Summary

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.

Background

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. 

Motivation

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. 

Proposal

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

  • USDC

  • DAI

  • FRAX

  • ARB (Preferred)

OHM utilized will either come from OHM already owned by the Treasury or minted specifically for this purpose.

Should Olympus create liquidity incentives on Arbitrum?

Understand the need and appreciate the test&learn approach but if we are to do this we need a clearly defined experimentation period and KPIs.

i.e. how long will we run this for, how will we judge success, and how will we report back to community to allow a vote on what experiments to build upon?

    thomasscovell

    Completely agree with your assessment, this is more an opportunistic TAP since we have smaller exchanges reaching out to list OHM. There are no concrete plans to do bribing or incentives activities on the scale as we are running them on Mainnet. We are more talking in the range of 500-2500$ per week experiments in bribes, where we will earn back most of the money anyway, so it has close to no impact on the treasury, but it will still create very attractive opportunities for all Ohmies.

    Since there are no clear major opportunities that we would deploy larger sized bribes to, its hard to quantify specific numbers that we are trying to achieve here regarding your request.

        was in favor of this until I got to the Arbitrum (Preferred) part. I'm assuming this is talking about using the $ARB olympus got from the airdrop. imo, Oly shouldn't spend that ARB at all, and only use it for governance purposes. In fact Olympus should be considering becoming a delegate on arbitrum and become the voice of OHMies on arbitrum.

          yieldohmie Ok fine I see we are talking very small experiments, but of course these will add up. Can we at least say "this runs for three months after which we'll provide a consolidated report of learnings and recommendations to move forward" or similar?

              Support this - using OHM incentives to drives utility and demand should be our #1 priority

              Treasury team shouldn't be hamstrung with KPIs on such a minor proposed budget - but should keep us updated with what they are doing!

              z_33

              Hey Z. Couple of quick questions:

              I take it then support would be given if we used OHM to incentivize like we do on Mainnet?

              On the topic of ARB Delegration, whom would you recommend delegating to who would be our voice? Interested who you were thinking.

                thomasscovell

                Hey Thomas. Sure, I think that's reasonable. If you look at 'incentives' as a whole it's a pretty binary decision if do them or don't do them.

                If cost of incentives < return from incentives; do incentives
                If cost of incentives > return from incentives; pause incentives

                I will say, incentives also allow us to pull some POL which third party typically replaces. That pulled capital put to work becomes accretive vs. it being capital in an LP that's fairly fixed and minimally productive.

                Either way, can certainly commit to an incentive rollup.

                  • Where is the data that quantifies what "deep liquidity" is on Arbitrum and what the expected liquidity needs will be in "the future"? Is the future in one quarter or five quarters?
                  • Will you also be experimenting on 0 external incentives as a baseline in some way?
                  • If other dexes want to list ohm, shouldn't they provide ohm incentives to list? If so I could understand the need to match some incentives from ohm as a partnership effort.

                    0xEvan

                    Hey Evan! Great feedback.

                    1. Quantifying 'Deep Liquidity' is actually an ongoing discussions happening within the DAO and the problem actually spans to liquidity everywhere. "Deep" is subjective and really, a world exists for "Deep Enough" is more accurate. Largely, we want to ensure that our liquidity levels are large enough to allow the full breadth of volume to transact through the pools with minimal slippage. That means that all the transactions that wanted to move through the LP's could move through the LP's without taking a bath. To qualify this, we're building tools to look at this a couple of different ways. Total Volume, Average Volume, Mean Volume, Max Volume and Volume as a function of all Liquidity (Both POL and Non-POL). When we have this data, we should be able to derive what appropriate levels would look like. Subjectively, Future means ongoing. If demand by volume goes up, more liquidity is needed. If it goes down, less is needed. Either way, we can and should cover both cases.
                    2. We're doing this today. Current POL has no incentives and so we provide all liquidity and routing through the pools is purely organic. That's the baseline.
                    3. If other Dex's want to list OHM they are welcome to create their own LP and incentivize it as they wish. They could also reach out and see if we would co-incentivize. For the scope of this TAP, we're looking for a not to exceed of 50k per week. This gives us room to work. If you look to the mainnet pools, we were permitted a not to exceed 400k per Epoch of which we have only used 100k YTD. Bribes don't scale infinitely so there's a 'good enough' amount of exposure which hopefully, pulls in some liquidity externally and lets us pull some out, which can be deployed more productively.

                    Hope this helps!

                      0xEvan I agree with Rewlyn assessment here.

                      Regarding your third point, I wanted to mention that this is not about proactively bribing random/small exchanges.

                      We want exchanges to reach out to us, and propose a partnership that benefits both parties.

                      We already have one in the pipeline, which will give us a nice chunk of their ve(3,3) supply so we can direct liquidity to our own OHM pools. In order for an ecosystem to flourish, it needs liquidity flow from both sides. So we are looking to participate in the respective ecosystem with small bribes.

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