Thetanuts Finance — Distributing Arbitrum STIP Incentives for the v3 Incentivized Alpha

Thetanuts Finance
3 min readJan 30, 2024

Introduction

In October 2023, Thetanuts Finance participated in Round 1 of the Arbitrum Short-term Incentive Programme (“STIP”) — where we first presented our vision of transitioning toward a decentralized on-chain options protocol, with our first-to-market v3 architecture at the core of our vision.

We worked tirelessly to engage the Arbitrum Community (including voters, delegates, protocols, and fellow builders) — ultimately achieving quorum with >90mm “For” votes to bring on-chain options trading to Arbitrum. As part of the Proposal to Backfund Successful STIP Proposals in November 2023, we became eligible to receive 200,000 $ARB to rally the Thetanuts Finance community around the v3 Incentivized Alpha on Arbitrum.

Designing an Effective $ARB Incentive Campaign

To enable users to go long and short on on-chain options, all three components of Thetanuts Finance v3 need deep liquidity — thus forming the basis of how $ARB should be distributed over the v3 Incentivized Alpha. These weights are subject to change at the discretion of Thetanuts Finance.

$ARB rewards will be distributed on a weekly basis, with allocations determined based on contribution to time-weighted TVL for the particular week. A snapshot of time-weighted TVL will be taken on Friday 9am UTC, with users being able to claim their $ARB rewards for the week on the new “Rewards” page every following Monday.

Users on Add Liquidity Module: 85%

The Add Liquidity Module provides liquidity to all three components of the Thetanuts Finance v3 ecosystem. Given the importance of the Add Liquidity Module in enabling users to go long and short on on-chain options, we intend to overweight $ARB rewards for the Add Liquidity Module at 85%.

Source: Thetanuts Finance v3 Add Liquidity Module

Users with Long Positions: 10%

A long position on Thetanuts Finance v3 is achieved by depositing trade collateral (i.e. $ARB) on the lending market — with a flash loan being performed at a 20x leverage (i.e. for $ARB-C) and then sold on the AMM (i.e. for $ARB). Long positions on Thetanuts Finance v3 provide liquidity in the lending market and the AMM, and such should be incentivized with $ARB rewards. However, taking into account the leveraged nature of long positions on Thetanuts Finance v3, we intend to underweight $ARB rewards for long positions at 10%.

Users with Boosted Short Positions: 5%

A short position on Thetanuts Finance v3 is equivalent to a position on a Basic Vault. Users with short positions have a further option to “Boost”, whereby their Basic Vault LP Tokens are deposited into the lending market. Given that the majority of liquidity on Thetanuts Finance v3 is already from the Basic Vaults, we intend to underweight $ARB rewards for boosted short positions at 5%.

$ARB Incentive Campaign Period

We intend to distribute the 200,000 $ARB equally over a period of 8 weeks, with the final tranche to be distributed by the week of 29 March — in line with Arbitrum Foundation’s guidance on when the $ARB incentives should be distributed by.

Concluding Thoughts

As always, we’re excited to hear your feedback — this time on the design of Arbitrum STIP Incentives for the v3 Incentivized Alpha. Please feel free to reach us on our Twitter and Discord, and stay tuned for upcoming updates.

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Thetanuts Finance

Thetanuts Finance is building a decentralised on-chain options protocol focused on altcoin options 🥜❓