Arbitrum has rolled out the DeFi Renaissance Incentive Program (DRIP), a $40 million initiative designed to reward high-value DeFi activity on its Layer 2 network. The program, backed by 80 million ARB tokens, places special focus on lending and looping strategies to drive meaningful engagement.
Season One: Loop Smarter
The first season of DRIP began on September 3, 2025, and runs until January 20, 2026. Up to 24 million ARB tokens are set aside for users who participate in leverage-looping. This strategy involves borrowing against yield-bearing assets like ETH and stablecoins, redepositing them, and repeating the process across multiple two-week epochs.
Supported Protocols and Assets
DRIP covers a wide range of lending platforms and tokens, including:
- Platforms: Aave, Morpho, Fluid, Euler, Dolomite, and Silo
- Ether derivatives: weETH, wstETH, rsETH, ezETH, gmETH
- Stable-focused tokens: sUSDC, USDe, syrupUSDC, RLP
- Yield derivatives from Pendle
This variety allows users to experiment with different strategies while earning ARB incentives.
How the Incentives Work
The first two epochs serve as a discovery phase, using only 15% of Season One’s allocation to test performance. After that, rewards shift to a performance-based system. Protocols and markets that deliver stronger results will earn a larger share of the remaining incentives.
The program marks a strategic shift in how Arbitrum distributes rewards. Instead of focusing on surface-level growth metrics, DRIP emphasizes productive liquidity cycling. It was created by Entropy Advisors, managed by Merkl, and approved by the ArbitrumDAO.
By encouraging capital efficiency and deeper liquidity, Arbitrum aims to reinforce its role as a leading Ethereum Layer 2 network, especially as competition across scaling solutions intensifies.
Key Considerations
While DRIP opens opportunities for amplified rewards, users should stay mindful of the risks:
- Looping can boost returns but also magnifies the risk of liquidation.
- Rewards are not insurance, so participants need to manage exposure carefully.
- Long-term success depends on whether DRIP can retain liquidity without over-reliance on incentives.
Arbitrum’s DRIP experiment could set a new standard for how DeFi ecosystems approach incentives. By rewarding specific high-impact strategies like leveraged looping, the program pushes beyond simple token handouts to foster sustainable growth. Season One could be a defining test of whether this model creates lasting value for the ecosystem.
