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Welcome back to 0xResearch. Here's what we’ve got for you today:

• Getting better at measuring DAO spending

• Chart of the Day: Kamino comes out swapping

• Recent Research: The skinny on Base DEX activity

Do DAO grants work to stimulate growth?

One of crypto’s biggest go-to market strengths are tokens.

The ability to spin up billions of dollars worth of digital tokens with a click, then use them as lucrative grants to attract users and developers has very much become part of the standard Web3 growth playbook. 

It works, but the tangible benefits of this spending is hard to measure.

Grant money invites extractive rent-seekers, creating a cycle of fleeting capital that rapidly shifts between projects in search of quick gains.

As such, DAO grant spending has largely been bogged with inefficiencies.

Since November 2023, Arbitrum has distributed 71 million ARB ($81 million) to ecosystem projects through the Short-Term Incentive Program (STIP) grant program. This was a significant expenditure at about 3-4% of Arbitrum’s entire treasury.

Treasure DAO co-founder Karel Vuong, who eventually did not participate in STIP due to the grant’s misalignment with gaming applications, called the grant a “double-edged sword.” 

“While it led to some degree of ecosystem growth and usage as well as learnings to inform a longer-term DAO-led program for incentives, this also came at the cost of increased sell pressure of ARB, poor mitigation of sybilling and decreased value capture resulting from the lower sequencer margin post-ArbOS Atlas upgrade,” Vuong told Blockworks.

As part of the Arbitrum Research & Development Committee (ARDC), Blockworks Research conducted a study of STIP’s impact on 17 Arbitrum projects across the verticals of perpetual exchanges, AMM exchanges and yield aggregators.

An econometric method known as a “synthetic control” was used to compare real-world Arbitrum to a simulated version that received no grants. In terms of ROI, STIP generated $15.2 million in sequencer revenue for Arbitrum against a $85.2 million marketing spend between November 2023 to March 2024.

In sum, Arbitrum’s sequencer revenues would have generated 43% less without STIP.

A subsequent second grant program, the Long-Term Incentive Pilot Program (LTIPP), has to date distributed another 22.87 million ARB ($26 million) to users over 12 weeks.

To better track its impact, the metric of “volume-adjusted TVL” was used to better reflect growing TVL numbers that were actually translating into real activity. Simply put, volume-adjusted TVL gives more weight to protocols only when trading volumes are growing faster than TVL.

Based on Blockworks Research studies, LTIPP had a positive impact on sequencer revenues and Arbitrum’s DEX and lending markets, but not its perps markets:

We find that, for lending, DEXs, and perps, TVL market share grew by 25%, 17%, and -5% respectively. We find that volume market share grew by 7%, 21%, and -11.38%, respectively. And finally, sequencer revenue market share grew by 6.54%. As one can see, while incentives have a positive impact on DEX, lending and sequencer revenues, they do not have a positive impact on perps.

For more, see Blockworks Research’s latest report, Meta-Analysis on Incentive Programs.

— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)

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Enter the Unlimited Era: Instant Market Creation, Automatic Liquidity.

Kamino revenue and valuation:

This chart shows the relationship between Kamino’s Fully Diluted Value (FDV) and revenue for the protocol over the past 90 days.

A new revenue driver on the horizon is the Kamino Swap product, which was proposed to Kamino governance on Thursday. The market reacted favorably, with the KMNO token climbing more than 20%.

Kamino Swap is an intents-based exchange platform for Solana with zero slippage, MEV or platform fees. It’s powered by Pyth Express Relay. This infrastructure aims to provide best price execution for token swaps, a direct response to inefficient liquidation systems.

The platform’s Limit Orders allow users to set precise buy/sell prices, enhanced by competitive auctions among searchers. Users benefit from surplus values and tips, which redefine profitability by redirecting typical MEV leaks.

These features set Kamino Swap apart from Jupiter, which aggregates liquidity across DEXs to optimize price execution for swaps. Kamino Swap instead uses auction swaps, turning user inefficiencies into opportunities while leveraging Solana’s expanding liquidity. 

While Jupiter appeals to users seeking instant, broad liquidity across Solana’s DEX ecosystem, Kamino Swap is designed for users who prioritize precision, transparency and cost-effectiveness. It is particularly beneficial for those concerned with slippage, MEV and earning extra value through surplus and tips.

— Macauley Peterson (X: @yeluacaM | Farcaster: @Macauley)

Base activity: An overview

DEX activity on Base has surged, reaching $12 billion in weekly volume — a 4x increase since September. Non-memecoins now dominate trading, with pairs like ETH-USD and BTC-ETH taking the lead. Stablecoin and LST swaps are also growing, with notable contributions from Maverick.

Aerodrome commands over 50% of Base’s DEX volume, while Uniswap’s volume remains more memecoin-focused. Memecoin volume has declined as a percentage, but continues to grow in total.

AI agents like Virtuals generated $100 million in daily DEX volume recently, with over 1,000 new tokens launched in a day. 

Activity peaks during US trading hours, highlighting Base’s growing role in DeFi markets.

For more insights from Blockworks Research, see @blockworksres on X.

• Pudgy Penguins is dropping the PENGU token on Solana. With a supply of 88,888,888,888, the token allocation includes 25.9% for Pudgy/community, 24.12% for other communities, 17.8% for the team (vested), 12.35% for liquidity, and 4% each for public goods and proliferation. Plus, amusingly, 0.35% for FTT holders — the de facto memecoin of defunct FTX Exchange.

• The Nomic DAO Foundation has launched fee-free BTC on- and off- ramps on Osmosis, the leading Cosmos DEX. The integration simplifies BTC bridging via a trust-minimized, decentralized process. The bridge, audited by Trail of Bits, has been in operation for over a year.

• Botanix Labs has launched the Aragog Testnet, marking a key milestone in Spiderchain’s rollout toward a decentralized Bitcoin L2. Featuring Bitcoin-native DeFi apps, FROST multisig and globally distributed nodes, mainnet v1 is set for Q1 2025.