AIP 0: Distribution Method for Points Season 2

This proposal seeks community approval to implement a new points calculation method for Arcadia's Points Season 2, to provide a more fair distribution.

This vote is only for the calculation method, the total AAA allocation for Season 2 will be decided in a future proposal. If this proposal passes, Arcadia will prepare the necessary steps to start Points Season 2 using the new method described below.

Motivation

As Arcadia moves towards a more decentralized future, refining our community incentive mechanisms is crucial. Points Season 1 rewarded early adopters, but feedback and analysis highlighted that the uncapped points system led to retroactive dilution, especially for early participants, as Total Value Locked (TVL) grew over time.

The goals for Season 2's points system are:

1. Reward Consistent Support: Incentivize sustained participation throughout the season.
2. Improve Fairness: Ensure points earned early maintain their relative value within the daily pool.
3. Increase Predictability: Allow users to better estimate their share of the daily points allocation based on their activity relative to the total.

This proposal outlines a method designed to achieve these goals.

Background: Arcadia Points Season 1

As detailed in the Arcadia tokenomics, 20% of the total supply is earmarked for community airdrops.

The first 10% was distributed on the 10th of April 2025, marking the end of the “Season 1” points program.

A recap of how points were allocated in S1:

• 1 point was given every hour for every dollar (calculated with the USD rate that day) held in the protocol. If someone had 10 USD in the protocol during 1 day, they would get 240 points.
• Borrowed assets are included. See this blog post for details.
• Additional multipliers were given for certain assets or certain communities as extra incentivization.

Below we propose a new point structure for Points Season 2, taking into account community feedback over the past few weeks.

Method for Points Season 2

For season 2 we propose to use a different allocation method for the points:

• The total number of points will be capped to 1B points per day.
• Each day we calculate a score for each user, the same way as in the first season: 1 per USD per hour, with potential multipliers.
• Each day each user receives a share of the 1B points, equal to the ratio of their daily score and the total daily score.

Using this new method, Points earned on a specific day are fixed relative to that day's total, but a user's future earning power per dollar still decreases if TVL grows (as their daily score becomes a smaller proportion of the growing total daily score). The key benefit is preventing retroactive dilution of already-earned points.

Here’s an example, assuming the following:

• A user has $2000 deposited
• After a day, this user has a score of 48,000
• The total score for all users that day is 960,000

In this scenario, the user receives 50M points for that day.

1B * (48.000 / 960.000) = 50M points.

Multipliers in Season 2

Multipliers will remain a key incentive tool, but with a more dynamic approach responsive to protocol needs:

• Purpose: To strategically incentivize specific actions beneficial to the protocol's health, such as providing liquidity to specific pools (e.g., increasing incentives if cbBTC pool utilization gets high) or supporting specific farm LP positions.
• Range: Multipliers will range from 1x (base) up to a maximum of 3x.
• Adjustment Cadence: Specific multipliers for assets/pools/actions will be reviewed and potentially adjusted on a 1 or 2-week interval based on protocol requirements.
• Communication: All active multipliers and any upcoming changes will be announced clearly in the Arcadia Discord.

This proposal seeks approval for this dynamic multiplier approach (1x-3x range, periodic adjustments based on protocol needs). The specific initial multipliers for launch will be announced prior to Season 2 starting.

Implementation Details

• Proposed Start Date: April 20th, 2025
• Estimated Duration: Approximately 6 months.
• Transparency: The existing points dashboard will be updated for Season 2 to reflect daily scores and point allocations.

Out of Scope for This Proposal

The following items are not decided by this vote and will be addressed separately:

1. Total AAA Allocation: The exact percentage/amount of AAA tokens allocated to the Season 2 airdrop pool.
2. Specific Initial Multipliers: The exact assets, pools, or actions that will receive multipliers at the start of Season 2. These will be determined and communicated before the season begins.
3. Conversion of points to airdrop allocations.

Next Steps

• If this proposal passes: The Arcadia team will finalize technical preparations, update the dashboard, determine and announce initial multipliers, and launch Airdrop Season 2 using this new points method.
• If this proposal fails: We will solicit further community feedback via Discord and forums to refine the proposal or explore alternative methods for Season 2 points calculation.

Call for Discussion

This is our first proposal on how to allocate AAA for Points Season 2. We encourage the community to discuss this proposal, ask questions, and provide feedback (see link below).