Arbitrum DAO Bets $40M on DeFi's Next Big Shift

Arbitrum has launched the DeFi Renaissance Incentive Program (DRIP), a $40 million initiative aimed at stimulating decentralized finance (DeFi) growth within its ecosystem. Managed by Entropy Advisors and powered by Merkl, the program spans four seasons, with each season targeting specific DeFi use cases. Season One, which commenced on September 3, 2025, and is expected to conclude on January 20, 2026, allocates up to 24 million ARB tokens (valued at approximately $40 million) to incentivize leveraged looping strategies on lending markets [1]. The program is designed to drive liquidity and support innovation in the DeFi space by rewarding user activity that contributes to the growth of Arbitrum’s ecosystem [2].

Season One of DRIP focuses on boosting leverage looping—where users deposit yield-bearing ETH or stable assets into lending markets and borrow against them to accumulate more of the same assets. This strategy aims to enhance capital efficiency and increase organic liquidity within Arbitrum. Participating platforms include Aave, Morpho, Fluid, Euler, Dolomite, and Silo. Users who engage in these strategies earn ARB rewards based on their time-weighted average borrow balances across each 2-week epoch [1]. The initiative is protocol-agnostic, meaning it supports multiple lending platforms rather than being exclusive to a single protocol [2].

The program adopts a phased rollout strategy, with the initial two epochs serving as a discovery phase to establish baseline metrics, during which only 15% of the season’s budget is allocated. The program then transitions into a performance-based model, with successful markets receiving larger shares of the remaining budget. This approach ensures that resources are directed toward the most effective strategies, while underperforming ones are adjusted or eliminated [1]. The performance-based model is intended to maximize competition and optimize incentive distribution over the 20-week period [2].

To participate, users must bridge eligible assets to Arbitrum One, deposit them into participating lending markets, and engage in borrowing and looping activities. No sign-up is required, and all opportunities are accessible via the DRIP website. Users are encouraged to monitor market performance regularly using Entropy Advisors’ DRIP dashboards, as rewards can vary depending on the performance of individual markets within each epoch [1]. However, participants are reminded that leveraged strategies carry risks, including the potential for liquidation and total loss of funds [2].

Morpho, Euler, and Maple Finance have already expanded onto Arbitrum in anticipation of DRIP, citing the incentive program as a catalyst for growth. Kirk Hutchison, Chain Expansion Lead at Morpho, noted that DRIP will enhance liquidity and improve rates for DeFi Mullet integrations, such as the Earn feature on Gemini Onchain [2]. The initiative is expected to attract more DeFi-native liquidity and strengthen Arbitrum’s position as the leading Ethereum layer-2 solution, according to L2Beat data, which indicates that Arbitrum holds over 35% of the market share [2].

ArbitrumDAO approved the DRIP initiative in June 2025, and the program is governed by the community. Entropy Advisors manages the operational aspects of the program, while the ArbitrumDAO oversees governance and treasury decisions. The success of each season will be evaluated by a DAO-approved committee, with underperforming strategies being adapted or discontinued. The program’s design reflects a broader industry trend toward community-driven initiatives that aim to decentralize control and empower users [1].

Source:

[1] Introducing DRIP: The DeFi Renaissance Incentive Program on Arbitrum (https://blog.arbitrum.io/introducing-drip-the-defi-renaissance-incentive-program-on-arbitrum/)

[2] ArbitrumDAO Incentivizes DeFi Growth With 24M ARB Token Rollout (https://www.coindesk.com/markets/2025/09/03/arbitrumdao-incentivizes-defi-growth-with-24m-arb-token-rollout)