[Ideation] SCP-128 - Enable opt-out donations instead of fees

[willy]

For more background and discussion, please see [Incubation] Enable opt-out donations instead of fees

Summary

This proposal will grant authority to the leaders of the Product and Engineering Workstream to implement optional, opt-out donations for any features offered in the ShapeShift App. The optional donations will be clearly visible in the UI (not hidden), and users will have the option to save their preference on their device. As long as both the Product and Engineering workstream leader agree, they will have the power and flexibility to implement these donations however they determine is in the best interest of the DAO until this authority is revoked.

Abstract

This proposal was created as a counter proposal to Added fees for Thorchain swaps.

Currently, ShapeShift’s application (https://app.shapeshift.com or https://shapeshiftdao.eth.limo/) is an open-source public good that does not add any additional fees onto protocols or services that it integrates. As one alternative business model, the DAO has established affiliate revenue relationships with multiple partners including fiat on/off ramps, DEXs, Name services, Yield aggregators, swag stores, hardware wallets, and validator operators. Once ShapeShift finds product market fit and attracts more users, this model could enable ShapeShift’s application to remain free forever and generate more than enough revenues to cover expenses and fund growth.

“Free” is a powerful concept in and of itself, and the community has the unique opportunity to take this one step further by not only not adding fees, but also sustainably rewarding users who generate revenue for the DAO via their activities in the app with FOX tokens. This could be a disruptively powerful model that could make ShapeShift objectively the best way to use a growing number of crypto protocols and services. This is a model in which users would have to be crazy to not use ShapeShift. This is a model that makes me bullish on the ShapeShift community’s ability to buidl the ultimate interface to the decentralized universe and cultivate unstoppable/unforkable network effects.

I talk about this model in depth in this presentation from ETHDenver 2021: https://www.youtube.com/watch?v=y-TOlyguMjQ

While the DAO is actively generating ~$10k/mo via the affiliate revenue model, current operating expenses are closer to $200k/mo, and the DAO is not profitable with current usage levels and market conditions. With the hope of extending runway and one day being profitable, a proposal has been made to experiment with adding fees onto protocols that ShapeShift integrates. While this proposal has positive intentions to increase the chances of ShapeShift’s survival and success, multiple community members and contributors have expressed concerns that adding any fees could have the opposite effect.

To summarize some of the arguments against the fee experiment:

• Fees alone are not a solution. Ultimately the DAO needs to attract an order of magnitude more users, and fees make it more difficult to attract and retain users.
• An experiment is not needed to prove that users would prefer not to pay fees, and it will be difficult to draw any conclusive results from the experiment. If usage did increase with fees, how could one know how much usage there would be without fees?
• Pursuing grant funding for integrating features that are already aligned with the DAO’s roadmap has the potential to generate far more revenue than fees during the bear market, and abandoning the no-fee public good model could arguably harm the DAO’s grant-fundability

To summarize the arguments for no fees:

• There is no issue with the current business model. Fees or no fees, the DAO needs to attract an order of magnitude more users. By remaining free (or even better, being free and rewarding users who generate revenue for the DAO with FOX), the DAO has the greatest potential to not only survive the bear market, but thrive, and achieve the community’s vision of building the ultimate interface to the decentralized universe.

In addition to fees being a race to the bottom, ShapeShift’s application is entirely open-source. If the DAO did manage to achieve product market fit, it would be very easy and compelling for a single engineer to fork ShapeShift, launch their own governance token, and pursue the no fees + governance token reward strategy. If someone did this, their offering would be objectively better, and ShapeShift would be at a risk of a vampire attack, similar to when SushiSwap forked Uniswap

• and sucked out the majority of their TVL in the course of 1 week with minimal effort. This risk is not a fantasy, but the status quo; whenever any open-source protocol in Web3 realizes product market fit, these forks should be expected. With opt-out fees, the DAO would be in a better position to defend against this attack vector.
• The DAO has not yet attempted the no fee + FOX reward model, largely because it spent the first 1.5 years of its existence focused on rebuilding/open-sourcing the legacy application and architecting it for full decentralization. Before throwing in the towel and adding fees on top of decentralized protocols, the DAO should experiment with rewarding users who generate revenue for the DAO with FOX tokens.

Through the lively community debate(s) on whether or not to experiment with adding fees, a new idea emerged (h/t @graymachine and @hornyfox) to implement optional, opt-out donations. This is the same model that both Giveth and Gitcoin have implemented that enables them to generate revenue and build network effects without mandatory fees, arguably much more than they would generate with fees. For such a controversial, divisive topic, I see this proposal as a solid middle ground which satisfies many of both camps’ desires while also alleviating many of their concerns.

Motivation

1. More valuable data - The data ShapeShift will get from whether or not users are opting-out of fees will give a good idea as to how much users really care about fees. On the other hand, if ShapeShift simply enables fees on THORChain swaps as currently proposed, it will be difficult to draw any conclusions.
2. More public goodness - ShapeShift can remain a free, open-source public good, which is a powerful meme, particularly in Web3, and particularly as a community-owned DAO. It also doesn’t require updating existing marketing messaging, and mitigates the risk of upsetting community members or users that were promised ‘no fees forever.’
3. More revenues - The opt-out approach has the potential to generate more revenues than mandatory fees, while also alienating fewer users. Further, this proposal grants authority to add opt-out donations to more features than just THORChain swaps, and also doesn’t require removing existing affiliate revenue streams. If this proposal passes, ShapeShift could potentially offer opt-out donations, still generate affiliate revenues, and reward users that generate revenue for the DAO with FOX. Remaining as a public good could also support the DAO’s efforts to continue securing grants.
4. Less fees - Another motivation for this proposal is to offer a compelling alternative to adding mandatory fees and to buy time for the community to experiment with the no fees + FOX rewards model.

Specification

The optional donations should be implemented in a way such that the donation amount is clear/not hidden, users can easily opt-out of donating, users can save their preference to opt-out locally on their devices, and no additional transactions are required from the user.

This proposal is purposefully left vague to give flexibility to the Product and Engineering workstreams to implement the optional donations on whichever features and in whichever way they best see fit. Both the product (Diggy) and engineering (0xdef1cafe) workstream leaders expressed in the Incubation post that they are not worried about the lift nor UX implications and that if this proposal were to pass, their workstreams would do the necessary work.

Benefits

1. Increase revenues and runway
2. Maximize user growth and retention/minimize user friction
3. Maximize grant-fundability
4. Maintain value prop of “free,” public good status, and meme-power
5. Buy time to experiment with no fees + FOX rewards, which could help the DAO in achieving strong and defensible product market fit

Drawbacks

1. Even though donations are optional, they could add a slight amount of friction to the UX relative to the current status quo of no fees nor opt-out donations
2. It’s possible that optional donations would result in less revenues than mandatory fees
3. Mandatory fees would not be added to THORChain swaps, and the DAO would not be able to see the results of that fee experiment unless another proposal was passed in the future

Vote

For: Implement optional, opt-out donations rather than mandatory fees

Against: Do not implement optional, opt-out donations

Voting for this ideation proposal is live on SnapShot until Feb 9th at 11:59pm CST: https://snapshot.org/#/shapeshiftdao.eth/proposal/0x3382a4363b21fec3a992b1edb9c5caa78391e265121c248c6d81d305ef246f3e

Feedback is welcome and appreciated.

[seven7hwave]

Thanks for articulating this alternate fee strategy, @willy .

I really love the idea of experimenting with opt-in (or opt-out) fees; now is a great time to be running all manner of experiments, and I can see the rationale behind what you’ve laid out here. As you point out there’s also a track record of some DAO’s using this approach successfully, and it would be very interesting to see how ShapeShift’s users reacted to this.

That said, I’ll be voting against this counter-proposal for two reasons:

1.) It would specifically prevent us from implementing the TC fee strategy that @0xean has championed. IMO there’s very little downside if that approach doesn’t work, and a good deal of useful data and perhaps even some revenue if it’s successful.

Adding fees to a very specific part of the platform is not like crossing the Rubicon; it doesn’t commit the DAO to a fee-driven approach in the future. The vast majority of the DAO’s users won’t even be aware of this change–or if they are, they won’t be directly impacted. If the experiment doesn’t work out, we could remove those fees and move forward with some invaluable insights about those users. If some of those users leave, well the DAO isn’t benefiting from their activity anyhow.

The TC community is very positively aligned with SS (as most recently seen by our excellent dual-ecosystem chat last Friday), and I think the reason TC users like us is not the lack of fees; it’s the close ethos alignment and our sexy UI/UX. Thus there’s reason to believe that they would support some nominal fees as laid out in the the TC proposal.

2.) There remains a good deal of ambiguity about how both exactly this alternate proposal would be implemented, and the associated lift from engineering. Not sure what this would entail, but I know it would be a lot more than the one line of code necessary for TC fees that @0xdef1cafe has outlined for that proposal. Regarding expectations and creating a measurable/testable experiment, it would be helpful to see projected earnings from donations versus expect cost to implement. Similarly, based on the incubation discussion for this proposal it seems like an open/unresolved discussion whether adding fees would require an extra TX signed by the user (which would negatively impact UX).

If the questions and ambiguities above were answered/addressed, I would enthusiastically support the addition of donations or optional fees across the platform so long as it also gave room to implement community-approved TC fees.

(I understand that the main point of this proposal is to avoid having TC fees added, but this is something to consider moving forward: even if TC fees are approved, opt-in/out-out fees could be an excellent experiment to try next!)

[Giantkin]

let me take a stab at this.

2. it was mentioned in another post that Def1 and Diggy talked about this and agreed it wouldnt be much

of a lift to get done. (i dont remember details)

1. yes, this is to prevent the FEE on Thorchain, specifically, as this would be in place of that. so that users could decide on their own, instead of being forced to pay the fee. Going the Fee route, we have to change how we are setup: ie: marketing, and mindset. We would not be Fee less anymore, and couldnt advertise as such. changing our landscape.

it might not be a permanent choice, but it could really hurt us in the moment. while this proposal, doesnt hurt us at all, and would show if the nofee route is viable or not, without any Course changes.

Just my 2 sats.

[seven7hwave]

Ahh as I reviewed the incubation post I had it sorted in a way that I didn’t see defi’s response implying the engineering lift not being a big deal. Thanks for pointing that out @Giantkin. Regarding the multiple TX’s thing–specifically explored in the back-and-forth between willy and 0xean–I wouldn’t say we collectively came to a conclusion about whether that’s avoidable in most cases. Perhaps worth further discussion before deciding on a course of action here?

I don’t think no fees is what makes (or could make) ShapeShift special. In my experience, most users are more than happy to pay a small fee for a reliable and unique product/service. The reason for experimenting now is that our current course of action hasn’t produced meaningful revenue (and at the same time, the no-fee value prop has not created a steadily growing user base in either bull or bear markets). So hey, let’s try a different approach without having to be married to it.

I can’t speak for Marketing, but it seems like it wouldn’t be a huge switch to modify the everything-is-free messaging. (The word “free” only appears on the home page once; it’s not the DAO’s core selling point). The foundation of what we do relies on attributes like self-custody, sexy UI/UX, and multi-chain functionality–all elements what would remain if we added TC fees.

Again, I love this opt-in idea (and even more-so if it’s practical to integrate across the platform). But there’s an opportunity cost IMO in not experimenting now with TC fees. By enabling optional fees we’re answering one question (what will users choose to do, and how much revenue can the DAO earn, if there are optional fees), but not answering another question (what will users do, and how much revenue can the DAO earn, if there are added fees). Mandatory fees very well could be a sustainable and viable business model for the DAO–but we’ll never know if we don’t experiment.

[Giantkin]

i’d like to know if we could try the no fee experiment first. its easier path to me, we are finally ready to go down that path that we’ve been talking about doing, after doing the Parity stuff for so long.

if we do the Fee option, theres no reason to even look at the donation idea. Well, maybe someone with better wordsmithing skillz can get you to see the light!

[seven7hwave]

To the contrary, I think we can (and perhaps should) experiment with both! We can get some meaningful data with added fees over on TC, and at the same time experiment with optional fees across parts of (or all of) the rest of the platform. They’re not mutually exclusive.

[Giantkin]

well, we get affiliate fee’s on the other aspects. so the donation part is for the Thorchain part mainly. could be used for others. Be a bit dbl dipping if we put it on other items wouldnt it?

[willy]

Thanks for the great questions @seven7hwave! Really appreciate you keeping an open mind and making it clear what you’d need to see to support this proposal. Thank you @giant for the assistance responding too (couldn’t agree more)!

1. It’s up for debate, but here are the main downsides I see from the fee experiment:

• Fees will make it harder to attract users (vs "completely free", which is a very powerful concept embedded deeply in human psychology). It also makes it more difficult to retain both existing and new users.

While I admit that we don’t currently know exactly how much harder added fees (and no longer being completely free) will make it to attract users, I do not see how the fee experiment will actually give us any useful data. If we still manage to see growth, how could we know how many users we would have without fees? I have asked this question multiple times and have yet to hear any response. Contrast this with the optional donation experiment. We will be able to see how many users are executing transactions with the optional donations vs how many are opting out. This will give us more useful data without the risk of hindering user growth, which ultimately is the KPI that needs the most attention and support in order to meaningfully grow revenues.

While you’re right that enabling fees for this experiment does not commit us to charging fees forever, I do think there are some significant downsides worth considering:

1. Losing users that we may never win back
2. Losing community members that we may never win back
3. Losing the DAO's public good status, which we've maintained since genesis and which adds hard-to-quantify value to the DAO's mission/vision, reputation, differentiation, ability to attract community members, grant-fundability, etc. ; Similarly, losing this status could immeasurably harm each of these factors.
4. Needing to update marketing messaging around "Free" which we use in many places, some of which cannot be updated (ie. old tweets)
5. Makes it more difficult to negotiate affiliate-revenue partnerships. Partners may say "you're adding fees on this protocol, why not add extra fees to ours too."
6. Once fees have been enabled, I do think it will be more difficult to make the argument to disable them. Thinking from first principles, I do not believe that fees are an ingredient to the ultimate interface to the decentralized universe and that they are antithetical to the DAO's current vision, and personally have much less confidence in ShapeShift's ability to achieve its vision if fees are added vs if ShapeShift implements no fees & FOX rewards.

Last thing I’ll say here is that while I agree that there is strong alignment between THORChain and ShapeShift’s community and that we have the sexiest UX, I do not think that is a very defensible competitive advantage, especially with all of our UI/UX being open-source. Any interface that integrates THORChain is likely to be aligned with THORChain’s values, and there are already some great UI’s out there such as TrustWallet, who recently integrated THORChain swaps and is not adding any fees. While I think ShapeShift can and does have the best values and the best UX, I do not think that would be sufficient for us to win, particularly in a world where a single engineer could fork shapeshift, deploy a new DAO and governance token, and launch a UI that works just as well, but is objectively better because it has no fees AND you can earn their shiny new governance token by executing txs that generate revenue for the new DAO’s treasury.

2. The only meaningful difference in engineering lift between the TC fee strategy and the optional donation strategy is the UI for users to opt-out of donating, which can be embedded within the trade widget. The implementation on the fee side is the same, and optional donations can be implemented everywhere that added fees are supported in the same fashion. The truth is, how interface fees are implemented across protocols and services varies. Some protocols don’t have any built in support for interface fees, and for these, the only way to collect fees would be to have users execute multiple (or batched) txs. Multiple or batched txs is not what I’m advocating for for optional donations, and I’m happy to see that @diggy would also not support this. My proposal would give @diggy and @0xdef1cafe authority to implement optional donations wherever and however they see fit (as long as they agree).

I hope this addresses your questions/concerns, but please let me know if any still remain. If you’re still on the fence, I would ask that you support the proposal for optional donations instead of fees as the 1st experiment. This will buy enough time to implement the 2nd experiment: no fees + FOX rewards, which can be prioritized after phase 1 of the roadmap is completed and more of the app’s core groundwork has been laid. If one month after implementing no fees & FOX rewards, we’re not seeing growth trend in the direction we feel it should be, then I will support the fee experiment alongside you. All of this should take less than 6 months, which means it could be completed well within our current stable runway while still leaving ample time to experiment with fees. Honestly, I’m still not sure why even in that world we would want to experiment with fees because I do not believe adding fees on top of decentralized protocols is a compelling model for any open source interface (unless that interface figures out some other way to generate strong & defensible network effects), but I’m so confident that no fees + FOX rewards will work, that I’m willing to take the bet.

[willy]

Thanks for the great questions @seven7hwave! Really appreciate you keeping an open mind and making it clear what you’d need to see to support this proposal. Thank you @Giantkin ant for the assistance responding too (couldn’t agree more)!

1. It’s up for debate, but here are the main downsides I see from the fee experiment:

• Fees will make it harder to attract users (vs "completely free", which is a very powerful concept embedded deeply in human psychology). It also makes it more difficult to retain both existing and new users.

While I admit that we don’t currently know exactly how much harder added fees (and no longer being completely free) will make it to attract users, I do not see how the fee experiment will actually give us any useful data. If we still manage to see growth, how could we know how many users we would have without fees? I have asked this question multiple times and have yet to hear any response. Contrast this with the optional donation experiment. We will be able to see how many users are executing transactions with the optional donations vs how many are opting out. This will give us more useful data without the risk of hindering user growth, which ultimately is the KPI that needs the most attention and support in order to meaningfully grow revenues.

While you’re right that enabling fees for this experiment does not commit us to charging fees forever, I do think there are some significant downsides worth considering:

1. Losing users that we may never win back
2. Losing community members that we may never win back
3. Losing the DAO's public good status, which we've maintained since genesis and which adds hard-to-quantify value to the DAO's mission/vision, reputation, differentiation, ability to attract community members, grant-fundability, etc. ; Similarly, losing this status could immeasurably harm each of these factors.
4. Needing to update marketing messaging around "Free" which we use in many places, some of which cannot be updated (ie. old tweets, articles, emails, podcasts, etc.)
5. Makes it more difficult to negotiate affiliate-revenue partnerships. Partners may say "you're adding fees on this protocol, why not add extra fees to ours too."
6. Once fees have been enabled, I do think it will be more difficult to make the argument to disable them. Thinking from first principles, I do not believe that fees are an ingredient to the ultimate interface to the decentralized universe and that they are antithetical to the DAO's current vision, and personally have much less confidence in ShapeShift's ability to achieve its vision if fees are added vs if ShapeShift implements no fees & FOX rewards.

Last thing I’ll say here is that while I agree that there is strong alignment between THORChain and ShapeShift’s community and that we have the sexiest UX, I do not think that is a very defensible competitive advantage, especially with all of our UI/UX being open-source. Any interface that integrates THORChain is likely to be aligned with THORChain’s values, and there are already some great UI’s out there such as TrustWallet, who recently integrated THORChain swaps and is not adding any fees. While I think ShapeShift can and does have the best values and the best UX, I do not think that would be sufficient for us to win, particularly in a world where a single engineer could fork shapeshift, deploy a new DAO and governance token, and launch a UI that works just as well, but is objectively better because it has no fees AND you can earn their shiny new governance token by executing txs that generate revenue for the new DAO’s treasury.

2. The only meaningful difference in engineering lift between the TC fee strategy and the optional donation strategy is the UI for users to opt-out of donating, which can be embedded within the trade widget. The implementation on the fee side is the same, and optional donations can be implemented everywhere that added fees are supported in the same fashion. The truth is, how interface fees are implemented across protocols and services varies. Some protocols don’t have any built in support for interface fees, and for these, the only way to collect fees would be to have users execute multiple (or batched) txs. Multiple or batched txs is not what I’m advocating for for optional donations, and I’m happy to see that @diggy would also not support this. My proposal would give @diggy and @0xdef1cafe authority to implement optional donations wherever and however they see fit (as long as they agree).

I hope this addresses your questions/concerns, but please let me know if any still remain. If you’re still on the fence, I would ask that you support the proposal for optional donations instead of fees as the 1st experiment. This will buy enough time to implement the 2nd experiment: no fees + FOX rewards, which can be prioritized after phase 1 of the roadmap is completed and more of the app’s core groundwork has been laid. If one month after implementing no fees & FOX rewards, we’re not seeing growth trend in the direction we feel it should be, then I will support the fee experiment alongside you. All of this should take less than 6 months, which means it could be completed well within our current stable runway while still leaving ample time to experiment with fees. Honestly, I’m still not sure why even in that world we would want to experiment with fees because I do not believe adding fees on top of decentralized protocols is a compelling model for any open source interface (unless that interface figures out some other way to generate strong & defensible network effects), but I’m so confident that no fees + FOX rewards will work, that I’m willing to take the bet.

[0xdef1cafe]

A few comments here

1. Giveth and ShapeShift is not an apples to apples comparison. One is a donation platform where you have existing altruistic users with a giving mindset, the other is a portfolio/wallet where we can’t make the same value judgement about our users and their intentions. Accordingly I don’t think the anecdata is applicable.

2. The summary and specification sections of this proposal are far too vague. In contrast to the THORChain swap fee proposal which is very tightly defined, i.e. x basis points on swaps on y date, this is more of a qualitative suggestion than a concrete proposal. Semi-rhetorical questions; could this apply to plain sends? How does a donation work without a contract or multiple txs? What chains? What multisig will own the addresses? Etc etc.

3. Let me clarify my previous comments - the UI is very simple, the behind the scenes is a much bigger lift, for a poorly defined upside here.

I’d like to see governance vote on well defined experiments with clear outcomes, such as fees on THORChain swaps, and don’t believe this is an example of such.

I’ll be voting against this proposal too.

[willy]

@seven7hwave

I don’t think no fees is what makes (or could make) ShapeShift special. In my experience, most users are more than happy to pay a small fee for a reliable and unique product/service. The reason for experimenting now is that our current course of action hasn’t produced meaningful revenue (and at the same time, the no-fee value prop has not created a steadily growing user base in either bull or bear markets). So hey, let’s try a different approach without having to be married to it.

I do think no fees is part of what makes ShapeShift special, but to your point, it’s not that unique. If anything, not adding fees on top of decentralized protocols is the status quo, particularly for open-source web3 projects, and adding fees would make ShapeShift special in the wrong way. On the flip side, I do think that not adding fees and rewarding users that generate revenue for the DAO would be very special, especially as a community-owned DAO that can reward users with voting power. Not only is it special, but I truly believe that this model has disruptive potential, and is ShapeShift’s best hope at achieving its vision of being the ultimate interface to the decentralized universe. Similarly, I feel that adding fees does irreparable harm to ShapeShift’s odds of success.

The reason for not experiment with fees now is that we’re so close to being able to experiment with no fees + FOX rewards. To your point, we’ve been free for a while and aren’t seeing meaningful revenue nor steadily growing user base currently. Fees will not solve either of these problems though, and in fact will only make the user problem worse. Fees are not a feature, and while we don’t have the data for exactly how much (nor would we after the fee experiment), they will objectively make it harder to attract and retain users. I’m all for experiments, but we should experiment with things that can bring us users (ie. no fees & FOX rewards), not with things that we know will only make this more difficult.

ShapeShift actually was seeing steady growth leading up to the DAO launch, and the growth began at the same time that we removed fees. We integrated 0x in January 2021 and THORChain in April of 2021 and saw growth trend up to 150k MAUs and over $50M trade volume in July. Since then, we churned users for 18 months while the DAO focused on rebuilding the application to be fully open-source and architected for decentralization. While it took longer to get to parity and complete the migration than anyone anticipated, it should not come as a surprise that we lost users over this period and are not yet seeing substantial growth.

The reason we’re not seeing growth is not that we haven’t added fees, but that we don’t currently have product-market fit and are not the best at anything. And that’s okay. We accepted that trade-off when we made the decision to rebuild. Now that we’re finally past parity, we have the opportunity to be the best at a number of compelling features.

Here are some of these opportunities available to the DAO in the next 5 months that were discussed at the DAOWOW.

Whether or not we’re good enough to justify added fees on top of decentralized protocols that users can access elsewhere for free, I’m not so bullish on. However, if we can be the best at those features and be free, I’m very bullish on the DAO’s ability to achieve product-market. Further, the DAO has the unique opportunity to be objectively the best way to use a growing number of protocols or services if the community agrees not to add fees. This will pour fuel on the fire, and is the strategy that I personally believe has the greatest chance of helping the DAO not only survive this bear market, but thrive, and achieve its vision. This is what gets me excited and what I’ve been waiting to experiment with for over 1.5 years now. I would hate to see the community throw away that opportunity now for an immaterial amount of revenue and for inconclusive data that tells us what we already know: all things created equal, users would prefer to not pay extra for things they can easily get for free elsewhere.

[willy]

Thanks @0xdef1cafe, I know this topic is passionate to you as well. I’ve responded to each point and offered a compromise at the bottom. Looking forward to hearing your thoughts.

1. I agree Giveth & ShapeShift are different, but I thought one of the leading arguments for experimenting with fees was that users do not mind paying a small fee, or that fees are “inelastic.” If that is indeed the case, then we can add optional, opt-out donations, and most users will not opt out (see the power of defaults). If that is not the case, then we will lose users and make it more difficult to attract and retain users.

2. I intentionally left it vague to give room for anyone in the community to suggest other places we could enable the optional donations, subject to your and @BeDiggy’s approval (like with any feature that we add). If you both agree to apply it to plain sends, then yes, that would be within the guidelines of this proposal. Technically the product & engineering workstreams already have authority to enact this; this proposal just gives clear signal from the community that they want you to (or rather, would prefer this optional donation experiment over mandatory fees). The same challenges you listed apply to any feature that we would want to add fees to, and were similarly not specified in the proposal for added fees. If you or anyone prefers that I update the final proposal to specifically be for adding optional donation of 25 bps to THORChain swaps, I would be more than happy to update the proposal.

3. Awesome, glad to hear you agree that the UI will be simple. Why do you think the lift behind the scenes will be bigger? It should be identical to the lift for mandatory fees.

Just because an experiment is well defined does not mean that it’s a good one. Experiments are only as valuable as the data they collect and how that data is then used to inform decisions. I will ask again, what valuable data will we get from the fee experiment that could inform future decisions? Most importantly, if we do still see growth after enabling fees, how will we know how much growth we’d be seeing without fees?

I have expressed the many arguments against mandatory fees to you many times, so will not repeat them. I just ask you to keep an open mind and will make the same request/offer that I made to @seven7hwave:

“I ask that you support the proposal for optional donations instead of fees as the 1st experiment. This will buy enough time to implement the 2nd experiment: no fees + FOX rewards, which can be prioritized after phase 1 of the roadmap is completed and more of the app’s core groundwork has been laid. If one month after implementing no fees & FOX rewards, we’re not seeing growth trend in the direction we feel it should be, then I will support the fee experiment alongside you. All of this should take less than 6 months, which means it could be completed well within our current stable runway while still leaving ample time to experiment with fees.”

What do you say @0xdef1cafe? Even if we don’t agree, can we make a compromise?

[seven7hwave]

Thanks for the detailed responses @willy - will spend some time digesting those.

In terms of your question here: “I will ask again, what valuable data will we get from the fee experiment that could inform future decisions?”

I’d say it’s simply a matter of seeing if adding nominal fees can produce a sustainable revenue stream for the DAO. The valuable data would be a.)how many users remain after adding fees, and b.) how much revenue the DAO is earning via that route.

It’s true that we can’t run a proper A/B test or cohort analysis in this case, because we don’t know about the hypothetical growth in a non-fee scenario. But at least we’d be able to see if this was a viable approach. And meanwhile, its very limited scope and clearly-defined testing conditions lend itself nicely to a proper measurable experiment.

From a tokenomics perspective, one interesting potential benefit of fees is the ability of the DAO to distribute them, via FOXY, to FOX holders. That’s a bit different from the fee use case most community members currently have in mind, which is to simply extend the runway using that revenue. The runway focus makes sense right now given the bear market, but fee redistribution could be a powerful value-accrual mechanism down the road.

The public good angle is interesting, and it certainly sounds good on paper. But has the DAO seen quantifiable benefits from that positioning? ShapeShift has a great reputation for being a champion of the core crypto values; that would be true whether or not we’re a “public good.” Similarly, have we seen community members join because they view us as a public good? Or perhaps you’re being more forward-thinking here.

There are many other points of discussion in this debate, and there was already a chat about this in the incubation post…but it certainly is an interesting existential question.

A few points/questions about FOX rewards, since this is so central to your vision:

Note that fees and FOX rewards aren’t mutually exclusive; the latter could offset the former for fee-sensitive users. In such a scenario, the DAO would have a revenue stream while still being able to incentivize usage. In other words, it’s not like adding fees automatically prevents the DAO from adding FOX rewards down the road.

• On a more fundamental note…I understand your vision with sprinkling FOX rewards, and you paint a very compelling picture, but how sustainable do you think this approach is? There are some important questions to consider with respect to rewards:

  How much FOX per user action would it take to incentivize usage? The DAO of course has ample FOX in its treasury, but do we have any sense of the USD amount per action this would require?

• How many users would simply immediately sell that FOX on the open market, and how would that price pressure impact the dynamics of the rewards program? A negative feedback mechanism could arise, whereby users are selling their FOX rewards, which pressures the price, which means the DAO has to issue a higher amount of FOX per rewardable action.

How could users be incentivized to hold that FOX , and how would we avoid a “mercenary user” situation akin to mercenary LP’s.?

• (FOXy would presumably be helpful here but is this sufficient?).

In a sense, the FOX rewards would be very similar to a liquidity mining program; it entails a steady outlay of FOX from the treasury, raises the risk of mercenary actors taking advantage of the program, and could lead to price pressure on FOX if it were over-utilized.

[Giantkin]

the sprinking fox is an added incentive on its own. not core to the idea. just a way to push growth faster/bigger. (imo) as the Donation is the center first. the Fox sprinkler, similar to the previous FoxGas setup, that was one of my favorite aspects.

[willy]

Thanks again for the open mind and excellent questions @seven7hwave.

@seven7hwave

I’d say it’s simply a matter of seeing if adding nominal fees can produce a sustainable revenue stream for the DAO. The valuable data would be a.)how many users remain after adding fees, and b.) how much revenue the DAO is earning via that route.

A) I agree that the fee experiment will give us some idea of how many users would remain after adding fees. I’d rather not find the answer to that question though, because the one thing I know is that it will be fewer users/volume than we’d have without the experiment. Rather than "“how many users would remain if we added fees,” the questions I’d prefer we try to answer are “how can we make shapeshift the best and attract the maximum number of users?” ; in the meantime I would also settle for “how can we make a meaningful impact on the DAO’s runway?”

B) If we agree that fees alone will not bring more users or volume, then we can calculate the maximum answer to this question at any time without running the experiment. at November’s peak that was $8,750/mo, which is far from a sustainable source of revenue for the DAO at current usage levels. If we currently had usage levels or volumes in which fees would generate enough revenue to make a meaningful impact on runway, I would be all about the fee experiment. That said, if we did already have those usage levels, we would likely have product-market fit, and the affiliate model would be generating meaningful revenues too (which it already has, albeit more during the bull market). The truth is, we need an order of magnitude more users, and for that we need to find product-market fit, and the fee experiment will not help either of these nor have a meaningful impact on runway at current usage levels.

While I agree that fees offset by FOX rewards are better than fees alone, I think there’s a major difference between that and free + FOX rewards. While I would be more open to a proposal for offsets than fees alone, I also don’t think it’s the right time to prioritize this as I wouldn’t expect that feature to attract users or make ShapeShift the best. Even if the value of the FOX reward covers 100% of the fees, the user is breaking even, or back to the free level they can get from a growing number/quality of interfaces, including the protocol or service itself. On the other hand, no fees + FOX rewards gives ShapeShift the opportunity to be objectively the best way to use these protocols, a model where any user who knows about this would have to be crazy to not use ShapeShift for any of the partnerships where we have affiliate revenues in place.

To your questions on the FOX rewards, which I agree are very important… please note that this is all my opinion and I am just one community member:

• How much FOX per user action would it take to incentivize usage? The DAO of course has ample FOX in its treasury, but do we have any sense of the USD amount per action this would require?

Long term, I love the simple idea of rewarding users with FOX proportional to the amount of revenue they generate for the DAO; so if you generate $1 for the DAO, perhaps the DAO rewards you with $0.50 worth of FOX and rewards FOXy holders with $0.50 worth of FOX. This prevents any risk of gaming/sybil attacks and makes the program forever sustainable. These parameters could be tweaked by governance. In the early stages of the program, the DAO could consider doubling these figures to make the program more attractive albeit less sustainable ($1 of FOX rewards for the user and $1 of FOX rewards for FOXy for every $1 of revenue generated). Or could something fun to kick start growth… ie. double FOX rewards for the next year for the first 100,000 participants.

• How many users would simply immediately sell that FOX on the open market, and how would that price pressure impact the dynamics of the rewards program? A negative feedback mechanism could arise, whereby users are selling their FOX rewards, which pressures the price, which means the DAO has to issue a higher amount of FOX per rewardable action.

As long as the amount of FOX being rewarded to the user who generates revenue is equal to or less than the amount of revenue they generate, the community can (and should imo) use revenues to purchase FOX to both offset sell pressure and make the program sustainable. Because the % of users that will sell is never 100%, this actually turns into a positive feedback mechanism

• How could users be incentivized to hold that FOX , and how would we avoid a "mercenary user" situation akin to mercenary LP's.? (FOXy would presumably be helpful here but is this sufficient?).

Exactly, FOXy, and allocating some % of the revenues generated toward FOXy holders. This is the wei

Note that this is just an example diagram. Any of these parameters could be configured by the community. I heard a good argument at the DAO WOW for not retaining any of the revenues in the treasury and instead using 100% to purchase FOX. I would support that during a bear market, and then during a bull market, the community could consider dialing that % back to accumulate more stables.

[thesmith]

Why I support #128: It aims at a long-term run, preserving our essence in a creative way. This generates potential revenue and causes less impact than a new branding direction/discourse. if we still don’t see opensource as public good, then we need to change our organizational culture. I also see opt-out + open-source like public goods.

What if think about #131: it’s a good proposal that brings short-term solutions and also has a positive impact - from the financial point of view. However, I also understand that short-term proposals are survival triggers. (I’m not that technical guy and I may be wrong, but in my opinion charging fees might attract regulators)

[Giantkin]

I dont look around the cryptoverse much. just what others post (in discord) maybe we need to list the other setups, that have 0 fee’s ?

(i havent looked)

but just saw 2 posted about today with 0 fee’s.

@Hpayne @willy