New Research Shows Limitations of DAO Grant Programs for Growth
Arbitrum's massive $107 million grant program brought modest returns, generating only $15.2 million in revenue while showing mixed results across different projects. These findings come from a new Blockworks Research study that analyzed the effectiveness of blockchain grant programs.
The analysis covered two major grant initiatives by Arbitrum. The first program, STIP (Short-Term Incentive Program), used 71 million ARB tokens ($81 million) between November 2023 and March 2024. The second program, LTIPP (Long-Term Incentive Pilot Program), distributed another 22.87 million ARB ($26 million) over 12 weeks.
STIP's results showed that while the program prevented a potential 43% drop in revenue, it cost $85.2 million to generate just $15.2 million in sequencer revenue. This means for every dollar spent, the program returned about 18 cents in direct revenue.
Different types of projects showed varying levels of success. Lending platforms grew their market share by 25% and decentralized exchanges (DEXs) by 17%. However, perpetual exchanges saw a 5% decline. Among individual projects, Gyroscope showed remarkable growth of 865%, while others like DODO experienced negative growth of -2.3%.
Treasure DAO co-founder Karel Vuong pointed out problems with the grant program. While it helped grow the ecosystem, it also created problems like increased selling pressure on ARB tokens and lower profit margins after technical updates.
The research used a special metric called "volume-adjusted TVL" to measure real activity rather than just looking at locked value. This helped show that some projects with high locked value weren't necessarily generating proportional trading activity, suggesting that grant money didn't always lead to sustainable growth.
