Proposal: Sushi's Bond Program on Arbitrum

Overview

Arbitrum and Sushi have put forth a comprehensive proposal to redefine liquidity solutions in decentralized finance (DeFi). The plan moves away from traditional liquidity mining towards a more sustainable bond program that promises to deliver a win-win situation for both protocols and the wider ecosystem.

Go straight to the proposal.

Goal

The proposal intends to enhance the Return on Emissions (ROE) for $ARB tokens, diversifying DAO assets, and boosting liquidity. This partnership capitalizes on Sushi being one the most popular decentralized exchange (DEX) on Arbitrum.

Key Rationale

Token Allocation:
Arbitrum's strategy to set aside up to 12.5 million $ARB tokens per sales period isn't just a random number. This aligns with the dire need to fill the liquidity gap that has currently plagued the Arbitrum ecosystem. Given the current Market Cap of ~$1B and the dwindling liquidity, this allocation, with the potential for up to three renewals, provides the breathing room needed to reset the liquidity equilibrium. It also allows for the DAO to maintain its reserves while actively leveraging its assets for ecosystem growth.

Bond Sales:
The bond sales mechanism provides an inventive way for users to leverage their LP tokens from popular trading pairs like $ETH-$ARB, $USDC-$ARB, $USDT-$ARB, and $wBTC-$ARB. This initiative isn't solely about providing Arbitrum with much-needed liquidity; it's also a way to reward the community with vesting $ARB tokens at discounted rates. This is a win-win, as it encourages both active participation from the community and long-term holding, which could enhance price stability.

Expected Outcomes: More Than Just Numbers

Return on Emissions (ROE)

High ROE: The expected ROE for Arbitrum ranges between 80-90%, significantly better than the 0% typically yielded by primitive yield farming strategies.
Value-Driven Emissions: Arbitrum's emission strategy focuses on recapturing value, making each emitted $ARB token an investment into the future of the protocol.

Potential Clawback and Permanent Liquidity

Clawback Feature: The proposal includes a clawback feature, aiming to recapture up to 50% of emitted $ARB tokens into permanent liquidity.
Enhanced ROE: This permanent liquidity not only improves the overall ecosystem but also serves to amplify the ROE over time.

Success Fee

5% Fee by Sushi: For each successful bond sale, Sushi will take a 5% fee, which is considered reasonable given the value they add to making Arbitrum's path to profitability more efficient.

Profit Projections

Time to Profitability: Arbitrum aims to become profitable within approximately 450 days, a short time frame in the crypto world, thanks to the plan laid out.

The Outcomes: A Holistic Approach to Liquidity Solutions

For Arbitrum

ROE Uplift:
One of the most immediate benefits would be the jump in ROE from 0% to between 80-90%. This is monumental for any protocol and signifies a smarter, more efficient use of resources.
Ownership Over Liquidity:
The shift from rented to protocol-owned liquidity is pivotal. It provides Arbitrum with control over its own destiny, as opposed to being at the mercy of mercenary liquidity providers.
Enhanced Liquidity:
Deepening the liquidity pools for $ARB and other critical tokens like $ETH and $wBTC will build a more robust and resilient ecosystem.

Treasury Diversification:
Moving from a monolithic treasury to one that's diversified into yield-generating instruments is simply smart finance. It's a risk-mitigating move that also has the potential for excellent returns.

Additional Benefits

Bond Holders: The discounted $ARB tokens aren't just a quick profit; they are a stable, long-term investment, given the vesting schedules. This helps in keeping the price of $ARB stable.
Developers: The proposal will make Arbitrum an even more attractive platform for developers. The more developers build on Arbitrum, the more robust the ecosystem becomes, benefiting everyone involved.
Traders: Improved liquidity and price stability mean reduced slippage and better trading experiences. This could make Arbitrum's DEXes the go-to platforms for traders, thereby driving even more liquidity to the ecosystem.

Conclusion

The proposed bond program marks a fundamental shift from traditional liquidity mining methods, paving the way for a more sustainable and capital-efficient future in decentralized finance.

Your Vote Matters

This proposal awaits your vote. Be a part of this transformative change in the DeFi space by casting your vote today. See the proposal here.