[Ideation] SCP-166 ThorFOX, a FOX tokenomics upgrade proposal

Proposal Discussion
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Summary

The goal of this proposal is to enact an upgrade to FOX tokenomics that more closely aligns the DAO with the THORChain ecosystem of which it is a vibrant part.

As part of its operations the DAO treasury receives and holds RUNE. This proposal would upgrade FOX tokenomics by paying a portion of the RUNE the DAO receives on a regular basis as “real yield” to FOX stakers in RUNE, as well as using a portion of that RUNE to buy and burn FOX.

Abstract

The ShapeShift DAO has been building through the bear market, consistently improving the interface/product offering as well as adding a number of THORChain related features in particular (such as streaming swaps, Metamask Snaps, and soon lending). Most of the focus during that time has been on improving the product and attempting to acquire users (as it should be), however the tokenomics of the DAO have not gotten nearly as much attention. This started to change slightly with SCP-153 when the community approved using FOX as a way to get discounted fees when trading. This proposal suggests, on the back of SCP-153, that the DAO should further embrace its alignment with the THORChain community by upgrading FOX tokenomics to enshrine that alignment with RUNE and the THORChain ecosystem at large.

Motivation

ShapeShift was and is one of the earliest THORChain supporters, well before others in the ecosystem recognized its value and even before the DAO launched, ShapeShift integrated THORChain for crosschain swaps. ShapeShift has consistently supported THORChain features as they are made available and most of ShapeShift DAO’s trading volume comes from users utilizing THORChain. The main motivation here is to encourage the ShapeShift community to further embrace and strategically focus on the THORChain ecosystem as its best opportunity. One of the best ways to do that is through an upgrade to FOX tokenomics that further aligns the ShapeShift DAO and THORChain communities together.

Specification

If passed, this proposal would dictate the following:

  1. 25% of all new RUNE accumulated by the DAO treasury (from whatever source, whether donation, fees, or any other revenue stream) is paid out to FOX stakers as real yield every week (pro-rata across those who are staking). The definition of ”New” here means any revenue source that adds additional RUNE to the DAO’s treasury that wasn’t previously in the treasury prior to this proposal passing.
  2. 25% of all new RUNE accumulated by the DAO treasury (again from whatever source, whether donation, fees, or any other revenue stream) is used to buy FOX from the open market which is then burned by being sent to 0x0000000000000000000000000000000000000000
  3. The remaining 50% of RUNE would continue to be held and used by the DAO treasury as governance sees fit.
  4. In order to effectuate this new change, it will become required that in order to get FOX benefits (such as discounts on fees, rewards, and any other benefits), a user must stake their FOX in a staking contract (this staking contract can either be the current FOXy contract or a new staking contract as determined by the Product and Engineering workstreams) as well as sign a message or transaction to assign the RUNE address where their yield will be paid. It should become standard that “unstaking” FOX takes a minimum of 28 days henceforth (though the receipt asset, such as FOXy or otherwise could still be liquid and transferable).
  5. New software will need to be prioritized and built by the Product and Engineering workstreams in order to allow a user to sign a message or transaction and assign a RUNE address where their yield will be paid. The user will also need the ability to update/edit this address at future dates by signing a new transaction.
  6. The DAO multisig will effectuate these RUNE and FOX transactions on a weekly basis based on the RUNE revenue numbers from the prior week.

If this starts to see increasing success and scale (in terms of overall RUNE volume, users staking, and number of transactions needing to be made by the multi-sig on a weekly basis) then it will make sense for engineering to create a bot for use by the multi-sig to make these transactions automated and more efficient (e.g. a hot wallet which the mutli-sig fills up every week that does the transactions automatically). This is not necessary to get it going, but would become a necessary upgrade once any sort of scale increase is needed. Alternatively, if members of the community think that some version of a system to take care of these transactions should be built as a requirement of this proposal instead (perhaps with help from the FOX foundation or other external resources) then that section can be better scoped and added as a requirement to this proposal when it moves to the next governance phase.

Effectively the specification of this governance proposal would setup 3 parameters that governance could affect going forward: (1) % of RUNE accumulated that powers FOX staking yield, (2) % of RUNE accumulated used to buyback FOX from the market which is then burned and, (3) % of RUNE accumulated that is held by the treasury. While this proposal passing would set the initial starting parameters for all three of these, governance can modify this with a subsequent proposal in the future to alter any of these, including setting any of them between 0-100%.

Benefits

The major benefit to this proposal is upgrading FOX tokenomics in a sustainable way that more closely aligns the ShapeShift DAO with the THORChain ecosystem. With this alignment, the better RUNE and THORChain does, the better the ShapeShift DAO does as well. This creates ongoing yield opportunity for FOX stakers to earn RUNE (something which does not exist in many fashions outside of running a RUNE node or LPing on THORChain) and it starts to consistently burn FOX on a regular basis, all in a sustainable manner.

Another potential benefit to this proposal is that it could establish the foundation for a further upgrade to veTokenomics in regards to governance and for voting on how and where revenue the DAO earns is used on a more active basis. That is better served for a future proposal due to further complexity, but this proposal passing would setup such a natural evolution for the next tokenomic upgrade being successful.

Drawbacks

The major drawbacks of this proposal are the time and priority of the product and engineering workstreams in order to make these changes and operate the system on an ongoing basis.

It also could create some additional ongoing burden and workload for the Operations workstream who would have to field and respond to user questions and issues around this tokenomics upgrade and its effects.

There are opportunity costs to aligning with the THORChain ecosystem further, such as not aligning further with other ecosystems the DAO may wish to pursue or other engineering and product features which do not get prioritized as a result.

Finally the obvious drawback of aligning the DAO further with the THORChain ecosystem could have negative effects for FOX whenever RUNE is in a downtrend (such as in a bear market).

Vote

Voting “For” this proposal would enact the tokenomics changes for FOX as stipulated in the specification of this proposal. The initial parameters would be set to 25% RUNE yield for FOX stakers, 25% RUNE used to buy back and burn FOX, and 50% of RUNE continuing to stack in the DAO treasury. A “for” vote also serves to prioritize the product and engineering work streams to enact this proposal as quickly as reasonably possible.

Voting “For with changes” indicates that you want to see this proposal move to formal vote, but you want changes to the proposal for the final vote (that you have indicated in the forum or elsewhere what changes you want to see).

Voting “Against” this proposal would enact no changes.

This now up for ideation snapshot voting here: Snapshot

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A few notes on this proposal moving to ideation:

There was some robust discussion regarding this proposal during the RFC period that can be reviewed here: [RFC] ThorFOX, a FOX tokenomics upgrade proposal

While a lot of discussion was had, from my perspective nothing was landed on or agreed to about what changes (if any) would be made to the original draft, so the only change that was made for moving this to ideation was moving the minimum staking withdraw time from 14 days to 28 days (which is a call I am making based on the discussion so far).

There was lots of good discussion in particular about what the starting parameters should be set to, whether to add additional parameters, the staking withdraw period, whether to burn or not, and a number of other topics. While the discussion was good, there wasn’t much consensus about what any changes would look like (in fact there was varying opinions on different sides of these), so for the moment I am keeping the other drafted starting parameters the same as what was in RFC but am more than open to hearing more community feedback on any of these topics!

There is of course still time between ideation and any formal vote to discuss, weigh in on, and potentially change any of this for that next phase and regardless all parameters can be updated by governance in the future even if the proposal passes in its current form.

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https://snapshot.org/#/shapeshiftdao.eth/proposal/0x1fbe7b7aa06685c6327ad55cc17e807ca17a2e888dd94f0280546e181d75196f
is the Ideation vote

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To me this appears to still need incubation in a deeper RFC phase before going to Ideation based on the previous discussions and feedback. There was enough healthy active debate around the variables and consequences of the RFC post that to move forward without considering those changes or providing additional collaborative curation via polls to solicit feedback seems more aligned in the process of developing this proposal.

I would strongly encourage narrowing and cleaning up many of the unknowns presented in this proposal so the DAO can vote on something more precise and specific. We have had many lessons learned in vague governance language and proposals that are not fully fleshed out or that have tbd sections to be hardened post passing.

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I mean it was in RFC for nearly 2 months (when no time is required in RFC) and I have gotten feedback from other DAO leaders and community members that they would like to see it move forward in ideation so that is where it now is.

If someone wants to suggest specific changes, they can still do that now and the ideation is longer than normal at 10 days so there is plenty of time for that.

If you have suggestions @Tyler_ShapeShift about what specific things should be cleaned up or changed please post them here!

On top of that, if the community doesn’t like it in its current form they can also simply vote this down in ideation and it won’t go to formal vote, so I don’t see a problem with it moving to ideation at this juncture.

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Aight ill take that.

Thanks for continually waiting for me to get back :saluting_face: during comment period, especially over the holiday months. I want to articulate that I’ve been pushing for details so much not only because they are important, but because i really would like to see an adjusted proposal succeed in governance.

yeeting this thing to ideation without making any meaningful changes is quite disappointing.

Sure thing! :handshake:

  • As i mentioned 10 % split both ways to burn and emissions is more reasonable and easier to stomach.
  • Volume thresholds must determine the pro rata pool payout. Ideally these would be correlated, like more volume = more staking unlocks (to a certain cap), plus buckets of those caps. Thresholds gives people opportunity to blow it out of the water for engagement and hype. And clear numbers to reach are also easier for marketing.
  • probably 75 mil monthly starting volume would be good? 25 mil in October during the bear trap. 25 mil in jan so far. ( 19 TC, 4 mil cow, 1 mil others) So, if you assume a 3x into a true bull, as your modeling suggests, that could be a good starting point. This is where both of us just need other eyes and other suggestions to try and put into the first proposal vote. It’s an inexact starter that will need close monitoring.

Speaking of, who will be the owner of changing this? more importantly, monitoring their performance? That’s still missing in the proposal.

Interestingly this is exactly my point, so i’ll try to be more clear:

  • We don’t even convert said source into any sort of buffer (like successful protocol & DAOs). It would probably be prudent to actually have cash flows before there are ratios/analytics/claims/emissions on them. They aren’t a 1:1 to swap out.

We are risking 50% (as written) of our biggest rev sources (now all of them which is just mindblowing). This is not insignificant and needs to change on final proposal.

  • something akin 5 -10- 15 % of said rev at start seems much more reasonable and far less risky. I think it would get utilized quickly which would be great.
  • Assuming "potentially massive " has gotten us into enough predicaments with the best intentions. So I continue to ask the same refrain: how massive? on what timeframe? and with what math/data?

I had to think about this for weeks . While I agree that we need more research here, as the steward of a game changing idea it’s perfectly reasonable to model out all the situations you can possibly think of. Growth is energizing yet we can also be responsible about expectations. Especially when challenged by community members.

However, pushing others towards modeling isn’t particularly inline with bringing the best proposal to governance. Not doing the details and assumption challenging work and leaving it others seems careless. Posting this straight to ideation after a holidays RFC with no changes or modeling is not great.

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I’ve appreciated the discussion between us on this subject a lot so far @0xFBL - and I am sorry you feel it was yeeted without making meaningful changes, mostly its because while we had a good discussion when I reviewed the RFC thread the majority of comments were supportive of the current proposal and suggested no changes and/or suggested changes well above what I had put here. And FWIW, the change to 28 days unstaking instead of 14 was primarily a result of our discussion.

I can understand being disappointed that a number of changes you suggested were not incorporated yet, though I think the reasons why I may have disagreed with a number of the suggestions can be found in our discussion in the RFC thread. Please don’t assume this proposal being pushed into ideation as meaning that many of those changes won’t still make it in or other changes, I just wanted to move the process forward as per the governance process and generate further feedback from the larger community (instead of mainly us two) before significantly altering the goal posts of where this proposal started.

I personally think 10% is too low, but if the community gives further feedback that a number closer to this or some other starting number is better we can definitely change that. FWIW - a number of folks commented that they thought 50% was actually too low, so i still think its a fine middle ground for the start of ideation. This is definitely one of the areas where I would love to hear some additional voices chime in with thoughts on starting param numbers.

Well there is no reason this “must” be the case other than I think you strongly believe this and I hear you on that. I’ve already talked about why I don’t think we should start with volume thresholds out of the gate in the prior RFC thread, so i’ll leave it to others to read through that discussion and comment further here if they wish.

I don’t think we should have volume thresholds out of the gate as I just stated ( I think it would stop us from seeing any immediate effect of this tokenomics upgrade) but if we were to set one I would hope it would be not much higher than current volumes vs a multiplier of the current volumes. Regardless i’m not personally for starting this out with volume thresholds and I think @0xFBL and @jonisjon have beat that point to death a bit in the RFC thread, but again would love to hear other voices/thoughts on this.

This part of the proposal seems abundantly clear to me, but let me make it clearer. What this means is that any further adjustments to the params would require further governance votes; e.g. its up to governance directly! Its not delegated to a specific DAO work stream leader or commitee, I think something as important as these top level tokenomic numbers should remain only in the hands of FOX voters, but that means anyone can put up a proposal and try to change them at anytime and I personally think that is how it should be for this (but as my familiar refrain continues, would love to hear other community thoughts on this!).

This was also discussed as length in the RFC thread, but you and I have very different views of what the financial risk is here. I think a tokenomic proposal like this is more likely to help runway and the overall treasury position even more than if we just sold 50% of that current RUNE revenue into USDC at every juncture, but I can understand where reasonable folks may disagree on this. I’m not assuming anything here ultimately other than I think this upgrade is worth trying in some form and I want to hear fox holders’ feedback at this point directly through the ideation voting mechanism.

I’ve already done some work modeling this out that was shared during the RFC (mostly at the request of you and others to build a model) and we have already had some discussion in that RFC thread on this front that I encourage others to review and then weigh in on here with any thoughts/comments/suggestions they may have.

I never comitted to doing any additional modeling even though I know you requested that and I don’t honestly think that additonal modeling is going to help or sway anyone further at this juncture. I do continue to encourage others to modify the current model and argue for why that is more realistic, or do their own modeling and share that (or even better, propose an entirely different tokenomic upgrade to what is being proposed here as a counter proposal), but I am not planning to do any additional modeling on this myself at this time. I understand that may be frustrating/disappointing to you @0xFBL but I don’t think it will be meaningful for me to do that further at this time.

I don’t believe that makes this “careless”, there is no such requirement in the governance process to post models related to any given proposal, much less some requirement to continually do more models upon request from one community member, but I respect your right to ask for what you want to see and your right to call me “careless” if that is how you feel about this, certainly you have every right to downvote this during ideation if you don’t see what you want in this current proposal.

I want to address this one directly as it took me a little off guard.

If you feel this is “rushed” in any fashion, well, I really don’t think that is being fair.

Per the latest version of the ShapeShift DAO governance process: Snapshot RFC is not even a required step, and many proposals now-a-days actually “start” in ideation without any RFC at all. In this case, the proposal was in RFC for 2 months (which is not required at all and is much longer than normal even when RFC is used), it hasn’t had a new post on it in over a month, and I really don’t think you can call posting this 24 days into ideation after the beginning of the new year as “right after the holidays”… I just don’t think that is fair, but you and others are entitled to feel that way if you want.

For context though, a proposal sitting in RFC for 2 months before going into just the ideation phase (of which it was also posted with a longer than necessary time frame) will go down as one of, if not the, longest times a proposal has taken to go from RFC to ideation in ShapeShift DAO governance history… so forgive me if I really don’t see this as rushed in terms of the process itself.

Ultimately it was the feedback of various community members and DAO leaders who wanted to see this go into ideation “yesterday”, who didn’t want to take any longer to hit ideation than it already has, is why it is being pushed forward today.

I would again refer anyone reading this post to review the robust discussion of the previous RFC thread and then weigh in here with your thoughts if you have anything to add or wants to specific changes (not to discourage @0xFBL from continuing to speak his mind of course, I just think perhaps we need more voices at this point than the two of @0xFBL and @jonisjon in order to further move the needle a little bit).

I think at this juncture having the post in ideation so that voting can do some of the talking for community members who don’t want to speak up directly in the forum is important, so look forward to seeing where fox voters lie on this but also additional feedback in this forum thread!

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Oh hai.

I think the proposal is a great one:

  • It gives users an incentive to hold FOX (real yield from real trades)
  • It adds regular buy pressure on the FOX token (some of the RUNE is used to buy FOX on the open market and burn it)
  • It aligns the ShapeShift DAO more closely with the THORchain ecosystem
  • It incentivizes users to receive/hold/use RUNE which strengthens THORchain (and thereby indirectly strengthens ShapeShift DAO)

I think the proposal as-written explains the idea very clearly, placing responsibility on FOX tokenholders to tweak the variables as needed.

After reading the comments to this proposal, I see there is disagreement on the numbers. Where the initial proposal suggested 50/25/25 for hodl/distribute/buyburn, I see comments that the “distribute/buyburn” combo being 50% of the THORchain revenue stream being too high.

I don’t know if it’s too high, too low, or just right. But I do know that there’s a goldilocks zone somewhere that properly balances two opposing forces:

  1. If the “distribute/buyburn” pair is too high, ShapeShift DAO will be “throwing away” good money that can be used to continue operations
  2. If the “distribute/buyburn” pair is too low, there won’t be enough incentive for this idea to pan out. (Users won’t receive enough RUNE to care, and not enough FOX will be bought to move the needle on FOX price)

After spending 5 years at ShapeShift US watching our exec team, marketing team, and product team work together to adjust various centralized levers to tweak profitability for ShapeShift, I learned a lesson I did not expect to learn. At times it seemed like ShapeShift was throwing away money by giving it out to affiliates who integrated ShapeShift swaps, or by distributing large amounts of FOX tokens to repeat users of our platform. My “gut” kept telling me: we’re throwing away our runway, and we should be giving less away.
Today, looking back at the results of those actions, I see that my gut was wrong. By giving such large percentages to affiliates it incentivized them to continue advertising their own front-ends and incentivized new front-ends to integrate. By giving such large percentages of FOX to users, it incentivized them to keep coming back and trade with ShapeShift US instead of trading with its competitors.

Informed by these lessons I saw play out in real-time, my opinion on the above discussion is that the “goldilocks zone” between #1 and #2 above probably lays closer to the 50% mark than my gut feels comfortable with. It HAS to be high enough to be material to users receiving RUNE and the burn of FOX.

We see businesses do this often with “loss leader” strategies. Costco has their cheap hotdogs, Ikea has their cheap meatballs… both of which are sold at a LOSS. The upshot is these losses incentivize people to come to their stores and most of those shoppers buy other things netting a profit despite the apparent “loss”

There are nearly limitless adages that espouse this lesson:

  • You have to break a few eggs to bake a cake
  • You have to risk it for the biscuit

I am personally fine with launching at 50/25/25 and tweaking them in the future if data shows a “better” threshold exists at different numbers (for whichever definition of “better”).

–MP

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My two gwei…

I remain a big fan of what this proposal is generally aiming to do, and was stoked to see @jonisjon move it to ideation in order to get more community feedback (and rekindle the discussion).

What’s particularly exciting (in addition to the potent tokenomics upgrade spelled out here) is that this model could be applied to other ecosystems as well; it’s not limited to just RUNE. (I’ve seen some mockups where @0xFBL took an initial stab at how this might work, which is awesome to see.) For now, mirroring what @mperklin said above, the disagreement seems to be primarily in terms of numbers. This is worth repeating, because for all the respectful debate above, nobody is arguing that the proposal is generally a bad idea. It’s nice to have this common ground as the finer details get discussed.

The fact is, we’re just sort of winging it here without any prior figures or experience. I would argue that the DAO should do its best to find consensus starting figures that the majority of the community is happy with, launch the thing (should it get voted in), and then get scientific with respect to measuring and adjusting. What constitutes success and/or failure? How does the DAO measure those things? That could help create a framework for evaluating when/if/how to tweak the parameters.

One potential friction with the proposal as stated is that it requires the full-blown governance process for any tweaks. I see Jon’s logic here given that tokenomics is such an important aspect of the DAO’s existence. And yes, on paper the governance process need not take too long from start to finish. Nonetheless, I worry about governance fatigue if there needs to be a proposal for every minor adjustment. This could in effect make those starting numbers stickier, and hamper the DAO’s ability to make changes on the fly.

An alternative suggestion: what if the TMDC had the ability to tweak those parameters within a certain min/max range, with perhaps that decision-making ability limited to, say, once every one, two, or three months?

This way the DAO wouldn’t have to go through the relatively cumbersome governance process to modify the params if in turns out that the starting numbers aren’t working out, or whenever adjustments are deemed necessary. The min/max would help mitigate centralization concerns by ensuring that the spirit of the proposal and underlying mechanisms remain in effect (i.e. the TMDC couldn’t effectively overrule the community’s collective will by dropping a number to a trivially-low figure, or increasing a param so it’s exceedingly high). This would streamline the process of tweaking and give the DAO the ability to be more responsive to what’s happening. It also would make the current debate over the exact starting figures a bit less intense and consequential, because it eases the friction associated with changing them down the road.

The TMDC has proven itself adept at making other important decisions, and it wouldn’t be a stretch to put this under their scope. (Although to be sure, this would presuppose that the TMDC had the throughput/resources/ability to handle the added analyses, discussions, and votes).

Regarding some specific concerns that Tim has raised, I don’t have an opinion on volume thresholds; I need to think more on that. I’m not overly concerned about revenue-sharing eating away at runway (currently, at least), although the dynamic nature of the DAO’s treasury means it’s super-important that the community have the ability to tweak the key parameters in a timely and responsive fashion. And to reiterate what Tim has mentioned previously, it would be a very good idea to think through the worst-case scenarios in terms of smart contract risks and other things that could potentially go wrong as these new dynamics are introduced to FOX’s tokenomics.

@0xFBL, you’re concerned that moving forward with this proposal as-is would create a situation where short-term benefits for the DAO might come at the expense of long-term sustainability. For the sake of clarity, can you spell out in a little more detail how exactly that unwanted scenario might unfold? I think everyone here wants sustainability; the DAO has historically been very good about keeping the long-term perspective in mind.

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Lets consider the fact that the DAO has around 8-ish months of runway without positive cashflow. Then say this goes through and we halve our revenue without halving our costs. My understanding is the DAO running out of funds wouldn’t benefit token holders because the platform wouldn’t be able to operate at all.

Halving our revenue while we have such short runway seems pretty shortsighted right now. In the future when we’re back at positive cash flow this is something I’d consider, but for now this isn’t helping.

Timing is everything. Its a cool idea but we should revisit this when our circumstances are better.

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Maybe, its 50% (or whatever number) of only the RUNE income atm. while the rest is set to bump up the users. As a foxholder, if the action is $100 for something ok. $25 goes to the stakers (me as part of that, gives a big reason to Stake) $25 buys Fox (raising fox some) (and is actioned on (rewarded or…otherword) , and $50 is Held in the treasury (and/or acted on normally)

I can see this driving ppl into buying fox, staking and using hte platform more than just holding fox for discounts.

(obviously i dont agree with some items) but overall i like the thought.
(50%? no idea) start 25%? whatever. its just a number. doesnt matter. getting the overall setup first… then nitpick the numbers.

I am against burning. (unless we can …mint more later?) always keep x in …supply? or as long as its POSSIBLE to mint more?(or whatever term this would be)

Burning just feels wrong. (i could be changed in my thinking ofc. but …)

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gm gk, thanks for your reply!

Yeah agree it’d encourage use of our platform, but we’d need to see a ~doubling in trading volume for this to make sense economically. Anything less and we’re looking at up to halving our runway down to ~4months. Heck even if it increased trading volume by 50% we’d still have 2 months less runway.

4-8 months not a lot of time to iterate and experiment with numbers using DAO funds. IMO we’d be better of waiting for a bit before yolo’ing this.

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  • What % of RUNE revenue should power FOX staking yield
  • 5%
  • 10%
  • 25%
  • 50%
  • other %
0 voters
  • What % of RUNE revenue should be used to buyback and burn FOX?
  • 5%
  • 10%
  • 25%
  • 50%
  • other %
0 voters
  • What % of RUNE revenue should be held by the treasury?
  • 10%
  • 25%
  • 50%
  • other %
0 voters
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I feel like it is much more useful to use a poll than count yeas and nays in comments so I made some preliminary polls to field sentiment on all of the %s presented so far. If you are one who votes for other % on any of these polls, perhaps you could post here and articulate a reason for the percentage you feel is right.

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I feel like there are other mechanics like the length of stake necessary to claim rewards and the potential penalties we could attach to defer actions of buying>claiming>staking>dumping that should be considered for explicit starting numbers and rates. There was the start of a conversation around dynamic staking penalties that feels pretty closely aligned with the mechanics of FOX discounts we have already navigated through governance.

I also think there are legitimate concerns that have been presented in both threads here about the potential impact this could have on the runway and resources our DAO has in this continuous bear environment. We aren’t making much revenue (compared to monthly expenses) so cutting it in half does not feel as dire, but it does feel like a theft of wind from our sails as we have finally navigated to revenue growth and are trending in the right direction.

I do not feel I have seen enough modeling on the true impact the variable numbers discussed here could have on the runway, treasury, and DAO’s ability to continue funding contributors to work on the service that generates the revenue required to operate this proposal. Perhaps this is something that the TMDC or @ProfMcCarthy could help lend us some cycles to so the DAO could be more informed about potential outcomes, impacts, and cost.

I agree with @kent in that there is a lot of decent incubation happening collaboratively towards a good and fresh proposal potentially playing with tokenomics and that there are closer compromises available than the arguments may read. I hope we can continue to be mindful of that and truly be the data based decision DAO that we have been touting and steering ourselves towards.

If this is to be one of the longer Governance proposal time lengths before a proposal passes(or doesn’t), having that time be active, and progressive towards filling in the holes and vagueness presented by the community seems like a more appropriate engagement and reason for continuation. I believe pushing this to Ideation has lit a small fire in community engagement, but again feel the need to voice that the DAO has learned tough lessons from governance proposals that were not explicit, and this proposal, to me, feels to need more editing, input, feedback, and specificity before going to an official proposal vote.

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<< I do not feel I have seen enough modeling on the true impact the variable numbers discussed here could have on the runway, treasury, and DAO’s ability to continue funding contributors to work on the service that generates the revenue required to operate this proposal. Perhaps this is something that the TMDC or @ProfMcCarthy could help lend us some cycles to so the DAO could be more informed about potential outcomes, impacts, and cost.>>

This is an awesome idea @Tyler_ShapeShift. Seeing some projections/modeling around the runway/revenue might go a long way toward clearing up some of the uncertainty. Similar to you, it’s my impression that because revenue isn’t particularly high right now, the proposal as described above wouldn’t make a substantial impact on the current runway. But I don’t have any actual data to back that up, and as you allude to a 50% reduction would be a bigger deal if the positive momentum continues.

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Hey all, great discussion and thank you so much to other community members for weighing in with some thoughts on this!

Would love to respond to a couple of the points made by a few different folk in here:

Thanks for weighing in with your thoughts @mperklin! I agree that its nearly impossible to know what the “right” number is but I do believe starting on the higher side (around the current proposal) and going down from there if necessary will likely be a better strategy then starting too low and trying to raise it from there.

Thanks @seven7hwave for multiple good thoughts here! I agree that ultimately we need to just come to some starting consensus and then adjust %'s as we go and collect more data after it’s implementation. It does seem the debate at this point is becoming far more about the specific parameters and less about the general idea of the upgrade/model. I would say that is progress and the right time to be having that debate!

Thanks for bringing up this point @seven7hwave - I have thought about this and do understand the concern of governance fatigue. I think however this is one of those rare circumstances where I think governance is best suited for making these decisions (as fox voters have a distinct interest in where these parameters are set or adjusted) and I think given the engagement we have seen on the fees proposal and other high level concerns that voters seem to care about we are likely to get more than normal participation on such proposals.

I think my concern with just delegating decision making on these adjustments to a committee like the TMDC moving forward is that I think the TMDC has already had a bit too much put on its shoulders and been stretched a bit thin from what was originally supposed to be a very narrow mandate and has become a bit of a catch all when we don’t know where else to delegate some such question. Given that, I do think governance is the best place to keep this authority for now. I don’t really envision a situation where its so critical to change these parameters quickly that a 12-14 day delay is a huge problem. Of course if it becomes a problem over time, anyone could propose an amendment to this proposal to vest that authority into TMDC or elsewhere.

If enough folks think it should be a TMDC responsibility I am not against compromising on that front though I would want to see some such limits like you mention such as a range within the parameters could be adjusted without requiring further governance (instead of “full control”), but ultimately I much prefer at least starting this under the purview of governance directly and then ammending things from there if it becomes necessary.

Hey @woody - thank you for weighing in with your thoughts here! I hear your concern, and have heard it from some others, but to be honest I don’t share this concern regarding runway. It came up on the governance call today, i’d encourage anyone to listen to that for a little more context, but i’ll also try to repeat some of the points here:

The reality is even if we half the current DAO RUNE revenue, it won’t come anywhere close to reducing the runway in half, and while I understand and share the concerns around runway at a high level, I don’t think this proposal has a material impact on the runway, unless its a success in which case I think its more than likely to help the runway situation in significant ways.

On runway in general, the way the DAO tracks its runway is very conservative and the reality is the DAO has had around “8-12 months” of runway for nearly 2.5 years or so now. The DAO has other options it utilizes to continue to extend that runway. I am confident the DAO has the resources, including other assets, FOX reserves, and hopefully rising revenue (which I believe this proposal would help) that I am not concerned about this proposal being some runway harbinger of doom.

In general for others, in order to vote forward this proposal you must believe there is a high enough potential chance that this helps the DAO’s runway and treasury over its course. That is my belief here, but if you disagree with that, and think the proposal will hurt runway in significant ways then you should vote it down!

So i made some arguments on the governance call why I think burning has value that is better than it just going into the treasury but understand some don’t want to see the burn. What do you think should happen with that other bucket instead of burning @Giantkin ? Should it just go into the treasury and be held? Locked and streamed back to the DAO? or maybe this bucket should just be eliminated entirely and that could just be additional rune revenue for FOX stakers?

I addressed this above, but just to be clear there is no scenario in which this somehow halfs revenue because we implement it given current RUNE revenues (and if revenues go up, probably runway is increasing, if revenues somehow go down, it will have less and less effect on runway than it currently does which isn’t super material now).

Thank you @Tyler_ShapeShift for putting up these polls, i voted and hope others will too in order to give us a better sentiment check here at least among those who vote on the forum. I also think the ideation vote itself should give us some level of sentiment too, so hopefully in combination we can use that to make better decisions for the next stage.

As mentioned on the governance call today, if the starting numbers remain contentious enough through the next 10 days I would consider separating the starting params vote (only to be triggered from the proposal passing of course) from the overall upgrade/proposal vote so that voters could directly weigh in on those starting params. Lets see how this discussion and voting play out.

Could you be a bit more specific what other mechanics you are talking about? If the community thinks there are good mechanics to add we can definitely do that with enough consensus! That being said I do think there is significant merit in keeping the proposal as simple as possible foundation wise and letting the model evolve over time via various other mechanisms and changes the community may add in the future as we get more understanding of how well it is working (or not working).

I’ve addressed this runway question a few times in this post already and on the governance call so I won’t repeat myself other than to say, I don’t share the concern and for those that really think this will have some terrible runway impact they should rightfully vote this down.

Can you elaborate more on the “holes and vagueness”? Is there some specific item of the proposal that is overly vague that you think should be clarified or talked about more? Would love to know what specific parts you are referring to. Personally I think the proposal as a whole is relatively clear at this point and it seems the main debate is around the params and not clarity, but if there is some clarity missing would love to zoom in on that.

Love to see the community engagement and discussion around the parameters and this proposal at this point and look forward to seeing more feedback throughout the 10 day ideation period.

So having recently looked over the runway projections with prof and the TMDC can confirm there is no scenario that I understand where this somehow cuts runway in half or anywhere close to that to be honest. That being said, if others want to modify the model that was put up in RFC, or create new models/scenarios to evaluate would love to see that!

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Weighing in here as I’ve been meaning to for a while.

At first glance this “sounds” correct, but from a cash flow/timing perspective it’s not yet the right time to do this.

Please note this is a very different proposal to traditional farming or inflationary token rewards that were popular in bull markets. This proposal skims top line revenue, effectively risk free to token holders.

This does not benefit the DAOs cash flow, balance sheet, or core business, in fact I think it’s detrimental.

Back of the napkin math, assume January is effectively closed, and is the most demonstrable month of underlying revs (no random traffic from competitors), trading revs look to be around $35k/mo, based on ~5600 RUNE * ~$4.5 / 72% (normalizing for all swap vol). My understanding is costs are still ~$200k - someone link me to latest DAO financials if this is wrong.

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I’ll address the two parts - the buy back and burn, and the distribution to stakers.

Buy back and burn schemes only make sense under a few conditions, e.g. excess cash (nope), perceived unvalued stock price (we’re still overvalued at ~$24mm market cap). Neither is true for the DAO.

Distribution to stakers (“dividends” if you will) is akin to looting the newly found revenue from the treasury, at the businesses expense. “As a token holder of an unprofitable organization, is a top line distribution of 25% of revenue to me in the organization’s best interest?”. It’s difficult to make an argument for the yes case. The org is far better off holding this on the balance sheet (for TMDC to speculate roon bags) or dumping for stables for operating expenses.

Another way of looking at it, is this proposal applies a 50% COGS as a dead weight on fresh saplings of revenue. It’s unnecessary and illogical.

There’s also detail lacking in the mechanism for this. FOXy isn’t appropriate as it’s a rebasing token and not liquid for swaps. A new contract + audit would be required. Off the top of my head we spent around $80k on the yieldys audit alone for contracts that were never used. Call it $100k for dev + audit to be fair.

Pros to this proposal

  • ~$8k/mo of RUNE to stakers, risk free.
  • ~$8k/mo of buy pressure on FOX via the burn mechanism. It’s rough to even list this as a benefit - the scalar price may increase, but at what cost to the business?

Cons to this proposal

  • Does not increase trade volume
  • Does not increase revenue (a function of trade vol).
  • Creates a burden of 50% COGS on trading revenue
  • Cost of contract + audit.
  • Opportunity cost/distraction from core business (improving trading UX, increasing trade vol).

I’d strongly encourage people that think they are in favor of this proposal to understand the mechanics and impacts on the DAO’s cash flow and balance sheet before supporting this.

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Props @0xdef1cafe for that well-articulated critique.

Great point on a the challenges of a repurposed FOXY not being liquid, as we saw with FOXY itself. Your cost estimate for the audit and dev work feels reasonable too, given the costs of Yieldies. One thought is that if there was a lot of code shared between FOXY/Yieldies and this new functionality, that could reduce the cost to implement the functionality described here.

The burning seems somewhat contentious…I think you did a good job of voicing some reasons to oppose it. IMHO it’s not really necessary, although it might marginally help improve the tokenomics narrative for FOX. (I voted for 10% burn above, as this adds to the narrative but is lower than the originally-proposed number).

Regarding the broader aim of the proposal…I like how it creates some reasons to own FOX and move it beyond governance token status. This feels nicely timed with the overall industry/market getting its legs again.

The last figure I saw was roughly $28K/month in fee revenue stemming from RUNE. Let’s round up and say $30K/month, and then assume that’s the figure for the foreseeable future. Is sharing and/or burning $15K/month worth the associated impact on the runway? Over the course of a year this would add up to $180,000 - roughly one month of DAO spend IIRC. So basically, the “cost” of implementation (minus the dev/audit costs) would be a month of runway.

(If fees double or triple or 10X, more sharing/burning would happen, but at the same time the DAO would be able to use a higher amount of USD each month to add to the treasury. )

In return for that effective spend, the DAO could potentially reap some powerful benefits: a.) more platform users, and b.) an improved treasury situation if the tokenomics changes led to increased demand for FOX. (The first is definitely more speculative…there might be other initiatives and product strategies that could have more of a direct impact on user growth).

These benefits are hard to predict/quantify, but it feels like a reasonable trade-off to improve FOX’s tokenomics; losing a month of runway over a year would not make or break the DAO. If this were a traditional business I would 100% agree with the critique and general points about revenue-sharing when the treasury and revenue situation is tenuous. In the DAO’s context, those factors don’t exist in a vacuum; the lack of a clear narrative and value-accrual mechanism for FOX has been a challenge historically. This feels like a relatively low-risk experiment (assuming smart contract risk is aggressively managed) to finally augment the token with some compelling reasons to hold it. (And as outlined above, this overall strategy could be replicated in other ecosystems/partnerships, which makes more powerful and extensible…potentially).

Weighing the costs/benefits, I feel like a 25% revenue share would “help the DAO’s runway and treasury over its course,” as @jonisjon put it. I’m less convinced on the need for a burn.

One final thought regarding the burn:

What if the burn aspect was completely eliminated, or reduced to 10%? Suddenly the month “cost” of the proposal drops, making it even less of a headwind on the treasury. Meanwhile, there would still be a powerful reason to hold FOX, in order to enjoy those revenue-sharing benefits. And the treasury could still benefit from any resultant increase in demand for FOX. So perhaps the burn parameter in particular could hold the key to finding community consensus; I just don’t see it as core to the spirit/objective of this proposal.

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My …want. is 0 burn, but maybe lock up the portion. (set up sablier stream maybe? once every … 3 months? or something to take it out of treasury, out of circ, but not lost. (i dont know if burn is worth the salt or not. just feels wrong to me) course, others feel dif. :slight_smile:
I like the overall, just details, id like to hammer out before this goes to Final vote. another ideation maybe?