Arbitrum community members are celebrating the all-time high in total value locked (TVL), but this success has failed to overshadow criticism over the effectiveness of incentive programs aimed at stimulating the network’s ecosystem activities.
Arbitrum’s TVL Reaches New Peak
According to data from research platform L2Beat, Arbitrum’s TVL increased by nearly 67% in a month, reaching $21 billion. This figure marked a milestone for this layer 2 solution, which was launched in 2021. However, it is noted that many of the major protocols supporting TVL growth are also seeing similar growth rates on networks outside of Arbitrum.
However, there is a striking fact: Some protocols that receive incentives are still experiencing a decline in TVL. This is leading to increasing views questioning the effectiveness of current incentive programs. Observers believe that this increase is largely due to the natural development of Arbitrum and market conditions.
Incentive Programs Criticized and Restructuring Proposed
In September 2023, the Arbitrum DAO administration approved an incentive program to distribute $56 million worth of ARB tokens to currently active protocols. In January 2024, a long-term initiative was launched that aims to allocate 45 million ARB tokens to projects that previously could not receive funding. However, experts share the opinion that these programs have failed to deliver tangible successful goals.
“It was difficult to measure the impact of the incentives because no clear targets were set,” said Krzysztof Kaczor, L2Beat and Arbitrum delegate, noting that this deficiency made the programs less effective. The IOSG Ventures team criticized the current structure, stressing that incentives needed to be reorganized.
The new proposal proposes adopting a results-oriented framework and distributing rewards more to liquidity providers. These changes are said to increase Arbitrum’s liquidity, increase developer appeal, and establish a foundation in DeFi verticals. “The incentives for users who deliver the most value will be doubled,” said Arbitrum delegate Joseph Schiarizzi, adding that the new strategies will reshape the competition.
The Arbitrum ecosystem is taking steps to make TVL growth sustainable and support it with fairer incentive structures. The new proposals look set to shape a user-centric ecosystem.
