[Incubation] Enable opt-out donations instead of fees

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.

  1. 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?
  2. 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.’
  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 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

  1. 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 :purple_heart: :fox_face:

Interesting idea @willy - thanks for posting.

@0xdef1cafe - let’s assume this was just for Thorchain swaps. What is the dev effort to include a opt-out checkbox and only add the additional fee if it remains checked?

@BeDiggy - what do you think about the UX implications of this?

Thanks @willy for posting this idea of a compromise that I think should satisfy people on both sides of the feence and that matches the realities of an open-source project in finance.

The most important part to me is not going back on a commitment we’ve made to users since the inception of the DAO. I know that users can “understand that nothing is free” as it has been said, but users also know when a brand is bullshitting them, going back on something that was a strong sale argument is not easily forgotten by the existing customers… if they stay.

Opt-out seems fair to me as long as the breakdown of the “fees” is not hidden to the users (it should not require a click to reveal it anymore). I would also suggest to offer them to remember the choice each time they decide to turn it on or off, in order to not force the feature on someone who decided to opt-out and not annoy someone who’d want to systematically donate a specific amount/%.

Thanks @Fireb0mb1, love these suggestions.

Agree the fees should be transparent, and that users should be able to check a box to ‘remember choice’

Will be sure to include these specs in the draft proposal

Thanks for putting this together @willy. Very interesting concept, comparing both proposals, I’m personally leaning more towards this. Although, I wasn’t opposed to adding fees for THORChain swaps, this seems like a better option for an open-source, community-owned project.

From a user perspective, I agree that this approach is less likely to upset community members who were promised ‘no fees forever’ and I also agree with your point on the defensible competitive advantage. Taking this approach is further likely to strengthen the community, demonstrating that this project is a public good, an innovative community that cares about its users and doesn’t just take the easiest route.

You mentioned that there is already a precedent of this at Giveth, do you know the outcome of this experiment? Does it generate a substantial amount of revenue? How sustainable is it? Maybe SS can learn a thing or two :slight_smile:

Echoing @Arina’s question about Giveth…is there a track record from other projects implementing this approach that we can glean useful conclusions from? Is Giveth the only project to have taken this route so far?

thanks @Arina and @seven7hwave! I’ll report back soon with data on how this is working for Giveth.

Gitcoin is another example of opt-out donations. This has always been the model for Gitcoin grants, and is Gitcoin’s largest source of revenue (some stats here). I haven’t been able to find any data yet that compares revenues from mandatory fees vs. opt-out donations, but my hypothesis is that both Gitcoin and Giveth generate far more revenue from the opt-out donations and have much more defensible competitive advantages than they would if they charged mandatory fees instead.

Here is some data I found from other donation platforms that shows that on their platforms, at least 50% of donors choose to cover donation processing fees (not quite the same, but better than no data)


hey @joshuAF i’m not worried about the UX implications. If this proposal were to pass, we would figure it out

@Hpayne reminded me of another important benefit to highlight.

Maximizing ShapeShift’s grant-fundability:

There is consensus in the community that pursuing grant opportunities aligned with the product roadmap is the most compelling avenue to extend the DAO’s runway during the current bear market. ShapeShift can arguably secure more/larger grants as an open-source public good that does not add fees on top of protocols or services that it integrates. If part of the argument to enable fees is to extend runway, the negative impact that fees could have on grant-fundability should also be considered.

Same answer, will let this go through the governance process first.

I support this compromise, adding fees early adds a barrier to entry and could harm growth. Personally I would go for opt in donations instead of opt out though. But this is details.

Im ok with opt out. some ppl might not ever turn it on… but those same ppl wouldnt turn it off either.

(if htat makes sense) :slight_smile:

This is an interesting perspective. This begs the question of whether we are an open-source public good or are we an organization seeking profit. To be frank, I’d always considered the latter. But I think there is a good case for the former. This is a pretty foundational question that would impact many decisions going forward.

After some thinking about this, I really like the idea of opt-out fees as an experiment. I’d support doing this in addition to experimenting with Thorchain fees per 0xean’s proposal. IMO it’s important to try many different approaches right now–and I don’t think the idea outlined here would be incompatible with trying the fee experiment with Thorchain.

One potential thing to explore should we pursue this route: what would be the likely lift here in terms of engineering resources? It sounds like it would certainly be more than the one line of code that needs to change for Thorchain fees–but not sure exactly how much. Something to consider with input from @0xdef1cafe and the other relevant parties.

how do you know this? Can you provide some more details and examples. Not trying to be a jerk, I’m just curious.

This is a really good point, Josh

Why not both!? :slight_smile:

I really believe both is the answer, and it’s one of the things that gets me so excited about Web3 and ShapeShift. I talk about this more in this presentation from ETHDenver (I know you’ve already seen this @joshuAF but in case anyone else is interested): https://www.youtube.com/watch?v=y-TOlyguMjQ

I personally believe that ShapeShift can generate the most revenue and the strongest network effects by remaining as an open-source public good. If we are seeking profit (I’m pretty sure we are, even if it’s elusive), I believe this is the best approach. I also have nothing against fees for protocols or services that ShapeShift develops, such as Yieldies. I just believe that if our vision is to build the ultimate interface to the decentralized universe, charging extra fees on top of protocols or services that we aggregate is antithetical.

Craiglist is a perfect example of a profit-driven organization that provides open-source public goods and likely generates far more revenue (and much stronger network effects) than if they added fees for everything. Wikipedia, while non-profit, is another example worth pointing out because they are primarily funded by optional donations, and arguably generates far more donations than they would revenue if they were to charge to access their content (especially if the content was available outside of their app for free).

To your point, I don’t know this for sure, and it’s ultimately up to the decision-makers for each grant program.

I do think an argument can be made that decision-makers will be more willing to give grants to projects that are developing open-source public goods in their ecosystem vs. projects that intend to build excludable goods, but admit that this is an assumption.

@willy -

I would love to understand the intended mechanics of this proposal.

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,

Does this mean that for many of the protocols that don’t allow an additional fee address to be passed we plan on having users execute an additional transaction to pay their fee? I think having 2 transactions is mostly a non starter from a UX perspective let alone the potential for gas to consume much of the fee in question.

I also want to comment against the ongoing FUD around DAO forks and front end forks that have been repeated.

If you care to read the article that @willy is referencing you will find this wonderful quote

Interestingly, this is still higher than Uniswap’s TVL prior to SushiSwap. So despite concerns that SushiSwap could have spelled the end for Uniswap, the whole debacle still seems to have been of net benefit to the protocol.

Another falsehood is that a single engineer would have success in their ability to fork our front end and maintain it. I think anyone in the DAO who wants to critically think about the all of the ancillary services should find this laughable. We have support, we have customer trust, we ship updates several times a week, and have infrastructure that costs real money to run and operate. If we get to a point where there is a real economic incentive to fork us, I would argue that we have already won and are in a much better place to operate than a competitor wit the same codebase. There is nothing to say we couldn’t remove fees in the future when we have a more sustainable path.

Wether you are for or against fee’s we shouldn’t be operating in a model of fear that our DAO cannot handle experimentation with business models. If we are unwilling to try new things, we are going to get largely the same results we have been getting.