Background
In DeFi, attention and capital are attracted to opportunities with the largest risk adjusted returns. Protocols retain attention and TVL until their rates return to the beta and capital migrates to the next hottest thing in crypto. However, different audiences have different risk profiles, and while some are willing to drop capital into brand new protocols for the promise of 100%+ APRs, more conservative investors may only act on opportunities that provide boosted rates offering real yield rather than inflation. These investors also care deeply about the security of the contracts in which they will deposit their capital. Therefore opportunities must be great enough to overcome the opportunity cost of relocating their capital; including the cost of personally auditing the contracts involved, writing directly on-chain to remove frontend risks, managing transfer risk, etc … These are the conservative investors Compound Protocol is looking for. They tend to manage large bags of capital, and their TVL is sticky as they’re looking for safe long term investments rather than short term boosts.
The Incentive Campaign Team’s job is to identify and execute opportunities that drive these investors to take action and deposit funds into Compound Protocol. With any marketing initiative, finding these individuals follows the Perato principle. Meaning, without a list of their names for a sales team to reach out directly, the growth team must create campaigns that attract the attention of thousands of minnows, hundreds of sharks and tens of the whales & structured products whose deposits end up dwarfing the rest of the participants.
Analogies & Thesis
There are multiple strategies with which to run an incentive program.
Let’s start with the Grand Canyon Approach. Given a long enough time horizon, even a small steady stream of APR incentives can still channel a massive amount of attention to a protocol. Much the same way that steady erosion built the grand canyon after millions of years. These campaigns manifest themselves as Merkl campaigns or COMP rewards programs that incentivize ALL liquidity … for long periods of time. And while a protocol can attract attention by being listed on Merkl, they’re likely to run out of funds before reaching critical mass. Especially at Compound scale where boosting a $400M market by just 1% a year costs the protocol $4M.
Wiser campaigns instead use a power washer approach. Imagine if the water flowing through the Grand Canyon were forced through a hose at the same rate. The water would move fast enough to do some serious damage. In these campaigns, our team limits the surface area (which markets are incentivized, who qualifies) and the participation period (1 week rather than 1 year). In turn, the same number of tokens can be distributed as incentives while the APRs skyrocket into the hundreds or thousands if only for a day or a week before millions in deposits flow in. These campaigns are the equivalent of shooting flares straight up, not everyone will rush in. But with each new flare the conversation re-starts and more groups who thought they’d missed out on a previous campaign will come.
Operationally, every campaign needs a structured product through which participants can take action on a specific blockchain. Therefore each campaign also presents the opportunity for Compound to partner with blockchain, bridge, vault & structured product teams for joint marketing campaigns with matching incentives. Joint incentives can as much as double the rewards available for Compound users to earn. Meanwhile, joint marketing campaigns disseminate the opportunity to the partner’s audience which, depending on the partner, can be a huge value for what the equivalent advertisement campaign would have cost to reach the same audience with the same level of credibility. We consider these partners Catalysts, a term stolen directly from Chemistry 101. A substance or enzyme that reduces the amount of energy needed for a reaction to occur. Or in the case of our campaigns, a product that reduces the effort an investor must provide when moving their money onto Compound. Having the best rates is not enough, large sticky investors won’t move their capital until a significant event occurs, it’s what we’re overcoming with these campaigns, and what we’re banking on once our campaigns are over.
Identifying Structured Product Partners
Structured products appear in an ecosystem as the result of either Contrived or Emergent design.
Ecosystems supporting emergent design focus heavily on building out modular open-source primitives and toolkits that lower the barrier to entry for third parties to build vaults and structured products atop their infrastructure. While the ecosystem creators may not be familiar with traditional financial products, after enough structured products are created a few emerge as market leaders whose structure and financial returns experience high demand. Examples of products like this include Beefy & Cian.
Conversely, contrived financial products are custom built from the ground up on ecosystems that provide little to no infrastructure to ease the development process. Ecosystems that launch with one or two contrived designs bet their entire ecosystem on the demand the product will create as there aren’t any tools available for other creators to backfill the ecosystem should their product flop. While this approach may seem higher risk, it’s also much more efficient. Products like Pendle & Ethena were contrived in this manner, their teams did deep research on what should be built before writing a line of code. They understood financial products and their customers and matched their product with known market demand.
Every blockchain ecosystem the incentives team works with is completely different, requiring deep research to identify impactful partners. The team also uses a scoring rubric to judge potential partners. The rubric judges each product on its ability to provide; Distribution, Leverage, Managed Positions (Automation), and Incentive Layers. While every product is different, the higher the score the faster a product is likely to impact and grow an ecosystem, and it’s invested in first with time and resources.
Past Performance
In 2024 the Compound growth team conceived and executed campaigns that distributed 1.8 million ARB (worth about $800,000 at the time of distribution) through eight partners; attracting $260M in TVL to Compound on Arbitrum. The lessons learned through Arbitrum LTIPP are currently being applied to Optimism where our initial campaigns have increased TVL by $30+ million. And we’ve also begun the process of organizing Mantle incentive campaigns with the $1M in MNT Compound has been entrusted to distribute on Mantle’s behalf. Check out our performance during LTIPP here as well through Open Blocks unbiased 3rd party account.
Testimonials
OKX Earn, Alan Gao – “On behalf of OKX Earn, we are excited to continue working with AlphaGrowth. OKX users might have contributed the most sticky TVL to Compound this year from both CEX and Web3 side. The partnership is definitely a win-win. Looking forward to the collaboration next year!”
Contango – “At Contango, we’re thrilled to continue working with the amazing Alphagrowth team! Their efforts in promoting and scaling Compound markets have been nothing short of outstanding. Our collaboration has yielded exceptional results for both Compound and Contango. For instance, Alphagrowth’s initiative to incentivize Compound’s Arbitrum markets with $ARB achieved a remarkable 930x ROI and resulted in sticky TVL, as detailed in this post. We’re excited about the potential renewal of the Compound growth program and look forward to building on this momentum together!”
Beefy, Jack Gale – “Working with AlphaGrowth has been a great experience, and we’re pleased to vouch for the fantastic service they deliver. It’s clear to us that their incentive model - as medium-term external service providers under constant scrutiny from the DAO - produces strong motivations to create value. And as more and more bullish sentiments take hold, the next 12 months will likely be defined not just by excellent technology, but by the teams who can operate and market themselves the best. We have every faith in AG to maximize Compound’s opportunities for growth. Full 4 paragraph testimonial here”
2025 Roadmap & Funding
In 2024, the incentives team managed and distributed around $1.5M in funds requiring trusted individuals, multisigs, and triple checking that funds were provided appropriately to partners.
In 2025, the team already manages around $1.2M of incentives, and by April will likely manage around $5M of incentives. $1M from each of Mantle, Sonic, Ronin and Compound, with other smaller amounts & matched incentives as well. As is evident from our LTIPP weekly reports, organizing campaigns, finding the right partners on each blockchain and managing partner relationships is a time intensive process that required a full time resource just for Arbitrum LTIPP. Once funded, we expect this business unit to staff up quickly and create a massive amount of activity as their processes have been honed in 2024 and they’re ready to execute.
Although external blockchains are providing us with ample incentives to distribute, we are requesting $1M in COMP directly from the Compound treasury to distribute as APR incentives because:
- We want to create a case study comparing our new methods to prior COMP Reward program methods to see if the $10M/year allocated for COMP rewards can benefit from our knowledge.
- Token grants from chains come with constraints that benefit the chain supplying them. When there are opportunities for campaigns that don’t align with our partner mandates and would greatly benefit Compound users, we would like to be prepared.
The $1M in COMP incentives will only be used for APR campaigns, and unused working capital will be returned to the DAO Treasury.
Daily Activities
- Distribute partner chain incentives → Replicate LTIPP successes with growth strategies
- Working with structured product partners to create & execute incentive marketing campaigns.
- Experiment distributing COMP with growth strategies to gauge its effectiveness.
- Optimizing the Compound Decentralized Frontend for incentive distribution.
- Pushing new Compound reward contracts. V2, V3.
- Profitability analysis: Working with Gauntlet to collectively apply experimental results to increase COMP reward distribution methods.
- Design and promote new structured products with sustainable incentive sources, which extend beyond growth campaigns.
Members
The initial team lead will be Seby Rubino with the support of Kyle Jacobs. Collectively they have been running the Optimism and Mantle Chain incentive campaign architecture & execution. They will hire additional team members as new blockchain deployments require additional members to champion those ecosystems.
Budget
11,600 COMP, for a dedicated team to run this business unit on Compound’s behalf.
Common KPIs
The success of APR incentive campaigns are typically judged based on the activity they create. Compound Protocol values the following metrics in order of increasing value: Transactions, Users, Volume, TVL & Fees (from utilization). The incentives team typically combines multiple campaigns per blockchain to boost each of these metrics and eventually to balance supply & borrow demand to increase utilization and generate sustainable revenue for the DAO. Exact target goals for the team will be created by the team during the first few months after its inception and targets will be updated as the team receives access to distribute additional incentives.
Cross Collaboration
Per the New Chains Article, once a chain accepts the growth team’s “Standard Offer” and the $1M in incentives is received, the funds are handed off to this team, who starts the process of identifying all viable partner protocols through which to distribute incentives to the blockchain’s ecosystem. The blockchain team will have categorized a number of these partner protocols in their evaluation of the blockchain and all research will be open and available to aid both teams.
Questions?
This document is intended to educate community members on the value generated by and general activities of an Incentive Campaign business unit. If there are additional questions you’d like to know please ask them below, we’re happy to answer, though some answers may be during office hours to protect strategies that are more valuable so they cannot be easily copied by our competitors.