paulx.eth on Warpcast

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Two months into Arbitrum's STIP program, let's try to answer the following questions: 1. Were $ARB incentives able to attract liquidity for $FRAX | $frxETH across various pools? 2. Can we isolate incentive-driven liquidity? 3. Does ROI (return on incentives) decay over time? 🧵

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Check out the @dune.eth dashboard here: https://dune.com/paulapivat/frax-arb-stip-return-on-incentives

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Return on Incentives for various Frax pools at a glance 👀 read on for definitions and more context.

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To get ROI we calculate the $USD value the _other_ token in a pool-pair (e.g., so for a frxETH/WETH pool, we’d only take the value of WETH allowing us to establish frxETH’s liquidity for that pool).

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You can also filter this table by the value of $ARB incentives sent to various pools; the Top 3 pools receiving the most incentives are: • Curve - frxETH/WETH • Curve - FRAX/USDC.e • Ramses - Correlated rAMM - frxETH/sfrxETH check out other pools receiving incentives:

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After incentives, we can look at liquidity. We isolate liquidity driven to pools only within the time frame of Frax’s participation in the Arbitrum STIP program (roughly Dec 5th, 2023 - onwards) The table has both *deployment date* and *STIP start date* for comparison:

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With “deployment date” we see several pool contracts were deployed *prior* to the start of the STIP program which factors into our next question: Can we isolate incentive-driven liquidity? 💦 This turned out to be more challenging. Read on to understand why.

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To approximate the “effect” of Arbitrum’s STIP program on these select pools, we examine several pools that were deployed and had liquidity flowing in *before* and *during* the STIP program. You can see when Incentives start kicking in at the start of STIP (roughly Dec 5th, 2023)

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At an aggregate level, we see a fair amount of liquidity in 2022, tampering off in Q1-Q2 of 2023 and being relatively quiet in the latter half of 2023. Liquidity does appears to pick up as STIP kicks off, but a causal effect cannot be definitively established.

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Finally, we want to understand if ROI (return on incentives) decay over time. The last section of the dashboard allow you to filter for specific pools. We'll go over each one by one.

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The following pools are only a subset of pools that received $ARB incentives. But because they had positive ROI, we can more easily determine if there's "decay" over time. Pool # 1: Curve - FRAX/USDC.e Not immediately clear if there's decay.

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Pool # 2: Curve - frxETH/WETH Slight drop off in ROI after Jan 22nd.

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Pool # 3: Horiza - frxETH/WETH Clear drop off in ROI after Jan 22nd.

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Pool # 4: Horiza - FRAX/USDC Seeing a slow decay in ROI after Jan 22nd.

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Pool # 5: Notional V3 (FRAX) We probably need more time to establish a trend, but there's a notable drop between Jan 29th and Feb 5th.

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