The Battle for L2 Supremacy

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One of the most important proposals in all of Web 3 is live! This $ARB proposal could put @arbitrum back into a frenzy with over $60M of incentives before January. L2 wars are heating up with the explosive growth of @BuildOnBase, now $ARB strikes back. Let's dive in! 🧵

First let me set the stage... The ability for @arbitrum to hold marketshare as $ETHs largest L2 is at stake. That's a massive title to fumble when considering ETHs future outlook. $ARB maxis haven't seen Base as a threat because its new. The numbers tell a different story.

Here are some @BuildOnBase numbers from yesterday... ~200% more fees than Arb ~500% more revenue than Arb - Nearly 4x more transactions - Base had 70% of daily transacting addresses compared to ARB

Zooming out... - Base TVL grew from $0 to over $375M in under two months - Arb TVL lost $600M in that same period - Coinbase has 108M CEX users that they can help bring onchain to Base. - Coinbase CEX did $830B in volume in 2022 - ARB onchain did ~$30B in volume in 2022

I'm a massive fan of @arbitrum, was an early adopter, and have longterm positions that reside there. My point with showing the @BuildOnBase comparison is that they are up against an absolute behemoth in the industry. Unfortunately the DAO hasn't taken this threat seriously.

Let's now dive into the proposal. Projects on @arbitrum have been itching for grants over the past few months. @CamelotDEX ask for a grant which was voted down mostly due to $ARB not having a Grant Framework in place. This brings us to today's proposal. x.com/SirBootsOfIron/status/1702068515648233610?s=20

The "Arbitrum Short-term Incentive Program" is to bridge the gap until a full framework is in place. The rewards being voted on will be used to kickstart volumes, TVL, liquidity, and create data between now and January. Without $ARB incentives, $BASE could be the top L2 by Jan

The proposal itself went live on September 10th and will run until September 17th. Only 3 more days for delegates, projects on $ARB, and users to get their votes in on the grant program.

The proposal has 4 voting options, including voting against it entirely. Three other options will decide the size of $ARB grants that would be distributed by Jan 2024: 25M $ARB 50M $ARB 75M $ARB As of today the top option is 50M ARB, with 25M close behind.

It's important to note that the foundation is operating under extremely tight timelines. The Grant Proposal ends on September 17th which is the same time that that protocols will be able to begin their applications. I'd expect the App Period to stir up discussion on all socials.

I've been fairly critical of the @arbitrum foundation recently due to the lack of urgency and not having a Framework for grants. With that said, I think they did a pretty solid job with eligibility requirements for protocols to receive grants. Trending the right direction!

There will be four different buckets of grants. These will be based on how long the projects been live, TVL of the project, cumulative volumes, and outlook. Once again, I think this is solid and applaud them for prioritize the projects that have continued to build overtime.

There will be two different application periods although each project can only receive funds during one "cycle". The important thing to note here is the first round of distribution is on October 7th. I'd expect roughly $10-30M to be distributed in less than 3 weeks... 👀

As a trader, I see a proposal dropping for $10-30M and my first thought is to front run the capital, hype, and on-chain rotation. When looking into this I think the most obvious way to profit would be targeting protocols eligible for receiving Lighthouse or Pinnacle grants.

When deep diving protocols that could benefit, you realize its not that easy. The @arbitrum network has over 450 protocols. If you split $20M USD across 450 protocols it'd average $45k per project. That $45k would be split across 4 months so $11,250 a month or $375 per day.

My point being, 25M $ARB sounds like more than it is until you consider how it will be split. Here are the top 20 protocols on $ARB by TVL.... - They make up 1.5B of TVL on $ARB. - Majority are DEX/Derivatives projects that would split a grant over 10-100 LPs

Let's pretend the other 400 protocols don't exist and give the top 50 projects the 25M ARB grant. 500k ARB per project is ~$400k. Split over 4 months, it's roughly $100k per month. $100k doesn't move the needle for Balancer, Camelot, Sushi, Curve, etc. They have 50+ LPs.

25M ARB seems light... The goal is to bootstrap TVL + Volume across a chain as big as @arbitrum, it needs to move the needle. The DAO holds 4.2B $ARB and 750M is for admin purposes. I mean, 750M ARB for admin budget and they haven't incentivized any protocols since March.

Personally I find it quite ridiculous the DAO/Foundation vote failed and they took 750M anyway. The part about this I hate is that now the foundation has a reason to drag their feet with grants as their 750M "budget" vests over 4 years. x.com/0xedenau/status/1642502145839890432?s=20

I'll be voting for "Up to 75M $ARB" option, it will help cement $ARBs top spot until a framework is complete. Arbitrum share is getting eaten and half the DAO is voting for light incentives? Makes zero sense. The $ARB DAO gov. experience has been brutal, lets turn it around!

I'm a massive fan of the Arbitrum chain and want to see it succeed longterm. It feels like the community really needs to rally together to push things forward. To start, familiarize yourself with the proposal here: snapshot.org/#/arbitrumfoundation.eth/proposal/0x5e0057920df9a278918e4de4ee1e6de7e2415d2af985e40a6c7a1a4b47a4ce01 Please do your part and vote!

For you traders and chain rotators, no matter what the final vote this should lead to onchain opportunities. I'll be doing my best to drop content here or on FT that walks through my top ARB plays going forward. GL and thanks for paying attention!