[RFC] Proposal for Utilizing $ARB Airdrop to Foster Growth and Establish Vesta as a Key Player on Arbitrum

General Protocol
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Introduction

As a functioning DAO on Arbitrum, Vesta recently received an airdrop of $ARB tokens. This proposal aims to outline a plan to optimally use these tokens to promote Vesta’s growth initiatives and establish VST as an important stablecoin on Arbitrum.

Objective

The primary objective of this proposal is to allocate a portion of the $ARB tokens toward liquidity incentives for VST pools, specifically a VST-ARB pool, and to become a delegate in Arbitrum’s governance process.

Proposal Details

  1. Liquidity Incentives for VST Pools:

    • Allocate a portion of the $ARB tokens to create liquidity incentives for VST-ARB pools, thus facilitating deep on-chain liquidity for ARB and capturing stablecoin market share on Arbitrum.

  2. Becoming a Delegate in Arbitrum’s Governance Process:

    • Allocate a portion of the $ARB tokens to establish Vesta as a delegate in Arbitrum’s governance process. Participating in Arbitrum’s governance will provide Vesta with a significant voice in the most popular L2 ecosystem, which will yield long-term strategic benefits and establish a strong presence in the growing decentralized landscape.
    • Enable meta-governance for VSTA holders by allowing them to vote on Arbitrum proposals using Vesta’s VSTA shares, strengthening our community’s decision-making power.
    • By becoming a delegate, Vesta will be able to influence DAO governance, including key decisions such as granting licenses to deploy additional Layer 2 chains on Ethereum, which could be beneficial for Vesta’s long-term strategy,

This proposal seeks to optimally utilize the $ARB airdrop to foster Vesta’s growth and establish VST as a key stablecoin on Arbitrum. By implementing the proposed liquidity incentives and participating in Arbitrum’s governance process, we can strengthen Vesta’s position in the market and create value for our community members. We encourage Vesta’s community to provide feedback on this proposal and participate in the upcoming discussions to help refine and implement these initiatives.

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Sounds great! Let’s do it!

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I fully support the proposal to increase VST liquidity/pairs, which will expand VST use cases and drive growth for Vesta. However, I am opposed to any form of airdrop. Instead, I believe that the ARB tokens can contribute to Vesta’s long-term stability and establish VST as the top stablecoin on Arbitrum, provided they are utilized properly. It would not be wise to prioritize short-term gains over the long-term benefits of the protocol.

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Love the team for always making the right decision for the project. LFG!

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GM Mikey and Vesta team

It can be difficult to decide what to do with an allocation like this.
As a long term user of Vesta, I would like to see it go from strength to strength in the vibrant Arbitrum eco-system. Making any decision for short-term gain should be heavily scrutinized and blocked.

Liquidity incentives in proposal 1 is exactly the short-term gain you don’t want to pursue. Pool two farming rewards have consistently driven mercenary capital into the pool in order to farm and dump the reward, leaving the protocol poorer following the reward’s finishing.
A better alternative would be to utilize the rewards to purchase the LP token’s and hold the liquidity which will always maintain the value for the DAO.

IMO option 2 at this time would strengthen the relationship of Arbitrum and Vesta. Afterall, there is no Vesta without Arbitrum. This will also give the DAO time to think about it’s next moves with $ARB.

I vote for proposal 2, and heavily against proposal 1 in it’s current form.

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Great to see Vesta being proactive with their allocation.

I think VSTA holders should be prioritized and be receiving part of this allocation (unless this is prevented by the terms of Arbitrum)

A simple merkle tree with 2 snapshots to decide amount could be easily be implemented e.g:

  • Balance of VSTA held at block x * if wallet holds a vsta key add a multiplier 1.1x - 1.25x - 1.50x based on rarity of the V-Key held.

  • First block would be before the $ARB announcement & Second one to be decided by community or by end of the month to maximize onboarding of new protocol users/community members

The other part of the airdrop could leveraged to incentivize more borrowing or do joint liquidity mining/incentives on pairs with VST ?

e.g: Any pools on Balancer/Camelot/Sushi/etc. including VST in their composition (80/20 - 33/33/33 - 50/50) could be receiving set amount of $ARB tokens for y period of time via bribes depending of TVL in the respective pools ?

A great opportunity to team up with other ecosystem partners

Lastly a small portion 10-25% could be used for becoming a delegate similar to what Mikey is proposing but it is hard to know how often / meaningful the governance of Arbitrum will be and if it will really impact Vesta directly in the short and future terms.

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Would a better alternative to providing VSTA holders with an allocation be to actual users of the protocol? IE Current open vaults, or all opened vaults? Holders of the V-Keys? These are the users that ultimately have made meaningful contributions to Vesta through its development.

Additionally, I would love to see a utilization of additional liquidity from the main VST/FRAX pool.
a VST/ETH pool would be great. or VST/GOHM. I agree that it is a good time to team up with others in the ecosystem or leverage existing partnerships.

Still highly against incentivized liquidity pools. You essentially end up with nothing after the incentives are gone. Much prefer the $ARB to be used elsewhere.

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I agree that a portion of the tokens should go towards incentives for a VST-ARB pool.

Maybe even more VST pools… Could we maybe boost the VST-FRAX one? Or use a chunk of the ARB rewards to bribe VST and/or VSTA pools on ve(3,3) DEXes.

Nonetheless, there still seems to be very little utility for VSTA…

We have been waiting for the VSTA staking module for quite a while now! I think a portion of these rewards should be used to incentivize a single sided VSTA pool.

Regardless, I think it’s time to explore other protocols on Arbitrum. Many protocols have seen good growth by bribing on all the ve(3,3) DEX. Maybe it’s temporary, maybe not, but ever since I’ve been a VSTA enjoyer, I haven’t seen much innovation in terms of partnerships with other protocols. I trust that it’s time to think outside the box here and find ways to increase VST’s utility drastically…

Have you seen how much liquidity DOLA managed to attract on VELO by bribing?

Also, what happened to plsGLP?

There’s the VST-FRAX pool that has extremely volatile APRs, which hasn’t grown much over a few months!

There are many ve(3,3) DEXes on Arbitrum which might be helpful, so I’ll list them here so we can find ways to boost liquidity:

  • Solid Lizard
  • Sterling
  • Ramses
  • Chronos (upcoming)

Migrate the LP from Balancer to a ve(3,3) DEX. Stop VSTA emissions for it (because it’s clearly not attracting more LPs) and bribe ve(3,3) DEXes with ARB to pump liquidity.

No offense, but I think that it’s time to find more efficient ways to attract liquidity here.

I’ve been holding a NFT key for a few months and I still don’t know why btw!

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I like the proposal and I think a VST-ARB pool is a good place to start in terms of creating more diverse liquidity options for VST, I’d also be interested in a VST-ETH pool, or potentially a VST-USDT pool so FRAX isn’t the only stable pair. It should probably be limited to just a few pools at this time to concentrate liquidity as VST grows.

Would VST-ARB be on Balancer or is there another DEX we might decide to use like Camelot?

I’m strongly against any kind of airdrop from Vesta to vault or VSTA owners. I think that’s a very quick way to squander the funds Vesta has been given. I’d almost rather the DAO just sell its ARB and use the funds as developer runway, but I think ARB incentives will be a good selling point for VST as people come to Arbitrum to farm ARB. I’m also not a fan of spending ARB on single-sided VSTA staking; I think that’s mostly pointless. There are better, more sustainable ways to accrue value to VSTA.

I also think the DAO should strongly consider partnerships with other Arbitrum projects to create ARB-incentivized products. There are several gambling projects on Arbitrum now (my personal favorite is Overtime Markets) that use stables, it might be possible to get VST added as a stablecoin option if Vesta provides additional ARB for incentives. That would help to increase the utility of VST.

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Rather than bolster treasury which is already quite healthy I think orienting part of the ARB towards a bonding program to maximize PoL for Vesta would be better this way the protocol can start accumulating liquidity of VST against other stables providing more liquidity and start accruing various governance tokens rather than just mercenary liquidity.

I would change the liquidity mining part in my reply above to a PoL Bonding program.

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@abmis @Maswasnos @Kerrod @0xMaki @florian @Complete_Degen @99donuts99
First of all, thank you for participating in the discussion and sharing your valuable feedback on the proposal. After reading through all the responses and considering various perspectives, I wanted to share some thoughts on the concerns raised and the future direction of the proposal.

  1. Airdropping ARB tokens to Vesta token holders:
    It seems that the idea of airdropping the ARB tokens directly to Vesta token holders has been met with some skepticism. I agree that this approach might not be the best use of our newly acquired resources, as it may not significantly benefit Vesta as a whole. Instead, we should focus on strategic initiatives that can drive long-term growth and success for the protocol and the community.

  2. Liquidity incentives and staking program:
    Giving out the $ARB as its own effort may not result in the most long-term impact. We have received some potential designs on a new staking programs from some very active community members. So it may be more effective to combine the ARB with our own VSTA emission if we roll out our own staking program. This program could emit escrowed VSTA (which escrows into liquid VSTA) over an extended period, such as several months or years. The escrow nature would make it more effective and less dilutive for the protocol. This approach would allow us to better leverage the ARB tokens for the benefit of the entire Vesta ecosystem.

Once again, thank you for your insightful comments and for contributing to the ongoing development of Vesta. We look forward to working together to build a successful and thriving protocol.

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If i may spend my sugestion in here.It might be worth of considering sharing a portion of the ARB tokens with the holders comunity.I mean most VSTA is in the treasury or vesting anyway so this allocation would stay home but to show the world out there that Vesta evaluates the ppl which keep it afloat.I mean it wouldnt be a lot per wallet as most of holders are tiny from the pre-ARB drop rush incentives so i would treshold it to something like 100VSTA but it might be not that bad idea.

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Thanks for getting back to us.

I feel like my main point has not been understood properly.

While this protocol has been live for a while now, it seems that VST has little to no utility outside of two main pools:

  1. The VST-FRAX pool has been constantly decreasing TVL wise. Now, as most of you might guess, this TVL at start was very likely driven by a very interesting APR on this LP, as you can see from the screenshot attached below. 50-70% APR is indeed hard to pass on… TVL has been decreasing ever since. Note that it reached $25-30M at start. How can this be possible if additional collateral options were added? Yes, the saving module was implemented, but my understanding is that people were chasing yields which are no longer available.

    vst frax
    vst frax1098×770 43 KB

    apr
    apr1074×762 56.6 KB

  2. VST saving module: It was introduced on the 6th of February. Now, according to the discord announcements: the $1m cap was reached in 5 minutes, while APR was fixed at 10%. I’m not sure how we can interpret this in the best possible way, but to me it shows that people are actively seeking good places to get yields on VST. Nonetheless, after raising the cap up to $4m, it now sits at $3.82m with a meager 2% APR.
    I am aware that this rate fluctuates, but unless the market gets volatile, I don’t see it booming much. Hence, the likelihood of attracting more VST in this pool is rather limited currently…

According the Vesta’s website, 6.6M VST have been minted.

  • 3.82M are in the saving module
  • 1.75M are in the CRV pool
    => 5.57M are in two pools (84%)

Concentration is extremely high. Since I’m gathering information while writing this, I am now wondering where the remaining 16% of VST are… Let’s do some on chain research:

First 2 holders are the two pools mentioned above.
Third holder: Vesta Finance admin multisig.
Fourth holder: Ethereum stability pool 223k
Fifth holder: Emergency reserve 154k
Sixth holder: gOHM stability pool 65k
Seventh holder: Looks like an active yield farmer who seems to know what he’s doing, but funnily enough, 44.5k have been sleeping in his wallet for 55 days now. I’d be curious to know why, but my wild guess would be lack of good options?
Eigth holder: He exited the 4 pool on Balancer 71 days ago and received 39.4k VST that have been sleeping in his wallet. I’d be curious to know why!

The rest are either smaller stability pools or small token holders.

So, now that we’ve dissected VST holders, please note that before I did this, I went on dexscreener to see if I could find VST pools.
BINGO!!
Two pools: One of 12k on Swapfish (lol) and 6k on TraderJoe!

I do not know what everyone’s conclusions here are, but mine are the following:

  • VST’s market cap has not been growing despite many uncertainties related to centralized stable coins (remember the USDT, BUSD & USDC FUD).
  • VST’s market cap has not been growing, although the protocol that it is based on, Liquity, has seen LUSD’s market cap increase from 183M to 271M (+48%) since the 1st of January (according to coingecko). Their growth even accelerated after Circle’s issues. VST’s stats? From 11M to 6.6M. Almost half, in three months.

While the team has worked on many protocol improvements, I feel like one aspect has been completely overlooked:
VST’s utility!
As mentioned above, the lack of options for VST have been hindering Vesta’s growth.
Why would anyone mint VST if it has little to no purpose?

I am writing all of this, because the team has received a huge grant that could literally make VST become a powerhouse, if used properly.

But after reading this proposal, it seems like the team’s plans for the Arbitrum Airdrop are too short sighted.

Obviously, I am in favor of a new VST-ARB pool, simply because it’ll create only a 3rd option… But I fear that again, it won’t attract either much volume or much TVL!

Please, aim higher. If a stable coin has so little utility, why would people mint it?

So, now, if you are curious, like me, you’re probably wondering what options LUSD holders have, that make it so interesting? Please note that I’ll just post a few Arbitrum ones, there are many other pools that are available!

Let’s start with the DEXes that I mentioned in my previous message:

  • Solid Lizard: There are a few pools here.

a) 940k in a LUSD/USDC pool that pays 13-34% APR
b) 430k in a LUSD/USDT pool that pays 15-38% APR
c) 54k in a LUSD/gDAI pool that pays 70-176% APR
=> Bribes are around $500 per week per pool. It’s pretty cheap, don’t you think?

  • Sterling: Nothing big, a 44k LUSD/DAI LP with a 36% APR.

  • Ramses: There are two pools, the first one is LUSD/LQTY with 380k TVL and an APR of 100%+. The second one is LUSD/DEI with 324k TVL and an APR of 44%! Please note that there is a LQTY/ETH LP with 1.26M TVL that pays a minimum of 55%+ APR. Also note that they are bribing two pools with ONLY 1000 LQTY for the LQTY/ETH pool and 500 LQTY for the LUSD/LQTY pool…

  • Chronos (Upcoming, so no pools)

Please note that most of these DEXes are fairly new compared to Velodrome, so the bribes market is not fully developed. It will be interesting to see how things develop once Chronos launches!

Now, I also mentioned DOLA on Optimism in my previous post.
There are 5 main pools on Velodrome:

  1. USDC/DOLA: $32M TVL with an APR of 16%!!!
  2. USD+/DOLA: $4.5M TVL with an APR of 23.5%!
  3. DOLA/MAI: $4.1M TVL with an APR of 19.2%!
  4. FRAX/DOLA: $1.1M TVL with an APR of 19%
  5. VELO/DOLA: $550k TVL with an APR of 123.4%!!!
    If you look into the bribes, they are relatively small and VELO also matches some bribes… Just as an example, total bribes for the USDC/DOLA pool are $40k and this has led to a $32M TVL!
    For DOLA/MAI, bribes are “only” $7k, yet it has a TVL of 4.1M, bigger than the Curve one for VST… If you combine the bribes for USD+/DOLA and the DOLA/MAI pool, the total amount is below $16k, yet it has brought over 8.6M TVL on Velodrome and around 50% of that in DOLA, almost equivalent to VST’s total market cap.

Imagine what Vesta could do with an airdrop of 2.7M Arbitrum tokens?! Just adding a VST-ARB pool seems short sighted.

Unless I am mistaken about VST’s utility, I believe that it is time to seek new ways to grow the protocol’s utility and TVL! The airdrop is a great opportunity to kickstart that growth and I think that there should be much more options for VST holders. The Arbitrum ecosystem is flourishing, yet it seems that VST has not taken advantage of it. One must not forget that bribing pools on multiple DEXes (or finding other efficient ways to increase VST’s utility) can only help VST and the overall Arbitrum ecosystem gain adoption and utility.

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I agree with you that an ARB airdrop wouldn’t be a net positive for the protocol.

For the staking program, you’re suggesting delayed inflation and ARB rewards that will eventually end. I much rather prefer users staking a VSTA-WETH LP or VSTA to earn esVSTA/ARB and VST protocol revenue.

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Quality research @Complete_Degen !!

Growing the utility for VST should be the secondary goal. The first is the stability (which I believe the team is doing great with) $VST is a stable coin pegged to USD, without it’s stability its nothing.

$VST is in it’s infancy, a great product on a great platform (Arb) easy to use and native to the chain. Integration’s with partners would be great to drive utility to VST.

The team now has $ARB to help drive some rewards with partners.

Possible integrations
Utilizing VST to settle options on Dopex, instead of Curve 2pool?
Addition as collateral for GMX, and addition to GLP (May be hard with negative feedback)
POL program with Olympus for FRAX/VST LP
Proposal for Olympus to acquire VST for backing (May be hard with negative feedback)

Plenty more no doubt!
Great thoughts though!

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Quality research sir. I understand your point fully on how VST lacks utility. However there is a fundamental difference in our view here - having VST in liquidity pool isn’t directly valuable to the protocol. Sure it would increase the amount circulating, but once the incentives dries up, the circulating amount would reset (e.g. SwapFish).

To me, the real utility is having VST be integrated in applications as a base token. This effort is underway: we have a integration incentivization program going public soon (sneak peek here) and in fact we have a big partner lined up for the start of April. I can’t wait to show people what we have going there…

But I do agree that having deeper liquidity pools is an intermediary step to the above goal. We’ve been indeed met with rejection during integration, and the main reason is the lack of liquidity depth and holder count. It also makes sense to take advantage of good deals in bribing to drive large amount of liquidity.

The examples you’ve given are all quite great. Do you have any particular protocols that you think we should partner with? If so, please share with us directly. I’ve reached out to Velo and Solid Lizard per your suggestion. We are also in close contact with Aura to discuss setting up a VST-wstETH Balancer pool potentially.

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“However there is a fundamental difference in our view here - having VST in liquidity pool isn’t directly valuable to the protocol. Sure it would increase the amount circulating, but once the incentives dries up, the circulating amount would reset (e.g. SwapFish).”

I mean, technically speaking, since people pay an interest rate on borrowed VST, I believe that it is in the protocol’s interest to have as much VST minted as possible. And it seems obvious that for the past few months, minted VST have halved, instead of increasing…

So, yes, it might not be directly valuable, but it’ll increase both exposure and TVL. I see it as a win win. And take no offense, but partnering with Swapfish to say that it was a failed experiment is a bit ironic. Everyone knows very well that it is a ponzi DEX that won’t last for long… Please!
Had you partnered with a non short term ponzi DEX, I’m sure that the results would’ve been different!

I think that at this point, either choose one or two DEXes with which you’ll have some form of “big” partnership, or just try on various DEXes and see where it leads you!

One protocol that comes to mind is Tarot. If you browse their twitter, you will see that they bribed many protocols and you can see how much liquidity has increased. There are many pools with over $500k TVL. And since then, the volatility of TAROT’s price has drastically decreased. As you can see, VSTA’s price is extremely volatile due to relatively low liquiditiy.

My suggestions would be the following:

  • Create many pools linked to both VST and VSTA
  • For VST, you could do some with wsteth, eth, arb, and/or VSTA. Also some purely stable pools with for example, MAI, FRAX, LUSD etc. I’m sure that some of these protocols would be willing to bribe this pool too!
  • For VSTA, link it with either VST and ETH/wsteh. There are, again, many options, but it would also increase overall liquidity, but also create arbitrage opportunities, hence, higher volumes. Additionally, it could also help with buy pressure if pool APR is decently high.
  • You could also maybe create one similar to the DOLA/VELO pool, so VST/XYZ partnered protocols.

Options are limitless.

Also, there are many protocols, especially VELO, that match bribes, so for example, the $40k bribes pool that I mentioned previously, receives a ton of extra VELO as bribes.

I would suggest to get in touch with all the protocols mentioned above and see what options you guys have.

Even a $500-1000 bribe per week can increase VST/VSTA’s desirability.

Just to reiterate, you guys have received 2.7M Arbitrum tokens, which even if you were to use 1M tokens for bribing, let’s say for 2 years, that would imply at a $1.4 price:
$1.4M in incentives
2 years= 52*2=104 weeks
1.4M/104 weeks= approx 13.5k in bribes per week for 2 years. Even if you add, say, 25% of extra bribes that will come from partnered protocols, you would reach around $17k in bribes per week!

This is all napkin math, but look at how much TVL the USDC/DOLA pool attracted with $40k in bribes. So now even if we simplify it and say 17k in bribes, all things being equal, the pool could yield around 32M*(17/40)=13.6M TVL

So basically 100% of VST’s current market cap.
For 13.5k in weekly bribes. And this is being conservative as I assumed that protocols would pay 25%, if you take 50%, we’re much higher!

Ok, so now let’s keep doing some napkin math.

So, how much money would the protocol make with the VRR? If we assume a 1% rate, that’s 6M*1%=$60k per year.

This is rather conservative and excludes money made from the GLP vault, for example. We should compare these costs to the ones you are spending on VSTA Integration incentivization program that was recently launched. This program can have many benefits, but also some added sell pressure on VSTA? Also, compare it to the 1M VSTA being paid over 500 days for the Frax pool!

Again, these are some napkin math and I’m sure that people who work for these DEXes are much more suited than me to help you strategize, but, as I have explained previously, it’s time to think BIG!

And even if you try and it doesn’t attract much TVL, how much did you risk? 50k? Out of $3.8M that you basically received for free…

If it can help, I’d be happy to hop on a call to discuss this further, but I think that it would be wise to contact all these DEXes and discuss how the can help Vesta increase it’s exposure & TVL. And trust me, it is in their interest too!

And just to get back to your rejections linked with lack of liquidity. You will hopefully be able to partner with non ve(3,3) DEXes once liquidity has drastically increased. At one point, who knows, maybe protocols will approach you for integrations, if VST is everywhere?!

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Im quite surprised at the strong opinions against using ARB as incentives for vsta and clearly the market doesnt like this either. From my perspective doing such isnt purely a “short term gain” but more of a marketing expense that would attract more capital and hence more eyes onto the project. Right now the project in my eyes is undervalued hence why I hold a lot of VSTA but it is simply not used much and I believe this is in part to the lack of visibility to the general arb audience. I strongly believe incentivising vsta-eth lp or staking vsta is a postivie decision in the long term future of vsta as this would also help solidify vst.

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As some people here have said, we should not focus on short term gains, spending the ARBs on incentives to rent liquidity is not interesting.
As a VESTA holder myself, I’m not interested in receiving part of the ARBs either. I want the school to grow and not to pay out purely speculative and unsustainable yield.
The only hypothesis I have for the growth of liquidity is the incentive and the BOND which would allow to exchange VST/FRAX for ARB and still I don’t think it is the best solution.

However, what future would VESTA want to have it seems to me that in the Roadmap VESTA plans to create VestaLev I prefer that the ARB be used to finance this project or then for example to be able to have a liquidity of departure thanks to the ARB.

Currently the ETH, ARB or DOPEX do not earn any fees apart from the reference rate unlike GLP/GMX which they generate fees.
The point is that VESTA can’t afford to offer stablecoin without a fee return.
The idea is to use some of the funds deposited on VESTA, for example 75% of the ETH, to deposit them on AAVE and get a return to create cash.
Why only about 75% is the goal and not to put all of it because then people can go out and enter the vault without VESTA having to make a multitude of transactions.
Why create a treasury because it will allow it to create yield that will be used to provide liquidity to the VST or then to buy back the VST if the price is below 0.99

To come back to the ARB it will be able to be added to this treasury to have a fabulous peg

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Definitely true but we (Gauntlet) and some of the other delegates are hoping to change that. It would be great to have an Arbitrum native protocol voice in governance.

Definitely agree that incentive programs have historically been poorly run. That said, tons of protocols wouldn’t have any marketshare today without them. When can us outsiders peak at this staking program designs? Happy to add our two cents if helpful.

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