Scroll Sustainable Liquidity Initiative

Ecosystem Growth RFI-Apr-2025
1

Title

Scroll Sustainable Liquidity Initiative

Name and whether or not you’re a delegate

@jengajojo_daoplomats

Category of your idea

Liquidity Incentives

Your Idea

The Scroll Sustainable Liquidity Initiative is a long-term program aimed at improving liquidity across the Scroll ecosystem while promoting sustainable growth. It features a phased liquidity mining program where participants earn SCR by providing liquidity to selected DEXs and liquidity pools, with rewards distributed proportionally to their contributions. The program will unfold in multiple phases, each targeting specific ecosystem needs, such as supporting new token listings, high growth projects, or innovative liquidity mechanisms, over a one-year period. A DAO led committiee should evaluate the best options and deploy incentives in phases as well as optimise allocation based on phases. To encourage long-term commitment, earned SCR tokens will be subject to a vesting schedule, unlocking gradually over time to align participants with the DAO’s future success.

How Will This Idea Help Ecosystem Growth

This initiative will boost ecosystem growth by ensuring consistent liquidity, making Scroll’s markets more efficient and attractive to traders and projects. The phased structure allows the DAO to adapt incentives to evolving priorities, such as onboarding new protocols or deepening liquidity in key pools, thus building a dynamic and resilient ecosystem.

Required Budget for the Idea in SCR

The proposed budget is 5,000,000 SCR for the first year, allocated across multiple phases. Each phase’s budget will be determined by the DAO based on specific goals (e.g., 1M SCR per phase for five phases), adjustable to market conditions and ecosystem needs.

Who Would Need to Be Involved

  • Scroll DAO: A team of delegates shall be selected to design the initiative, sets phase parameters & monitors performance.

  • Scroll Dev Team: Implements and audits contracts as well as gathers analytics data from incentives

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2

Thank you, @jengajojo_daoplomats, for sharing this idea.

To keep the conversation going, it would be great to hear from you on a few things:

  1. DEX and pool selection: How are you thinking about which DEXs and pools would be eligible? Would it be open to anyone from the Scroll ecosystem, or would there be some kind of selection or vetting process? Who would oversee the process?
  2. Metrics and evaluation: What kinds of metrics do you see as most important for measuring each phase’s impact?
  3. Committee structure: How do you imagine the DAO-led committee being formed for this (if at all)? Are they the ones performing the evaluations as well? What input would be requested from the growth team?
  4. Industry examples: Are there any similar programs from other ecosystems you think we could learn from? Would be great to look at what’s worked (or not) elsewhere.

Thanks once again for drafting your idea!

3

Thank you for the questions @Jamilya Below I’ll state my suggestions for these, however I am open to modifying these based on data and feedback from the community.

Anyone in the ecosystem is eligible to apply given that they fulfil certain criteria. To ensure quality and security, a vetting process is common in such initiatives. These are my suggestions:

  • DEXs might need to meet standards such as minimum TVL, security audits, and alignment with ecosystem goals.
  • A DAO-led committee could manage selection and oversight. This committee could define eligibility criteria, review applications and ensure compliance.
  • Total Value Locked (TVL): Measures the total assets locked in selected DEXs and pools, indicating liquidity depth.
  • Trading Volume: Tracks the amount of trading activity over different timeframes. Filter for manipulative activity and choose venues with consistent organic volume.
  • Number of Unique Users/Liquidity Providers
  • Liquidity depth & stability
  • Fees Generated & distributed

I’d suggest a mix of 1-3 delegates, a foundation representative and a labs representative as the optimal structure. The committee would likely perform evaluations, using the metrics mentioned, and collaborate with the growth team for strategic input. The growth team’s role could include:

  • Providing market trend data and user behavior insights
  • Suggesting incentive structures
  • Offering feedback on alignment with broader ecosystem goals, such as increasing Scroll’s user base or improving its competitive position against other L2s

Here are some examples from other L2 DAOs:

  • Arbitrum DAO’s Long-Term Incentive Pilot Program (LTIPP) and Short-Term Incentive Program (STIP) distributed ARB tokens to test new designs and drive growth, with DAO-led governance ensuring community oversight. It seems likely these scalable models could guide Scroll in structuring incentives and evaluations (Arbitrum LTIPP Program Results).
  • Uniswap Liquidity Mining Analysis from June 2023, re-examined data from experiments on Optimism, hypothesized a “liquidity → volume bootstrapping mechanism”. This suggests that well-designed incentives can create lasting effects through user stickiness and organic trading. Simulation-Based Pool Selection was a key learning by Gauntlet in the UDAP which is worth considering as well.
4

Hi everyone, sharing some thoughts on this RFI.

First of all, thanks to @jengajojo_daoplomats for dropping this proposal. We consider that liquidity management is a key topic in order to develop a thriving and resilient ecosystem so this is definitely timely.

When it comes to the proposal, we believe a different approach would be beneficial here. Therefore, instead of having an isolated liquidity programme, a strategic plan to improve Scroll’s liquidity is what we consider necessary here..

First, while we appreciate the idea of splitting the proposal into different phases, we think that such a programme should have a precise focus on solving specific problems that we have to define beforehand. For example, instead of funding “innovative liquidity mechanisms, or supporting new token listings”, we consider a better approach would be to try to solve some foundational issues when it comes to liquidity in Scroll, such as stablecoins and SCR pools. Therefore, we shouldn’t leave any room for loose ends here, and clinically select those pools that we desire to incentivise in order to solve the foundations of our liquidity issues. Moreover, when thinking about liquidity programmes, perhaps it wouldn’t be a bad idea to consider more strategic approaches like Protocol-Owned Liquidity (POL), rather than just traditional incentives. This way we can potentially create a more sustainable solution to address the liquidity issue.

Building on top of Jamilya’s comment, we think that metrics here can make a huge difference. While many liquidity programmes measure their success on TVL metrics, we tend to believe that this is far from being a good metric to determine if a liquidity programme was successful or not. For instance, we should rely on metrics such as volume, TVL retention, TPS, and number of active addresses, to mention a few. In this sense, before continuing, it would be a good idea to have a look at other ecosystems’ programmes. Some of the early work done by the Data working group should be leveraged moving forward.

Since liquidity is usually a problem that different chains or protocols try to solve through their DAOs, by doing some research we can have in mind what to do and what not to do when tackling liquidity issues. Circling back, the POL approach doesn’t require the deployment of native tokens as incentives in order to address liquidity issues. Instead, the DAO would deploy its own capital to provide concentrated liquidity pool(s) on Uniswap V3, which should be actively managed to maximise capital efficiency and minimise slippage. This would potentially mean better UX when swapping tokens, which can translate into increased trust from users and more arbitrage activities. The increase in activity would generate more fees (a portion of which can be used to cover the liquidity manager costs) and a higher transaction volume, all whilst deepening Scroll’s liquidity. Here, we aren’t suggesting to copy someone else’s proposal, but to learn from other DAOs’ examples to build solutions that serve Scroll’s purposes and goals.

Lastly, the expectation for the Ecosystem Growth Committee (or whatever name is chosen) is to take this as part of its scope and develop a comprehensive strategy that leverages Scroll builders and its strategic direction instead of blindly allocating incentives. We’ll leave the composition and scope outline for that specific proposal but happy to see this core issue being tackled!

5

Thanks for the feedback @SEEDGov I agree with your approach of doing deeper research before deciding on the optimal strategy. To successfully deploy POL its optimal to have a two positions, one full range and the other concentrated, however this requires ETH/stables to successfully get started. It is ofcourse possible to deploy single sided liquidity and only sell into the buys and build liquidity that way. Another approach is to use products which sell native tokens at a slight discount is exchange for LP positions. Overall I believe this specific topic sits at the intersection of treasury management and onchain liquidity. The advantage of having POL is that its more sticky than market driven liquidity, however, this can dry up if on average there is more consistent selling into the pool than buying. Hence, I agree with your approach of creating value as a whole which attracts builders, users and ultimately deep liquid markets. However, this goal is more wholistic and goes beyond the liquidity conversation. In all cases, I’m happy to work with you to identify an optimal path forward for the DAO.

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6

It is worth considering why there is a desire for increased liquidity. There is no point having idle liquidity without volume and volume comes from users. For this reason we encourage the DAO to consider a broader program that aims to grow DeFi across multiple verticals rather than simplistic liquidity incentives which has higher risk of simply being spend without driving meaningful activity on the chain.

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