Gm foxes! Hope you’re having the best day ever.
As most of you know, this proposal is currently in the Ideation phase: Add fees to THORChain swaps.
There are compelling arguments on both sides, and the data from incubation and the many conversations on this topic suggests that this could be the DAO’s most controversial proposal to date. Ultimately, the power to enact this change rests in the paws of FOX Token holders. Regardless of which side wins, a significant percentage of active token holders or contributors will not be happy with the outcome.
While I still strongly believe that enabling fees would hurt the DAO more than it would benefit it, and conversely that no fees plus proportional FOX rewards for users who generate revenue for the DAO is a winning, disruptive strategy, I think we should consider a compromise.
This is the incubation post for a counter proposal to grant authority to the Product & Engineering workstreams to add opt-out donations to any transactions, including but not limited to Fiat on/off ramps, swaps, or yield generating opportunities. By default, a donation (not a fee!) of 0.5% would be applied, but users could easily opt-out and pay no extra, and we could also consider giving users the ability to donate more (or perhaps link them to a page on Giveth to donate any amount directly to the DAO’s treasury). If the community prefers to keep the scope of this initial proposal limited, we could also start with swaps only, or even THORChain swaps only.
@graymachine first suggested this at the 2022 DAO WOW, and there is precedent for this right now at Giveth.io, another open-source public good that was reluctant to charge fees on donations, but also needed to generate more revenue in order to survive and cover its operating expenses. @hornyfox also suggested this in the Incubation discussion for Added fees for THORChain swaps.
I think this idea strikes an equitable balance between both sides, is less likely to upset community members that feel strongly about the fee decision, and also has some meaningful benefits.
- More valuable data - The data we will get from whether or not users are opting-out of fees will give us a good idea as to how much our users really care about fees. On the other hand, if we simply enable fees on THORChain swaps as currently proposed, it will be difficult to draw any conclusions. Even if we see usage increase, how will we know how much usage we would have if we didn't add fees?
- We can still be 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 that we update all of our marketing messaging, and mitigates the risk of upsetting community members or users that were promised ‘no fees forever.’
- More revenues - The opt-out approach has the potential to generate more revenues than mandatory fees, while also alienating fewer users. Further, this proposal is suggesting adding the opt-out fees to more features than just THORChain swaps, and also doesn’t require that we remove existing affiliate revenue streams. In this world, we could potentially offer opt-out fees, still generate affiliate revenues, and reward users that generate revenue for the DAO with FOX.
Defensible competitive advantage - One of the reasons I love the no fees + FOX rewards on affiliate revs strategy is that it has the potential to develop powerful network effects for ShapeShift that can not easily be forked. On the other hand, one of the reasons I am anti-fees is that fees are a race to the bottom, and if the DAO achieves product market fit with fees, 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.
I plan to refine this incubation post into a proposal, but first wanted to start the 3-day incubation countdown asap and highlight this proposal during today’s governance call, which started 15 minutes ago sweat_smile
Thank you everyone for your consideration and for the thoughtful debate so far