• Proposal

  • Allocation for 2M ARB STIP Grant

The Synapse DAO is receiving a 2M ARB($3.8M as of January 5th) grant from STIP, the arbitrum short term incentives program[https://forum.arbitrum.foundation/t/arbitrums-short-term-incentive-program-arbitrum-im.provement-proposal/16131/1]

The core goals of this grant is to increase bridge usage & accelerate new efforts to make the bridge faster and cheaper, outlined in Synapse’s proposal. [https://forum.arbitrum.foundation/t/synapse-protocol-final-stip-round-1/17550]

The grant requires Synapse DAO to distribute 2M ARB before March 29th, 2024.

To accomplish these goals, in-lign with Synapse’s proposal to the Arbitrum DAO, I propose the following allocations:

  1. 1.5M ARB allocated to accelerating RFQ bridging
  2. 500k ARB allocated to fee & gas rebates to expand Synapse’s existing presence in the Arbitrum ecosystem

RFQ Bridging:
RFQ bridging is a new Synapse bridge paradigm built around Intent based bridging. When users bridge, their intents(example: $500 USDC from Ethereum to Arbitrum) are passed onto relayers who compete by giving their best quote to complete the bridging transaction. The best quote from the relayers is matched with the user's intent and the bridge is complete.

Launch RFQ and accelerate relayer deployments (1.5M ARB allocated in total):

  • Protocol fees on RFQ will be set at 2bps initially – fees will be changed to ensure Synapse has the most competitive rates
  • An ARB rebate will be given to users to compensate for protocol fees, slippage and gas costs.
  • The rebate will only be available to transactions over a certain minimum amount to prevent abuse of min fee rebates.
  • Each address will be limited to a max rebate of 10k ARB

This grant is a great opportunity to bootstrap the relayer ecosystem. Encouraging people to build and run relayers will drive the cost of bridging down while increasing protocol fees and market share by encouraging competition amongst fillers. To accelerate the relayer ecosystem, I suggest giving a % of this allocation to relayers. This portion will be divided up at the end of the grant term by the percentage of total volume each relayer has done. As more relayers are deployed, they’ll compete to give better quotes to users.

This proposal suggests two options:

  • Allocating 750k ARB to bridger rebates and 750k ARB to relayer incentives
  • Allocating 1.125M ARB to bridger rebates and 375k ARB to relayer incentives

Gas, fee & slippage rebates for Synapse’s existing ecosystem(500k allocated in total)

  • Incentivize Arbitrum bridging for GMX, SDT, nUSD, nETH and other eligible tokens
  • 100% of protocol fee rebate + 20% gas & slippage rebate – this will reduce bridge costs for users encouraging Synapse usage.
  • Depending on bridge volume and rebate usage, rebate amounts will be changed to ensure rewards are distributed evenly
  • Distributing 500k ARB over the next 12 weeks until March 29th would mean 41.6k ARB($75k) distributed weekly
  • Each address will be limited to a max rebate of 10k ARB

Assuming an average rebate of 6bps, this 500k ARB could incentivize up to $1.5B in bridge volume and close to $1M in protocol fees.

*the effective fee taken changes drastically given min fees and token bridged
**Given the short timeline and the fact that it might change, rewards will be adjusted weekly to ensure it’s as close as close to equally distributed throughout the period designated by Arbitrum DAO.

Successfully distributing this STIP grant should result in:

  • A large ecosystem of relayers competing with each other to give users the cheapest bridge quotes possible
  • $4B+ in bridge volume, bringing billions of dollars to the Arbitrum ecosystem and introducing hundreds of thousands of new users to Synapse
  • $3M+ in protocol fees

Poll for specific allocation of the grant:

Option 1:
500k non-RFQ bridger rebates
1.125M RFQ bridger rebates
375k RFQ fillers

Option 2:
500k non-RFQ bridger rebates
750k RFQ bridger rebates
750k RFQ fillers

Grant allocation

500k non-RFQ bridger rebates, 1.125M RFQ bridger rebates and 375k RFQ fillers ecosystem67%
500k non-RFQ bridger rebates, 750k RFQ bridger rebates and 750k RFQ fillers ecosystem33%

    socrates who can do a relayer ? Is it open to everyone ?

    What’s the average monthly volume partner tokens have done ?

        I think the proposal is missing the tradeoffs of each option so I'll put following excerpt so that people have more context to vote on. Below details the tradeoffs

        Option 1

        • Emphasis on Bridger Rebates: Allocating a larger portion (1.125M ARB) to RFQ bridger rebates puts a significant focus on incentivizing users to engage with the RFQ bridging system. This could lead to a quicker adoption rate and more immediate user engagement.
        • Lesser Allocation to RFQ Fillers: With only 375k ARB allocated to RFQ fillers, there's less incentive for relayers to participate and compete. While this may still attract relayer engagement, the lower incentive might slow down the competitive drive among fillers, potentially affecting the speed of innovation and improvement in the bridging service.
        • Potential User-Centric Growth: The higher rebate for bridgers could result in a more user-centric growth, possibly creating a more robust user base. This could be beneficial in building a strong community around the Synapse protocol.
        • Risk of Slower Ecosystem Development: By not allocating as much to RFQ fillers, there's a risk that the development of a competitive relayer ecosystem might be slower, which could, in the long run, affect the overall efficiency and cost-effectiveness of the bridge.

        Option 2

        • Balanced Allocation: This option provides a more balanced allocation between RFQ bridger rebates and RFQ fillers (750k ARB each). This balance could create a more sustainable ecosystem where both users and relayers are equally incentivized.
        • Encouragement for Relayers: A higher allocation for RFQ fillers might attract more participants to become relayers, thereby increasing competition. This could lead to more innovative solutions and potentially lower costs in the long run.
        • Possible Slower User Adoption: With less incentive for bridgers compared to Option 1, there might be a slower initial uptake by users. This could impact the short-term growth of the user base.
        • Potential for a Healthier Long-Term Ecosystem: By equally supporting both sides of the bridging process, this option could foster a healthier, more competitive ecosystem in the long term, which is crucial for scalability and sustainability.

        Summary

        • Option 1 is more user-centric and might result in quicker adoption but could potentially slow down the development of a competitive relayer ecosystem.
        • Option 2 offers a balanced approach, possibly leading to a healthier, more competitive ecosystem in the long run, but might see slower initial user engagement.

        Opinion

        I lean toward option 1 to maximize user growth simply because I think markets move fast and competitors have been slowly eating into Synapse bridging dominance. Option 1 should drive DAU (daily active users) which is essential for Synapse to remain relevant and competitive in the bridging ecosystem. The DAO also has the option in the future to add more incentives from the treasury for relayers in the future if the initial allocation is not sufficient.

        socrates

        Great progress, excited to test out the new RFQ bridges.

        Agree with fool, trade-offs need to be made clearer for each option - are you able to elaborate on pros and cons of each?

            0xbottomseller

            The main tradeoff is to give incremental rewards to bridgers (incentivize short term user growth) versus more rewards towards fillers (which should make rfq more robust and decentralized).

            A good way to think about this is that spending $X on RFQ bridger rebates should incentivize $Y volume (and thus fees). We can do some simple math to make estimations here but once rebates run out, you are left with the fees from that volume and any increase in DAU. Increasing the pie for RFQ fillers means that more RFQ fillers will be run during the course of the program, and can make bridging even cheaper and faster (as fillers compete to give the best price). Scaling a filler ecosystem is non-trivial since running a filler requires some fixed cost and active management. These subsidies should go a long way to encouraging a robust ecosystem of fillers.

            A good example for this is ecosystems that already use intent based fillers (e.g. CowSwap), and how different programs they have run created a robust system of 15+ fillers that are all very competitive.

                Moses

                Don't you think increase in volume and DAU subsequently result in more fillers joining the ecosystem ?
                Aren't relayers alrdy incentivized by relayer fee ? so higher volume --> higher fee for them ?

                    6 days later

                    Passive increase in volume and DAU subsequently results in more competition amongst relayers to provide the cheapest bridge quotes possible

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