Key takeaways

• DAO grants are among the largest growth budgets in crypto, with Arbitrum's short-term program alone handing out 71.4 million ARB to 56 projects.

• Blockworks Research's review of Arbitrum's short-term program found $85.2 million spent and only $15.2 million directly recouped through sequencer revenue, the fees Arbitrum itself earns.

• DAO grants can work when success is defined and measured against a comparison group, which is what Gauntlet's Uniswap study did and what most programs skip.

DAO grants are the biggest marketing budget in crypto, and almost none of that money is controlled by a marketer. It sits in governance forums, where token holders vote to hand treasury money to projects as growth incentives, and the scale is hard to match anywhere else in the industry. Arbitrum's short-term incentive program alone gave out 71.4 million ARB across 56 projects, Optimism's Retro Funding rounds moved about 76 million OP to 1,168 projects, and academic researchers count single ecosystems with grant budgets of $276 million and $100 million.

The uncomfortable part, as we see it at AnkhLabs, is that almost nobody checks what the money bought. That same academic study found that the lack of follow-up reviews makes the long-term impact of these grants close to impossible to measure. Krzysztof Urbański, the governance lead at L2Beat and an Arbitrum delegate, said it more plainly when he described Arbitrum's programs and noted that "the exact goals were never set, so it was hard to measure whether they worked or not". A marketing lead who spent that kind of money without a retention report would be fired, while a DAO tends to vote to do it again.

A DAO grant is a marketing budget where nobody's job depends on asking what stayed.

Do DAO grants actually work?

Mostly not in the way they are sold. When Blockworks Research checked Arbitrum's short-term DAO incentive program, it found $85.2 million spent and only $15.2 million directly recouped through sequencer revenue, and it called the program's long-term effect unclear. A minority of well-designed programs kept a lasting gain, and those were the ones that measured it.

The official report on Arbitrum's short-term program, written by the DAO's own data partner, sounds great at first. It found $13.95 of TVL growth for every $1 of ARB claimed, and about 94,000 new daily users on the network. TVL, or total value locked, is simply the money users deposit into a protocol. What the report doesn't contain is a single number about what remained after the program ended, so it measured the party and never checked the morning after.

Independent researchers did check. Blockworks Research, working for the DAO's research coalition, estimated that 43% of Arbitrum's revenue between November 2023 and the Dencun upgrade was attributable to the program, but that $85.2 million was spent and only $15.2 million was directly recouped through sequencer revenue, meaning the fees Arbitrum itself earns. That is less than a fifth of the spend coming back, and the same review said the program's ability to drive long-term sustainable growth "is still unclear". Individual cases make it vivid, like MUX, the second-biggest recipient, whose deposits fell by about two-thirds, from $63.5 million to $21.4 million, after the rewards stopped.

None of this should surprise anyone who has watched liquidity mining attract mercenary capital at the protocol level. Money summoned by rewards leaves with the rewards, and the only new thing about DAO incentive programs is the size of the check and the fact that nobody is paid to notice.

What happened to Arbitrum DAO grants and Optimism's Retro Funding in 2026?

Both ecosystems have pulled back and tightened up. Optimism paused Retro Funding in January 2026 for at least a year and cut its total token spending by about 35%, while Arbitrum's newer DRIP program spent a small fraction of earlier budgets on a narrow target and published a single efficiency number for it.

Optimism's foundation said the program would be paused to reevaluate how it fits into Optimism's long-term strategy, and the roughly 775 million OP reserved for it may be reallocated. Its governance numbers show the same retreat, with about 150 million OP committed in its fourth year against 229.92 million the year before, and the Grants Council capped at 4.2 million OP.

Arbitrum went smaller and more specific. Its DeFi Renaissance Incentive Program deployed 14.6 million ARB, about $4 million, across six lending protocols between September 2025 and February 2026, and reported that the lending markets grew $51 for every $1 of ARB, the best result of any program it benchmarked against. That is still the program's own scorecard and it still measures growth while the money was flowing, but it's a clear break from spending $85.2 million with no clear target at all.

Incentives work when someone defines success first

The exceptions prove this is a discipline problem rather than a tool problem. Gauntlet, a quantitative research firm, paired five incentivized Uniswap pools with similar pools that got nothing and found two of the five showed a statistically significant lasting lift.

Two out of five sounds modest until you remember that most programs never check at all. The difference between the winners and the bonfires is that someone decided what success meant before the spending started and compared the result against projects that weren't paid.

How should a DAO measure grant program ROI?

Measure what remains, not what arrives. A DAO should name the result it wants before the vote, such as retained deposits, retained users and revenue per dollar twelve weeks after the program ends, then compare funded projects against similar unfunded ones and hold back part of each grant until those numbers come in.

The comparison is what most programs skip, and it matters more than any other step. A figure like "$13.95 of deposits per dollar" means little in a market where everything was rising anyway, because the honest question is what the money added compared to the projects nobody paid. Gauntlet's pool-by-pool study shows it can be done cheaply, and it's the only method that holds up in a bull market.

What we'd tell a founder about DAO grants

Set the after-metric before the vote. If you design or vote on incentives, the target isn't growth during the program but retained deposits, retained users and revenue per dollar at week twelve. A program that can't name its after-metric has already told you what its result will be.

Pay for what stays, not what shows up. The structure that works in every other channel works here too, where activity qualifies a project for rewards and retention decides what it actually gets paid. Split the grant into parts and hold the last third against week-twelve numbers, and the applications improve overnight because mercenaries don't apply for deferred money. The points programme we worked on for Mythical Forest was built the same way, with rewards tied to sustained activity, and it recorded 1M+ users onboarded and 10M+ campaign impressions, as reported by client and platform data. The same logic is why crypto user retention matters more than any acquisition number.

Demand a comparison group. Ask what the money added compared to the projects you didn't fund. Gauntlet's method of pairing each funded pool with a similar unfunded one is simple enough for any grants committee to copy.

If you receive a grant, publish your own report card. Almost nobody does, which is exactly why it works. Show up to the next funding round with what you kept and what each dollar bought, and you become the easiest yes in the forum, because in a system with little accountability the accountable team stands out.

The money is already allocated and the programs will keep running in some form. The fix costs almost nothing, since it's just goals set before the vote, payment tied to what remains, a comparison group and a report someone actually has to write. Crypto already paid for this lesson once with play-to-earn games that paid people to stay, and the first big ecosystem to apply it to DAO grants will stop funding its own churn. Designing incentives around what stays is part of our strategic advisory work, and our case studies show the programmes behind it. If you're designing a grant or incentive program and want a second opinion on how it will be measured, talk to AnkhLabs.

Frequently asked questions

What are DAO grants?

DAO grants are payments from a decentralized organization's treasury, approved by token holder votes, to projects that are expected to grow its ecosystem. They cover development funding, retroactive rewards and user incentives. Arbitrum's short-term incentive program alone distributed 71.4 million ARB to 56 projects, which makes DAO grants one of the largest pools of growth money in crypto.

How do Arbitrum DAO grants work?

Projects post a proposal on the Arbitrum DAO forum and ARB holders vote on whether to fund it. Early programs like STIP spread 71.4 million ARB across 56 projects with loose goals. The newer DRIP program is run by a small committee, targeted six lending protocols with 14.6 million ARB and reported $51 of lending market growth per dollar.

Is Optimism's Retro Funding still running?

No. Optimism paused Retro Funding in January 2026 and said it would not run for at least 12 months while the foundation reconsiders how it fits the network's strategy. Before the pause, Retro Funding rounds had distributed about 76 million OP to 1,168 projects, and around 775 million OP reserved for the program may now be reallocated.

Why do DAO incentive programs attract mercenary users?

Because open rewards pay anyone who shows up, and the people most responsive to rewards are the ones who leave when rewards end. MUX, the second-biggest recipient in Arbitrum's short-term program, saw its deposits fall by about two-thirds, from $63.5 million to $21.4 million, after the rewards stopped, which is the pattern any program without retention terms should expect.

How do you measure the ROI of a grant program?

Compare what remains twelve weeks after the program ends against a similar group of projects that received nothing. Gauntlet used this approach on five Uniswap pools and found two kept a statistically significant lift. Revenue per dollar matters most, and Blockworks Research found Arbitrum's short-term program directly recouped only $15.2 million in sequencer revenue on $85.2 million spent.