Arbitrum season. Part 3 - Camelot incentives

Chapter 3 of this saga, it’s time for Camelot this time. Plenty of farming opportunities

Are you ready?

Let’s get it

1. Camelot incentives overview

Camelot max allocation sits at 3.09M ARB making it the 3rd biggest grant in the program. Their proposal is based on a bracket though, from 1.87M to 3.09M depending on the performance of the incentive program.

They have structured the 3 month program in 6 bi-weekly epochs and will adjust the initial 400k ARB per epoch +-10% based on the performance of the previous epoch.

Personally I like this approach as gives enough flexibility to make data driven & looking forward decisions. Here is the dash example they provide to adjust parameters in future epochs.

How are these 400k ARB being distributed?

ARB will be distributed as incentives for LPs in the many pools Camelot has, focusing on the most strategic ones for the chain.

Distribution seems pretty balanced and coherent with the objectives they aim to achieve, which I think are +EV for the Arbitrum and obviously also to Camelot.

These are their objectives in their own words.

This is great ser, but where is the money?

2. Best farming opportunities

Camelot included in their proposal an initial distribution of rewards among pools, you can check it below.

Plotting the ARB allocation for each pool we can find out which pools will be receiving the lion share of rewards. But this chart by itself does not give a clear picture of which are actually the best pools to farm.

To find the best farming opportunities we will calculate the estimated APR with current TVL (even though this will change as more capital is deposited in the most profitable opportunities)

APR(%) = ARB epoch * 0.8 * 24 * 100 / TVL of the pool($)

There are huge divergences among initial APRs in pools, so we will classify them in 3 groups:

• Diamond pools - More than 500% APR

• Gold pools - Between 50-500% APR

• Silver pools - Under 50% APR

2.1 Diamond pools

These are some crazy APRs as you can see in the chart, SPA and MAGIC pools have no liquidity atm, so their number is a way to show currently that yield tends to infinite.

Some of these pools will also be able to scale up to mid 6 figures with very nice APRs (MAGIC, WBTC, DPX, PENDLE..) but from that point onwards, yield will dilute significantly, so likely being early will be rewarded.

2.2 Gold pools

Really big yields in this section, and some of them are among the most sustainable during the grant period, like ARB pools which will receive the biggest amount of ARB rewards (60k one and 40k the other)

Some of these pools will be able to scale up to mid 7 figures maintaining very attractive APRs. Very attractive opportunities here, especially if it does not get very crowded.

2.3 Silver pools

There are good opportunities in this category, and some pools will probably maintain decent APRs through the period, but overall, think these are not the pools you should be focusing on for the time being (allocations per pool can change overtime)

Ok, then now we now which are the best current opportunities, but… how much size can these take without lowering APRs too much?

Let’s take a look at it, we will aim for a 20% APR in “inorganic” ARB rewards plus the “organic yield” from fees.

We arrive at an estimate total TVL of $38.4M which is a substantial growth from current $17.3M for 2,2x multiplier.

Most of the potential TVL is concentrated in a few pools, which should provide good returns while incentives are still up and running.