Who receives incentives: Liquidity providers who deposit into priority pairs through Arcadia. Incentives are distributed exclusively to active LP positions and not to lenders, traders, or passive depositors.
To amplify active management, only users who use one or more automations will be eligible. These include:
* Auto-rebalancers
* Auto-compounders
* Auto-yield claimers
Distribution structure: OP incentives are distributed via Merkl, which calculates rewards based on the actual fees generated by each position (fee-based distribution). This directly aligns incentives with productive liquidity: positions that provide more liquidity more efficiently, generate more trading fees and receive proportionally more Merkl rewards. Out of range positions generate no trading fees and receive no emissions.
Duration: Incentives distributed over the Season 9 measurement period, structured in tranches aligned with the milestone-based unlock schedule (40% / 60%). Emissions per pool are calibrated weekly based on TVL gap-to-target; if a pool hits its target early, its OP allocation is redistributed to underperforming pools.
Per-pool OP budget and expected impact:
| Pair (Chain) | OP Allocation | OP/Week | Target TVL (M2) | Implied APR at Target |
|--------------|--------------|---------|-----------------|----------------------|
| WBTC/WETH (OP) | 70,000 | ~2,917 | $1.50M | ~11.9% |
| WBTC/USDC (OP) | 45,000 | ~1,875 | $0.75M | ~15.4% |
| wstETH/WETH (OP) | 50,000 | ~2,083 | $1.80M | ~7.1% |
| WETH/USDC (OP) | 75,000 | ~3,125 | $3.00M | ~6.4% |
| weETH/WETH (Unichain) | 60,000 | ~2,500 | $1.02M | ~15.0% |
| rsETH/WETH (Unichain) | 50,000 | ~2,083 | $0.43M | ~29.8% |
| Total | 350,000 | ~14,583 | $8.50M | ~10.5% wtd avg |
Implied APR = (OP/week × $0.118 × 52) / Target TVL. Higher APRs on smaller/riskier pools (rsETH, weETH) reflect the greater incentive needed to bootstrap liquidity where current depth is near zero. Larger pools (WETH/USDC, wstETH/WETH) require lower APRs as they already have organic flow. If actual APRs fall below 5% on any pool (indicating TVL overshoot), excess OP is redirected to pools still below target.
Why this design creates sustained liquidity:
Industry evidence supports that well-targeted liquidity incentives can create lasting retention. Gauntlet's Arbitrum LTIPP retro (2024) found that 70% of incentivized pools (21 of 30) showed lasting volume growth after incentives ended, with incremental TVL averaging ~13% above baseline over 8+ months. Their earlier Arbitrum LM programme showed $318M in volume maintained post-incentives. The key factor Gauntlet identified: pools where organic trading fees can sustain LPs independently retain liquidity, while pools without organic demand see immediate flight. This is why Arcadia's programme targets high-volume collateral-borrow pairs (baseline volume/TVL ratios of 5-44x) rather than low-activity pools.
Beyond pool selection, Arcadia creates structural retention through:
1. Active management reduces LP losses. Users who experience better risk-adjusted returns through Arcadia have strong reason to stay beyond the incentive period.
2. Leverage amplifies return-on-capital. Users accessing Arcadia's USDC/ETH lending pools to lever up their positions have a more complex, higher-yielding position.
3. Community of smart farmers. Arcadia has an active community of 'White Glove' users who employ more complicated strategies (e.g. delta-neutral) and are less likely to leave a certain pair even after incentives end.
How the design discourages wash trading and mercenary liquidity:
* Merkl's fee-based distribution (rather than TVL-based) means rewards only flow to positions that generate real trading activity. Wash trading in clAMM pools is economically irrational: at the programme's weighted-average APR of ~10.5%, a wash trader paying 0.05-0.3% pool fees per round-trip would need to generate ~$1 in incremental Merkl rewards per trade, but the fee cost of a $10K wash trade ($5-$30) far exceeds the marginal reward ($0.01-$0.05 per trade at realistic emission levels).
* Arcadia positions require active management overhead (gas, rebalancing decisions) that mercenary capital is less willing to absorb at scale.