[AlphaGrowth] ARB LTIPP incentives distribution mechanism experiments

Compound won a 1.8M ARB LTIPP grant to be distributed as incentives to users on pools. Distribution is planned over 3 Markets, currently starting with USDC Market with future plans to incentivise USDT and ETH Markets on Arbitrum. Given the upgraded compound rewards contract is currently in a development-audit feedback loop, we are experimenting with multiple external platforms to find the best distribution mechanism for the LTIPP grant incentives.

Testing Platforms

  1. Merkle
  2. Layer3 Quest
  3. VaultCraft
  4. OKX DeFi VaultCraft

Experiment Design
We will reward Compound users who deposit funds into boosted markets. Each platform works slightly differently and the goal is to find the best experience for Compound users with the least friction.

Different platforms will vary in rewarding new or existing users of the Compound market. The first market we’ll be rewarding is USDC on Arbitrum, for which there is currently $22M in TVL earning 7.7% at the time of writing this. We can boost the APR on the initial $22M in TVL by 2.7% for every $25,000 in incentives we deploy over a 2 week period.

Our goal is to start with Merkl and deploy $25,000 in incentives to increase the APR to 10.4%. Depending on how many new users we see through Merkl, we can double down incentives on Merkl with another $25,000 in ARB to increase the effective APR to 13.2%.

We are also launching a 2 week quest on Layer3 in parallel with $25,000 of incentives that will only be accessible to NEW transactions on Compound that complete the Layer3 quest. This will massively boost the APR rate to 60% at $1M TVL and 12% at $10M TVL.Our goal here is to see how many new users we can acquire through Layer3. This will use a separate Landing Page that links from the Layer3 campaign.

We are driving all marketing campaigns at simple landing pages that will explain how to participate and claim rewards (i.e. for Merkl Lend on Compound | AlphaGrowth) [rewards will be live soon] using landing pages will also let us control the User Experience of the campaign participants to reduce friction and uncertainty about what platforms to use in what order.

Each platform has stated that they can then build in functionality that weights rewards according to the distribution mechanisms outlined in our LTIPP proposal (0.8x for under $10K, 1.0x for under $100K, and 1.2x for over $100K). We will take advantage of this granularity after an initial assessment.

Merkl → Rewards will appear here Merkl
Layer3 Questhttps://app.layer3.xyz/quests

Next Week, we will also launch a VaultCraft vault and incentivize with $50K over 2 weeks. The vault will be an auto compounding USDC vault on ARB. Because this vault will start from $0 TVL on a market earning 7.7% on supply right now, adding the $50K incentives will boost the effective APY to 140% at $1M TVL, 23% APY at $10M, 16% at $20M) This gives us a significant APR to market. This vault will also be made available on OKX DeFi when OKX is ready, and we will push additional marketing budget (paid for by compound directly in order to appear in OKX’s top 4 DeFi deals on their main page) + we will push additional traffic with ad spend.

OKX DeFiDeFi Aggregator | Liquidity Pool, Yield Farming | Crypto Staking | OKX

As the Arbitrum ETH and Arbitrum USDT markets become available we will launch additional campaigns and landing pages to bootstrap each of these new markets.

These are experiments, we are not pre-determining how much we’ll distribute to every market and token before we understand which distribution methods work and which markets are easiest to affect.

We said we’d distribute more incentives to incentivise whales. Depending on which channels work the best we will set up programmatic tiers on that channel, however it won’t help us learn faster by creating 9 separate pools for a single experiment to try every possible combination, it spreads attention to thin and unnecessarily increases our operational complexity. Having discovered a great tool we will set up an automatic distribution based on tiers programmatically.

Experimental Goal

  1. Ensure each platform is secure and safe from hacks
  2. Ease of use for the Compound Growth Team
  3. Ease of use for individuals to participate and claim rewards.
  4. Which platform attracts the most attention given an equivalent adspend to each platform.

If the community has additional input on distribution platforms, we’d love to start a conversation.

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Merkl has been live for a week distributing 25K ARB over 2 weeks. During which time 10,000 ARB incentives on a $22M TVL USDC pool on Arbitrum have led to an $2.8M increase in TVL to $24.83. The bonus APR rests around 2% for all new and existing users.

Campaign launch schedule

Thursday the Layer3 campaign will go live, which will only incentivize new positions that complete the Layer3 quest (25K ARB over 2 weeks)

On Monday, Vaultcraft should Launch (50K ARB over 2 weeks)

Monday should also see OKX DeFi launch (100K ARB over 2 weeks)

The initial incentive distributions on each platform were chosen based on the platform’s audience size and how much TVL we anticipate each can attract. After the four initial 2 week campaigns conclude we’ll have additional data to inform our next distributions.

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