The Arbitrum DAO has voted in favor of distributing 21.52M ARB to 26 ecosystem projects that missed out on grants in October despite receiving approval for Short-Term Incentive Program funding.

The back-funding proposal passed on Dec. 3, with two-thirds of votes cast in favor of allocating roughly $23M worth of native tokens for the extended round of STIP grants. Nearly 217M ARB were mobilized for voting, equating to 2.1% of ARB’s circulating supply. The funds will be used by grantees to incentivize adoption.

The recipient projects were among the 57 applicants that passed the required voting threshold to receive funding in Arbitrum’s previous STIP proposal, but the 50M ARB earmarked for the first STIP round was exhausted by the top 30 applicants ranked by supporting votes. One project, PancakeSwap, has since reneged on its funding request since the first STIP vote due to KYC requirements.

“This proposal represents a critical opportunity for our community to support diverse, emerging builders and make Arbitrum a welcoming environment for new projects,” the proposal said. “Projects that received approval but no funding have immediate initiatives requiring support. Our opportunity is to fund these initiatives, level the competitive playing field, and enhance the data available for the STIP process.”

Arbitrum will distribute the funding by Jan. 31, 2024. Recipients must provide regular reporting on the performance of their grants. However, ARB holders are currently voting on a proposal to extend the deadline until March 15 to give ample time for grantees to carry out their incentives campaigns. More than 95% of votes have been cast in favor of extending the deadline, with the proposal set to close on Dec. 9.

Layer 2 wars

Arbitrum said it hopes the STIP grants are intended to grow its ecosystem and position the network to “win the L2 wars.”

Arbitrum is the leading Layer 2 network in terms of total value locked by a wide margin, boasting 53.7% of the sector’s TVL with $8.1B. The network is also the top Layer 2 by throughput 30-day transaction volume with 22.6M, narrowly beating out ZkSync Era’s 20M.

Despite its long-standing dominance, Arbitrum has faced an influx of new competition this year, with Era, Base, Linea, and Polygon ZkEVM among 2023’s cohort of major L2 releases.

Arbitrum said it chose to backfund an extension of its first STIP round rather than move to a second round of STIP proposals to allow for the completion and analysis of the first cohort of grants to inform future STIP rounds.

“Voters lacked the data to ascertain whether the initial 50M would be adequate to achieve the objectives of STIP,” Arbitrum said.”Proper design and fulfillment of a Round 2 or similar future funding programs may take time to develop.”

Arbitrum added that a back-funding extension avoids splitting the community’s attention between old and new applications.

The largest allocations went to the Gains Network derivatives DEX with 4.5M ARB, the Stargate Finance multi-chain DEX with 2M ARB, and cross-chain interoperability protocols Synapse and Wormhole with 2M ARB and 1.8M ARB respectively.

Arbitrum also noted the initial cohort of round one STIP recipients tended to be larger projects. In a bid to promote emerging protocols, the back-funding will divy out five new grants of less than 100,000 ARB and 15 allocations of less than 500,000 ARB.

Early contributor funding knocked back

On Dec. 5, voting ended in opposition to a proposal seeking to distribute sums of 20,830 ARB (nearly $23,000) to 24 community contributors each. Roughly 60% of votes opposed the distributions, with 30% in favor and 10% abstaining.

Arbitrum said opposing voters cited a lack of information on the proposed recipients and their contributions, in addition to expressing a preference for incentivizing ongoing contributions rather than paying out a single lump sum.

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• Source: https://thedefiant.io/arbitrum-greenlights-grants-to-fuel-incentives-for-26-ecosystem-projects