the incentive program. We are also seeing protocols like Silo and Gamma seeing an order of magnitude greater returns per dollar spent on incentives.
Ultimately, protocols on top of Arbitrum are reaping benefits from the STIP program thus far. Using the Arbitrum Incentives Program perspectives, we will continue tracking how the Arbitrum ecosystem grows as more rewards get allocated. As well, we will be measuring the impact after these incentives finish, looking at how protocols are able to retain capital and users amongst other things. Because of these changing dynamics, more metrics are likely to be added to the dashboard as the program approaches an end. Make sure to keep an eye out in the dashboard directly or through our social media to stay up to date with how the program impacts Arbitrum, the ARB token and the protocols built on top.
