Hi Aave community,
I am reaching out as an active Aave user and community member. I was going over the incentive grant proposals on the Arbitrum foundation (Grants Discussions - Arbitrum) and I saw that Aave hasn’t applied.
The deadline for the first of two rounds is today Wednesday 27 at 11:59PM EST. The Arbitrum Foundation is distributing a total of 50 million ARB tokens to protocols through the end of January 31, 2024. The Arbitrum’s forum discussion panel evaluation guidelines for protocols applications puts Aave on the “Lighthouse Grant” tier, making the protocol eligible for up to 2 million ARB incentive tokens.
Applications for the first round need to be submitted by Wednesday 27th, but there is a review period of one week in which edits to the proposal can be made. Since there is high demand from protocols for the incentive program it could be beneficial to apply today as details for round two remain unclear. The application template can be found (STIP Application Template - Incentive Framework (Round 1) - Arbitrum).
In terms of allocation, it would make sense to incentivize the ETH market on the supply side. This would make it more attractive for users to lend their ETH on Aave, and adds limited risks since ETH has substantial liquidity on Arbitrum and still hasn’t reached its supply cap.
Another potential use-case would be to incentivize the Aave pool for native USDC on Arbitrum, which is not exposed to bridge risk as USDC.e currently is. The liquidity there is not as high yet, but with upcoming stablecoin incentives from Balancer and Curve, the liquidity for native USDC is expected to increase, decreasing the risk of bad debt from this market.
Finally, I know that the DAO previously voted (Snapshot) to allocate the ARB airdrop to a “mixed option”, and that incentivizing GHO on Arbitrum was discussed. That being said, it seems premature to incentivize GHO at this time as it remains competitive already with its low borrowing rate, and it is probably better to first establish a strong peg on mainnet.
I would appreciate community feedback regarding the plan to apply to the ARB STIP program and the best way to allocate it. Tagging some frequent contributors of the Aave community, who can help push this forward @MarcZeller @bgdlabs