Cosmos Validator Renewal

SCP #TBD

TaxiStake would like to continue running a ShapeShift DAO branded validator but based on data from the last year, as specified in the 8 month update https://forum.shapeshift.com/t/cosmos-validator-update-8-months-later/1652 we are proposing the following terms outlined in this proposal.

Specification:

TaxiStake purchased the Cosmos validator from ShapeShift AG (on 09/30/2021), unlike most ShapeShift branded validators, the amount of ATOMs has been on a steady decline.

When we started TaxiStake, we were under the strong impression that “if we build it they will come”, however; over the past year we learned it takes a lot more than a strong brand to achieve success. The profitability of the validator depends heavily on us remaining in the “active set” of the top 175 validators. The ShapeShift DAO is the 45th biggest but over 80% of the total delegations are coming from only a few addresses. Through the past year TaxiStake has developed a strong trust relationship with these large delegators.

While these delegators support the use of the ShapeShift name for a portion of the revenue split, they have indicated that the biggest reason they delegate to TaxiStake’s validators is not because of the ShapeShift brand or support of the DAO, but because of the availability and the security standards put in place by the TaxiStake team. However, having so few delegators with the majority of the stake on the validator put the validator at risk of falling out of the active set if they were to decide to un-delegate. TaxiStake is proposing the following for both the ShapeShift DAO and TaxiStake to help ensure the validator maintains a solid base of delegated ATOMs while growing overall delegations.

The revenue split proposed is 80% to TaxiStake and 20% to ShapeShift DAO for a 3 month period. TaxiStake will take 10% of revenue it earns from the revenue split and re-delegate it back to the “self delegation address.” This will help keep the ShapeShift validator in the active set and signal to the community that ShapeShift is running this validator on the Cosmos chain for the long haul, with “skin in the game.” The rewards from these self-delegated tokens will all be added to the total revenue split. TaxiStake will retain ownership of these delegate ATOMs. TaxiStake will continue to perform all the maintenance, upgrades, monitoring, and governance tasks as is specified in the expiring terms.

Under this proposal, the ShapeShift DAO must create a multisig Cosmos address to be controlled by the Treasure Signers (TSes). TaxiStake is requesting that the DAO then delegates 10,000 ATOMs from that address to the ShapeShift validator. This is also the address used by TaxiStake to send the DAO its revenue split in the form of native ATOMs.This would allow the DAO Treasury full control of its share of the revenue, hopefully choosing to re-delegate a portion of those ATOMs earned. Receiving ATOMs earned from the DAO’s delegations will give the DAO a new income stream, and more options for managing its treasury.

The ShapeShift DAO agrees to, at minimum, do bi-monthy promotions/advertising about positive aspects of the ShapeShift DAO branded Cosmos validator. Ideas for topics could be how easy it is to delegate and earn yield using the ShapeShift platform or how delegating to the ShapeShift validator funds further development of Cosmos integration in the platform.

The DAO is targeting 15% monthly growth rate as specified in the most recent DOA revenue model. https://docs.google.com/spreadsheets/d/1z8zHiVuFoDIKHRwKdVY8DAo8WE_LS2jMczBxPHsIRok/edit#gid=0

Increasing delegations by half that (7% a month) is adding approximately 68506 ATOMs a month for a total of 205,518 ATOMs in a 3 month period. If the DAO can hit that goal, TaxiStake will increase the revenue split from 80/20% to 70/30%. We believe that these changes will help ensure the long term success of the ShapeShift Cosmos validator, and continue to provide a growing revenue stream for both parties.

Summary:

  1. DAO:

    Revenue Split 20% for 3 month term

  2. Creates a multisig cosmos wallet address
  3. Delegates 10,000 ATOMs to the validator
  4. Commits to 2 postings a month promoting the validator
  5. Targeting to increase delegations by 7% (half DAO’s own target growth rate) will trigger an increased revenue split to 30% after 3 months. (note that is approximately 205,518 ATOMs). This does not include the potential ICF delegations per the October 29th 2022, application submitted by TaxiStake.
  6. 978,669 current delegations x 7% = 68,506 ATOMs/month for a total of 205,518 ATOMs in 3 months.

TaxiStake:

80% Revenue Split for

  1. 3 month term
  2. Re-delegate 10% of revenue to self-delegation address
  3. Covers all hosting, maintenance, upgrade costs
  4. Provides all maintenance, upgrade operations
  5. Sends rewards in native ATOM to ShapeShift DAO address

Vote

Yes to these terms

No to these terms - Please comment below.

First, I want to say thank you for all of the work TaxiStake has put in to run these validators securely, and apologize that we haven’t been able to drive as many delegations as hoped.

I definitely want to see the relationship continue in a way that’s mutually beneficial for both parties. Revenues from validator commissions have been one of the strongest rev streams for the DAO, and I believe growing these delegations is one of the best opportunities we can focus on.

While I support the intention for TaxiStake to self-delegate ATOM, the proposed 80/20 rev split (or 70/30 if milestone is hit) is a stark difference from the current 30/70 split. Can you share more on how this split was calculated? I’m curious if there are any levers we can pull to maintain the 30/70 split; what would TaxiStake need to see? Perhaps we could offer FOX that taxistake could use to buy ATOMs to self delegate for instance.

Re: setting up a Cosmos multisig on behalf of the DAO to acquire and delegate ATOMs - I like the idea of the DAO receiving ATOMs and having the option or delegating to the ShapeShift DAO validator, but would first like to see an additional signer added so it can be 2/3 (2/2 is acceptable on mainnet because safesnap is implemented, but otherwise if 1 signer is compromised then we’re screwed). The discussion for this was started here.

I’m eager to see the results of the ICF delegation application, and am roughly estimating we could get ~250,000 additional ATOMs delegated from this.

I’ve also been working this past week with @BeDiggy and @PTT to make the business case to prioritize a number of features centered around attracting more of the Cosmos ecosystem to use ShapeShift and delegate to our validators, including Axelar/Squid bridging, Osmosis bonding (once trading and LP are completed), supporting more zones (Juno, Umee, Evmos, Secret, Stargaze), autocompounding, FOX rewards for delegators, and possibly even voting. We’re also ready to go live with Cosmos and Osmosis support on MetaMask as soon as their snaps are released (ETA is q1 2023). I know we’ve been waiting for many of these features for a long time. Now that migration is finally complete, we have room to focus on this. We have the opportunity to be the best interface to the Cosmos ecosystem, or at the very least the best multichain interface, and many of the core pieces already in place, but there are some clear gaps that we need to fill. Maintaining the 30/70 split would help us make the business case to prioritize the necessary work.

Another thing I’ve been thinking about is how ShapeShift can become one of the validators that Stride and other liquid staking protocols delegate to. I’d be happy to reach out to them to let them know we’re interested in this, and see if there are any levers we can pull such as offering to integrate them (which would also help us be the best interface to the cosmos).

Willy thank you for your comments and, as always, you’re a great leader for the DAO and we really appreciate all your thoughtful constructive comments.

We agree the 80/20 split (Taxi/DAO) is a big difference from the 30/70 split (Taxi/DAO). The short and simple reason is that the current arrangement just isn’t working. This proposal and the 8-month update forum post justify the many reasons we came up with new terms. Ever since the validator has assumed the ShapeShift DAO name, we have been losing delegations as we pointed out in the analysis.

We wholeheartedly agree that this has been one of the strongest, and I believe the first, revenue source for the DAO. Growing delegations would be the primary way to increase that stream. The DAO has had an entire year to focus on increasing delegations and as we see from the data, they are on a steady decline. We don’t doubt the DAO’s intentions to grow these delegations but the execution isn’t working. There has been a lot of talk surrounding new features and prioritizing new Cosmos zones but, as you mentioned, we have been waiting for these for a long time. We’re completely open and willing to increase the split back towards 30/70 (Taxi/DAO) as these features actually get released and the DAO drives more delegations to the validators. This is one of the reasons we are suggesting a shorter proposal time. This is a good incentive for the DAO to implement these features.

Looking at it from another perspective; from some quick Google searches, we find that a typical franchise fee is anywhere between $25,000 - $50,000/year or 5% - 7% of revenue. Royalty agreements run typically anywhere from 4% - 12% and marketing fees somewhere between 2% - 3%. Over the last proposal year, the Cosmos validator alone brought in $273,607 in stable coins.

https://docs.google.com/spreadsheets/d/1nxIMNGUJKyPGSmmaZ4415KBKwJS6EROFWu9qQZY4y2g/edit#gid=686558491

In addition, unlike other ShapeShift DAO validators, TaxiStake purchased the Cosmos validator from ShapeShift AG at a premium using its own capital and capital raised by investors. These costs have not been fully covered after a year of service. In fact, all initial and ongoing costs associated with the creating, maintenance, and hosting of this validator are covered by TaxiStake. Not to mention that TaxiStake, although being one of the strongest revenue streams for the DAO, is not a formalized workstream that collects any salaries as other do other workstreams. Nor has the ShapeShift DAO or ShapeShift Foundation supported the validators by providing any delegation of native Atoms to the validator. TaxiStake is solely funded through private investments and commissions on the validator they run.

TaxiStake is responsible for over 80% of the delegations. We have built professional relationships and many of these delegators have indicated they would stay regardless of the name of the validator.

TaxiStake believes in the partnership it has with the DAO and is excited to continue. However, after a year of declining delegation and promises of features and future delegations, it would be more fair and beneficial to increase the revenue split to the DAO in the future as new delegations and features are realized, instead of paying for them now. This would allow TaxiStake more resources to promote and help grow both organizations. TakeStake is also promising to commit a portion of its revenue to help stop the declining delegation trend.

The 20% revenue split proposed, when looking in terms of a standard licensing, franchise, or marketing fee, is still above the standard. Even at current Atom prices, it would provide the DAO with a strong and consistent revenue stream especially as the markets recover or move into the next bull-market cycle. This new proposal adds a secondary source of revenue for the DAO by having the DAO delegate 10,000 native Atoms to the validator. Right now TaxiStake and the DAO split only 10% of the total revenue earned by the validator. The other 90% of the revenue potential is distributed to the actual accounts delegating to the validator. The DAO should take advantage of this.

Taxistake, Trust, they are Active in updates, votes etc.

有空投吗?

抱歉,没有空投

我们的 discord 有一个中文频道,加入我们吧。 discord.gg/shapeshift

thanks @scoh really appreciate the detailed response :pray:

So a few thoughts on above (and continuing from governance call where I discussed this some last week).

Overall am really happy to see this proposal moving forward and want to see the relationship with taxistake and the DAO continue who have been great partners thus far. You all have done incredible work and I am very thankful for it.

Here is my suggestions of changes I think would be worthwhile to make before heading to ideation phase for further discussion:

  1. To Willy’s point, while I understand the motivation and reasons such a drastic switch of the revenue share has a bit of sticker shock value to it. Could we soften this somewhat? My suggestion would be to go to a standard 70/30 revenue share (in favor of taxistake) with the caveat that it can move to 60/40 if the goals are reached. This still heavily favors taxistake but is not quite so drastic of a swing. If the DAO starts driving more delegations in the 3 months then renegotiating back towards original split may be reasonable and if it doesn’t moving towards 80/20 favoring taxi stake may be reasonable at the time.

  2. Rather than the 10k atom staking requirement, would prefer to see this as the DAO will restake a minimum of 50% of the atoms it receives during the 3 month term, that will let the DAO start going towards that effort but without a huge capital expenditure which may be detrimental to stable coin treasury.

I look forward to seeing the DAO and taxistake continue to work together and hope it will make sense after 1-2 more terms of this type to have the revenue split swing back towards where it was with significant delegation and self staking progress.

I’ve been out and just seeing this now. I see that voting on this is closed, and before it goes to an official vote wanted to express the same concerns as @jonisjon . Namely, needing to buy 10,000 ATOM from the treasury does not seem like a good idea for the DAO at this time. I also think the big revenue split reversal is a bit of sticker shock, and like his suggestions. I’m good with the DAO restaking some of its earnings each period, rather than trading 100% to stablecoins.

There is no mention of OSMO, UMEE, or JUNO - which are all losing money for TaxiStake. Are those in a separate proposal that will come up for renewal later?

This has been moved to snapshot for ideation: https://snapshot.org/#/shapeshiftdao.eth/proposal/0x7bcef6a9c5fd14e73438897003d189bac462d4c8c3afad7e57d60d8f102097d4

  • 18 Yes - 4 No
  • Based on feedback from the forum and Governance Call, these changes are proposed in Ideation:

Forum Link: https://forum.shapeshift.com/thread/cosmos-validator-renewal-40874

Summary of Changes from forum feedback:

  • Drop buy ATOM requirement from the DAO
  • 75/25 up to 65/35 if delegation target hit
  • Include potential IFC delegation as part of goal
  • DAO handles ATOMs and delegates 50% back to compound
  • On the DAO to setup a multi-sig still

Gm Marley and TaxiStake team!

Firstly, I’d like to thank you on behalf of the marketing team for connecting with us recently to talk through some of TaxiStake’s value props and to clarify your perspective on this proposal! We see your motivations and have taken strides in marketing the DAO validator now that the base functionality is built out and our app has reached parity.

We can commit to 2 postings activations (I will refer to them as “activations” for the sake of having a broader term as it better suits some of our marketing plans/roadmap) per month. This commitment for future campaigns and activations with TaxiStake and the validator feature is driven by a recent internal marketing analysis of potential growth ability, amount of revs/basket size per customer, and other features and potential roadmap moving forward. As staking to our validator is such a high revenue-generating feature and extremely easy to execute from a user journey perspective, this feature takes the spotlight in terms of where we want to be driving users as a first step to get people earning and using our app.

During the last two weeks, we have spun up a consumer funnel and started testing new marketing initiatives on our platform to drive both warm and cold customers to the Cosmos validator. We are excited to see the initial results of that marketing push next week and tweak activations towards validator staking from there!

Roadblocks:

One of the most significant roadblocks has been the need for formal documentation related to TaxiStake validators/services. This documentation would enable us to synthesize and package the Whitelabelled DAO validator value proposition much better than we can actively do now.

There are some general claims we can make of “support decentralized public goods while validating”, but part of the messaging that gives us the most differentiation is the specifics of what makes TaxiStake (ShapeShift) validators some of the best in the business. We made good headway during our recent meeting in deepening that understanding on our end.

Our Stance on Atom delegation from the DAO

TaxiStake says they will re-delegate 10% of their revenue back to the ShapeShift validator, we think the DAO should consider doing the same, choosing to re-delegate a portion of the ATOMs earned to ensure a solid base of delegated ATOMs and to keep the ShapeShift validator in the active set. If TaxiStake is doing this, we should at least match the re-delegations since it’s the most prominent revenue-driving feature and also benefits our users (who will continue to earn if we maintain active set status–another marketability point we strongly believe in).

On Staking Goals:

After looking at the data presented in the proposal above, it’s clear that the DAO would benefit from setting goals around validator staking. During our most recent conversation, we clarified verbiage around KPI’s and growth rates, and we appreciate your transparency and communication regarding that. From the marketing team’s perspective, high % MOM targets can quickly become unobtainable due to parabolic compounding, particularly under current market conditions. Perhaps we might consider identifying reasonable pessimistic, realistic, and optimistic total staking milestones to aim for as a community? We would love to hear your thoughts there.

Validator Voting

At this time, our marketing copy refers to TaxiStake as the ShapeShift DAO validator. This is an important selling point for the product and implies participation in a DAO activity. Given the significance of ATOM 2.0, the marketing team would like clarity on how we should expect to communicate critical voting decisions by the ShapeShift DAO validator. Further, has there been any discussion about how this issue intersects with governance, more broadly speaking?

Marketing would like to dive into a content strategy around the DAO validator that positions us to educate our audience and drive new stakers to delegate their ATOM. We look forward to furthering discussion on how we can collaborate and succeed together!

Gm Marley and TaxiStake team!

Apologies for the long turnaround for this reply–we wanted to make sure we had adequately synthesized our thoughts related to this (and see it moved to snapshot an hour ago but are hoping that some of these comments can still be addressed as we think they foster good discussion moving forward).

Firstly, I’d like to thank you on behalf of the marketing team for connecting with us recently to talk through some of TaxiStake’s value props and to clarify your perspective on this proposal! We see your motivations and have taken strides in marketing the DAO validator now that the base functionality is built out and our app has reached parity.

We can commit to 2 postings activations (I will refer to them as “activations” for the sake of having a broader term as it better suits some of our marketing plans/roadmap) per month. This commitment for future campaigns and activations with TaxiStake and the validator feature is driven by a recent internal marketing analysis of potential growth ability, amount of revs/basket size per customer, and other features and potential roadmap moving forward. As staking to our validator is such a high revenue-generating feature and extremely easy to execute from a user journey perspective, this feature takes the spotlight in terms of where we want to be driving users as a first step to get people earning and using our app.

During the last two weeks, we have spun up a consumer funnel and started testing new marketing initiatives on our platform to drive both warm and cold customers to the Cosmos validator. We are excited to see the initial results of that marketing push next week and tweak activations towards validator staking from there!

Roadblocks:

One of the most significant roadblocks has been the need for formal documentation related to TaxiStake validators/services. This documentation would enable us to synthesize and package the Whitelabelled DAO validator value proposition much better than we can actively do now.

There are some general claims we can make of “support decentralized public goods while validating”, but part of the messaging that gives us the most differentiation is the specifics of what makes TaxiStake (ShapeShift) validators some of the best in the business. We made good headway during our recent meeting in deepening that understanding on our end.

Our Stance on Atom delegation from the DAO

TaxiStake says they will re-delegate 10% of their revenue back to the ShapeShift validator, we think the DAO should consider doing the same, choosing to re-delegate a portion of the ATOMs earned to ensure a solid base of delegated ATOMs and to keep the ShapeShift validator in the active set. If TaxiStake is doing this, we should at least match the re-delegations since it’s the most prominent revenue-driving feature and also benefits our users (who will continue to earn if we maintain active set status–another marketability point we strongly believe in).

On Staking Goals

After looking at the data presented in the proposal above, it’s clear that the DAO would benefit from setting goals around validator staking. During our most recent conversation, we clarified verbiage around KPI’s and growth rates, and we appreciate your transparency and communication regarding that. From the marketing team’s perspective, high % MOM targets can quickly become unobtainable due to parabolic compounding, particularly under current market conditions. Perhaps we might consider identifying reasonable pessimistic, realistic, and optimistic total staking milestones to aim for as a community? We would love to hear your thoughts there.

Validator Voting

At this time, our marketing copy refers to TaxiStake as the ShapeShift DAO validator. This is an important selling point for the product and implies participation in a DAO activity. Given the significance of ATOM 2.0, the marketing team would like clarity on how we should expect to communicate critical voting decisions by the ShapeShift DAO validator. Further, has there been any discussion about how this issue intersects with governance, more broadly speaking?

Marketing would like to dive into a content strategy around the DAO validator that positions us to educate our audience and drive new stakers to delegate their ATOM. We look forward to furthering discussion on how we can collaborate and succeed together!