Connext - LTIPP [Post Council Feedback]

Following the initial feedback of LTIPP Council, Connext would like to re-submit its LTIPP application.

The full proposal can be found here: https://forum.arbitrum.foundation/t/connext-ltipp-application-final/21579/8

The council feedback could be summarized as:

• Incentives should go more towards users
• Lack of benchmarking with other bridging projects to justify LP requests

Key facts about Connext:

• Connext is positioned as a B2B2C protocol, serving apps (and indirectly their users). The protocol has experienced tremendous growth with innovations like its Restaking from Anywhere module, which allows users to restake their LRT from Arbitrum.
• Connext facilitated and brought more than $285m of LRTs to Arbitrum in the last 3 months.
• Connext volume through Arbitrum in the last 30 days was $280m

Connext wants Arbitrum to succeed, and their priority remains to attract more users to bridge into Arbitrum and Restake ETH on the L2.

Goal of the LTIPP incentives

Increase ETH TVL in the pools to provide better pricing for its integrated apps and their users

How (new strategy post feedback): incentivizing users who bridge into Arbitrum by subsidizing part of the bridging fees. This will further boost the utilization of the pools which will attract more liquidity. Higher TVL enables the best pricing when the Restaking module is used.

Incentivizing users to bridge into Arbitrum has 2 benefits:

1. It helps more users to bridge away from mainnet fees, onboarding them permanently onto Arbitrum
2. It helps to rebalance the AMM pool, as the restaking activity tends to unbalance the pool in the opposite direction. Having a balanced pool means that users restaking ETH don’t incur a negative price impact.

Changes from previous requests:

• Remove any liquidity incentivization for routers and LPs, and shift focus towards users
• Refund 95% of the fees to the users bridging into Arbitrum, up to 13bps. Fees vary depending on the origin chain (from mainnet it’s 9bps, from other L2s, 13bps) so only the actual fees incurred will be refunded. Fees will only be subsidized to users who are onboarding to Arbitrum (from any other network), and users exiting Arbitrum will not get subsidized. This is fully aligned with other crosschain protocols that saw their requests approved.

The estimate (according to the average of the last 7 days at the time of writing the original proposal) is for users to bridge 137k ETH during the pilot program.

Bridging fee rebate: 137,000 * 0.0013 (max fee) * 0.95 = 169 ETH

Tot ask: 446,472 ARB (1 ETH = 2,646.75 ARB at the time of writing)

Note: pricing the ask in ARB vs ETH as the pair is less volatile

Expected milestones

Month 1: 45k ETH bridged into Arbitrum (30% of ARB distributed)

Month 2: 90k ETH bridged (60% of ARB)

Month 3: 137k ETH bridged ($100% of ARB)

The Connext team agrees to return to the Arbitrum DAO any unused ARB funds once the 12-week LTIPP program is concluded.