CamelotDEX Grant: Evaluating the Token Distribution

•

12 Million of $ARB tokens worth over $13.8 Million could be given out to @CamelotDEX 😱 Is this too much? Let us find out. 👇

Context Camelot has requested for a grant of 12M ARB, with 2M to be distributed each month until the 6th month. TLDR, one of Camelot's main reasons is their provision of deep liquidity for Arbitrum native protocols which is essential for survival. twitter.com/CamelotDEX/status/1674439522287845377?s=20

Motivation The second main reason is the fact that Camelot has been able to distribute rewards in a sustainable manner. Last but not least, they also have several integrated partners such as Gamma and Pendle. The claim is that the grant will also benefit the partners.

Significance It is no doubt that Camelot has played a vital role in the growth of Arbitrum. I have outlined that in one of my old posts where I agree that Camelot is unique in the sense that they cover for the entire lifecycle of protocols they support. twitter.com/matrixthesun/status/1636379527340511235?s=20

Plan From what I see, the incentives will be used to incentivise users and builders to come onto Camelot. LPs will be deep as liquidity providers enter to take advantage of the ARB incentives. Builders will want to launch and see liquidity on Camelot due to high DAU and Liq.

Plan This is because as liquidity is deeper on Camelot, more users will swap on Camelot due to lower slippages. More inflow of capital into Camelot will naturally make it a more attractive place for new protocols to launch on.

Initial Take The plan makes sense and Camelot has great ideas for the ecosystem. However, the grant seems to be excessive and the approach is likely to be aggressive with respect to how the incentives will be handed out. Let me explain. 👇

Metrics The following are to be used to gauge the success of the grant. • TVL growth • Volume growth • Daily active user growth • New pools and protocols supported • Integration partner growth There are some flaws I foresee by using such metrics.

Flaws TVL growth seems to be the most obvious flaw here. With such a huge amount of ARB tokens to be given out, mercenary capital is sure to flush in. This metric would be a giveaway in that case. As shown, Velodrome was able to >3X its TVL with a 4M OP grant.

Flaws However, such TVL is not sticky, as Velodrome's TVL is now at $199M, a >38% drop. The team themselves have stated that TVL and volume numbers are easily skewed, but yet the milestone is measured in exactly that.

Flaws No problems with DAU, a great metric since this will not be an airdrop scheme. New pools and protocols supported is rather vague. IMO, its best to reserve this metric for the new protocols that launch on Camelot since Camelot specialises in covering lifecycles of them.

Clarity Integration partner growth is also rather vague for now. I'm guessing the team will elaborate on this. It will be good to focus more on DAU and fees here as well and place less importance on things like TVL.

Comparison Camelot argues that they are doing a better job than Velodrome even without incentives. However, they are requesting for 2M ARB (~$2.3M) per month vs 3M OP (~$1.42M) over 4-5 months. $2.3M vs $315K The difference in the amount they are asking for is stark.

Treasury Keep in mind that Camelot currently holds 2.18M of ARB in their treasury already. They will have a total of 14.18M ARB by the end of the grant.

Personal Take I think there is no need for Camelot to have so much ARB. The way I see it, the 2M ARB monthly will be given out aggressively/needlessly since Camelot has points to prove. A big mercenary session would waste most of the ARB which may not result in sticky users.

Market Current market conditions are very PvP, such a huge amount of rewards will be wasted on mercenaries. Fortunately, Arbitrum is a chain with one of the most organic activity. Excluding the skew on 23 March due to the airdrop, Arbitrum still has many users.

Organic Therefore, Camelot can definitely grow organically/with a smaller ARB grant. They have done this before as they have said so themselves. From what I have observed, Camelot enjoyed great success in March due to the hype in their launchpad back then.

Moving Ahead I think that Camelot definitely has potential to grow much further with less incentives. How they can approach this is: • Use ARB from their own treasury first to prove their point • Probation of 2 months of the grant before deciding to continue

Launches An alternative approach is for Camelot to focus on its current product too. With a great launch, Camelot would expect a spike in volume from the new launches. Previous launches did not go too well and Camelot has tried to rectify it with xGRAIL utility and caps.

UX However, many are still complaining that Camelot has horrible UX and I personally have experienced it during the $PNP launch. Swaps frequently had errors and the router was routing through illiquid pools causing high price impacts.

UI Many have also complained that the UI is laggy and hard to use. It would appear that Camelot has several things they can opt

My Approach Camelot should optimise the UX/UI and focus on vetting quality projects with no predatory raises to launch on their platform. I think that alone will drive a lot more organic activity onto Camelot naturally.

Conclusion The grant is excessive considering that there are other things Camelot can work on to first maximise organic activity. Coupled with a smaller grant and/or Camelot starts using their own ARB treasury, the platform is likely to gain much more traction sustainably.

Disclaimer I hope that if the team sees this, they can understand this is constructive criticism and not take this the wrong way. Have tried to be as objective as I can be and am definitely open to hearing other opinions. I myself am a big supporter of GRAIL too. ⚔️ twitter.com/matrixthesun/status/1636379477646409732?s=20

Tagging chads to see what they think about the huge ARB grant Follow them too! @LouisCooper_ @RealDegenGMX @2lambro @CryptoGideon_ @rektdiomedes @crypto_linn @Flip_Research @Cryptoalpharian @CryptoShiro_ @18decimals @undeadcat1or0 @Crypt0_Andrew @defi_mochi @FungiAlpha @0xTindorr

More chads to see what they think about the ARB grant, drop them a follow too! @CryptoBlooom @Nicknick2109 @defi_antcrypto @arndxt_xo @DAdvisoor @0xShinChannn @stacy_muur @CryptoKoryo @monosarin @thedailydegenhq @Flowslikeosmo @CryptoYusaku @CryptoNikyous @Defi0xJeff @daman_n_diu