To support the cross-chain growth of OHM liquidity and, by extension, new use cases, establish an ongoing incentives budget that can be used to experiment with incentivizing liquidity on the various DEXes and staking layers on Arbitrum. This budget will be capped at $50k/week.
TAP-15 permitted Olympus DAO to explore the use of Hidden Hand incentives as a means to boost voting power to its LP Gauges. TAP-23 formalized this approach, increased the allocated budget, and extended these incentives to multiple Aura and Balancer markets.
The results so far have been favorable, and Olympus has seen several million in TVL added across its incentivized pools. On average, Treasury has seen around a 5-15% return, with margin largely being impacted by the decrease in BAL and AURA prices. Even still, incentives have proven an effective means to accumulate liquidity in a cost effective way.
On Mainnet, the liquidity incentives are both good to attract liquidity as well as to increase the protocol’s voting power (by accruing more strategic assets). On Arbitrum, the considerations are slightly different.
Perhaps most importantly, Arbitrum POL is not as deep as mainnet since the protocol needs very deep liquidity on Mainnet in order to run RBS, whereas on Arbitrum this is not a direct concern. The protocol will not be able to offer the same level of deep liquidity on all chains without reducing POL on mainnet. A way around this is for the protocol to offer a guaranteed base layer of liquidity through POL and extend that with third party liquidity, which is created either through incentives, voting power, or more novel solutions like the recently launched BLV.
It’s important to note that as more OHM finds its way to Arbitrum and as the number of integrations and use cases expand, there will be a need for more liquidity to, for example, support effective liquidations in lending markets.
As such, the Treasury Team requests community approval to create a budget specifically to experiment with liquidity incentives on Arbitrum and to support the creation of more third party OHM liquidity. This budget will be capped at $50k/week. Initially, it is likely that only a fraction of the budget will be tapped.
Considering the number and variety of DEXes and staking layers on Arbitrum this TAP is not limited to selected venues, but instead offers the flexibility to experiment with various platforms in order to find the most optimal solution to create third party OHM liquidity.
The list of potential assets used to incentivize will include:
OHM utilized will either come from OHM already owned by the Treasury or minted specifically for this purpose.