Market Research / Logic : Revenue Staking – Single-Sided vs LP Rewards
Background
ShapeShift DAO earns protocol revenue (e.g. affiliate fees from THORChain swaps and other integrations) which can be shared with FOX token holders to boost token utility and community alignment. Many similar wallets and DeFi platforms (“affiliate peers”) have introduced staking or loyalty programs to reward their users or token holders with portions of trading fees or other revenues. These programs take various forms – some allow single-sided staking of a native token to earn “real yield” from protocol fees, while others require providing liquidity (LP tokens) or simply offer discounts to token holders.
To inform ShapeShift’s decision, we researched how a range of peer platforms handle fee distribution, staking, and user rewards. The table below summarizes key practices of each platform:
| Platform | Staking | Fee/Revenue Sharing to Users | Discounts / Tiered Benefits |
|---|---|---|---|
| Ledger Live | No native token; no staking program | Does not distribute affiliate swap revenue to users (fees retained by Ledger) | No user discounts or reward program |
| Trust Wallet (TWT) | No yield staking for TWT (TWT is a governance/utility token) | No revenue sharing to token holders (Trust Wallet itself charges no swap fee) | Yes – TWT holders get in-app perks (e.g. holding ≥100 TWT waives the 1% fiat purchase fee ; TWT grants discounts on DEX trades and crypto purchases ) |
| THORWallet DEX (TGT) | Yes – Single-sided TGT staking (on Arbitrum) | Yes – “Real yield”: 50% of all THORChain & Maya Protocol affiliate fees are paid back to TGT stakers in USDC (distributed proportionally as cashback to users) | Yes – Fee discounts via loyalty NFTs (e.g. holding a THORWallet “Soldier” NFT reduces swap affiliate fees) |
| THORSwap (THOR) | Yes – Stake THOR single-sided (receive vTHOR or uTHOR tokens); also supports THOR-asset LP staking | Yes – ~75% of all swap fees (THORChain, Maya, etc. affiliate revenue) is shared with THOR stakers . Stakers choose reward type: vTHOR auto-compounds yield in THOR, or uTHOR/yTHOR yield in USDC . (Remaining ~25% of fees go to the treasury) | Yes – Trading fee discounts from 17% up to 100% for users staking THOR (discount tier based on amount staked or holding vTHOR) |
| Asgardex | No token (community-run interface) | Yes – Charges a 0.3% swap fee on large trades (>$1000) which funds the platform; no fee on small swaps . (No direct redistribution to users aside from keeping small swaps free.) | Yes – Tiered by trade size: swaps <$1001 incur 0% extra fee (encourages small users); standard 0.3% fee applies above that. No token-holder program. |
| SwapKit (THORChain SDK) | No token (infrastructure tool) | N/A – SwapKit is a backend integration kit; any fees depend on the integrator’s settings (no direct user program) | No |
| Bitget Exchange (BGB) | No on-chain staking; users hold BGB on exchange | No direct payouts – Bitget does not pass trading fees to BGB holders as yield. Instead, 20% of quarterly exchange profits are used to buy back and burn BGB (indirectly boosting token value). | Yes – Tiered VIP levels and trading perks for token holders. Holding BGB reduces fees (e.g. pay trading fees in BGB for a 20% discount on spot trading ) and unlocks higher VIP tiers (volume + token-based). |
| Vultisig | No token (multi-sig wallet) | No revenue sharing (any THORChain affiliate fees likely kept by the service for upkeep) | No user reward program |
| Ctrl Wallet (formerly XDEFI) – Token: CTRL | Yes – Single-sided CTRL staking (users get vXDEFI/CTRL) | Yes – 75% of all swap/bridge fees are used to buy back CTRL on the market, and rewarded to stakers . (This provides real yield in the form of more CTRL tokens for stakers, sourced from actual revenue rather than inflation.) | No explicit fee discounts for token holders (instead, revenue sharing is the primary incentive; base swap fees are already low at 0.3–0.5% for all users) |
| Gem Wallet | No token (open-source wallet) | N/A – Gem does not charge extra swap fees to users (“no hidden fees” policy ), so there is no fee revenue to redistribute. | No (Gem is free to use for all; no tiers needed) |
| ZenGo | No token (custodial keyless wallet) | No revenue sharing – any partner commissions or fees (from swaps, fiat buys, etc.) are retained by the company for revenue, not paid to users. | No token-based discounts (occasionally offers promotional cashback or referral bonuses, but no ongoing tier program) |
| Edge Wallet | No token | No revenue sharing – Edge adds ~1% fee on fiat or in-app swap services which it keeps as revenue; none is distributed to users. | No token or volume-tier benefits for users (all users pay the same partner fees; Edge’s 1% fee is flat) |
Key Takeaways: Platforms with a native token (e.g. THORWallet, THORSwap, XDEFI/Ctrl) tend to offer single-sided token staking that returns a share of protocol revenue to those stakers. The revenue share is often significant – 50% to 75% of fees – paid in either a stablecoin (USDC) or via buybacks of the native token. This “real yield” model aligns the community with platform success and has precedent (e.g. THORWallet’s TGT stakers get USDC rewards ; XDEFI stakers earned bought-back XDEFI ). Many also grant trading fee discounts or tiered perks to token holders as an extra incentive (for example, THORSwap’s fee discounts for THOR stakers , Trust Wallet waiving fees for TWT holders , or Bitget’s VIP tiers for BGB holders ).
By contrast, platforms without a token (or those that choose not to tokenize fees) generally do not share revenue with users. Ledger, Edge, ZenGo, etc., retain affiliate fees as company revenue. Some “neutral” interfaces like Asgardex and Gem opt to charge little or no additional fees to begin with , focusing on user growth over tokenomics. In summary, the dominant trend among our affiliate peers with tokens is to reward single-asset stakers with a portion of fees (often in stablecoins or via token buybacks), and to use token-based tiers or discounts to incentivize usage – while none require liquidity pool (LP) staking as the sole mechanism for rewards (though THORSwap does include LP holders in its fee-sharing mix alongside single-asset stakers).
ShapeShift Revenue Sharing Options
ShapeShift DAO is considering two models to distribute a portion of protocol revenues (from affiliate fees) to FOX token holders:
- Option A: Stake FOX (single-sided) & earn USDC rewards – Distribute 25% -or- tiered % of ShapeShift’s affiliate revenue to users who stake FOX. Rewards would be paid in a stablecoin (USDC), sourced from the protocol fees collected (providing a real yield in stablecoins).
- Option B: Stake FOX-ETH LP tokens & earn LP token rewards – Distribute 25% -or- tiered % of affiliate revenue to users who provide FOX/ETH liquidity (e.g. on Uniswap) and stake their LP tokens. Rewards would be paid by returning the fees as additional FOX-ETH LP shares (i.e. using the revenue to buy FOX & ETH and add to the liquidity pool, then distribute LP tokens to stakers).
Both options would allocate a quarter of protocol revenues back to the community, aligning with the DAO’s goal of increasing FOX token utility. However, each has distinct implications:
Option A – FOX Single-Sided Staking for USDC Yield
How it works: FOX holders stake FOX into a contract (no second asset required). 25% of all applicable protocol fees (e.g. DEX/swapping fees earned via ShapeShift integrations) are converted to USDC and periodically distributed or claimable, proportional to their stake. Users effectively earn a stream of USDC by holding and staking FOX.
- Pros / Benefits:
- Simplicity & Accessibility: Lower barrier to entry – users only need FOX. This mirrors models used by peers like THORWallet (stake TGT, earn USDC ) and is likely to attract a broad base of FOX holders. No need to also hold ETH or manage LP positions.
- No Impermanent Loss: Stakers are not exposed to impermanent loss since they aren’t providing liquidity. They maintain full exposure to FOX and receive rewards in a stable asset. This makes the reward more predictable (USDC is stable value) and the process similar to a “dividend” or cashback, which many users may prefer for its certainty.
- Proven “Real Yield” Approach: Distributing actual revenue (not just inflating FOX supply) in stablecoin is a sustainable model that has precedent and regulatory friendliness when framed as a usage reward. It directly shares platform success with token holders – much like THORWallet’s and THORSwap’s single-sided staking programs – which can increase FOX’s appeal.
- FOX Demand: Requiring FOX to earn these rewards could increase demand for FOX (users buy FOX to stake and earn USDC yield). The more FOX staked, the more governance alignment and reduced circulating supply (potentially positive for token value).
- Cons / Trade-offs:
- No Direct Liquidity Improvement: Unlike Option B, this does not incentivize providing liquidity for FOX. FOX liquidity in AMMs would remain dependent on separate initiatives. High staking participation could even pull FOX out of circulating pools (reducing liquidity). This might lead to continued relatively shallow markets for FOX compared to if LPs are rewarded.
- Reward Not Auto-Reinvested in FOX: Paying in USDC gives stakers a stable reward, but those users might not reinvest it into FOX. This is great for user income, but from a token perspective, some revenue (75% in this plan) still isn’t bolstering FOX directly. Peers like XDEFI chose to use revenue to buy their token , which can support token price. Option A foregoes automatic FOX buybacks on behalf of stakers (though stakers could choose to manually buy more FOX with their USDC).
- Lower Percentage than Some Peers: The 25% revenue share is a smaller slice than THORWallet’s 50% or THORSwap’s 75% . While this leaves more revenue for the DAO treasury, it means the staker APR might be modest, potentially affecting participation. The DAO may later consider adjusting the % if needed to stay competitive in attracting FOX stakers.
- Security & Regulatory Considerations: A pure “stake and earn revenue” model can draw regulatory scrutiny if perceived as a dividend. ShapeShift will need to structure this as a rewards program (similar to a cashback or rebate for users of the platform, as THORWallet does ) and ensure smart contracts are secure for handling the revenue distribution.
Option B – FOX/ETH LP Staking for LP Rewards
How it works: Users provide liquidity in the FOX-ETH pool (likely on an Ethereum DEX) and stake their LP tokens in a ShapeShift rewards contract. The protocol takes 25% of its fee revenue, converts it into FOX and ETH (in equal parts), and adds those as liquidity to the FOX-ETH pool. The newly minted LP tokens from that liquidity addition are then distributed/made claimable (and easily re-stakable) to the LP stakers as rewards (pro-rata by their share). Users end up with more LP tokens, increasing their ownership of the pool (which is composed of FOX and ETH).
- Pros / Benefits:
- Deepens FOX Liquidity: This option directly incentivizes growth of the FOX-ETH liquidity pool. As LP stakers earn more LP tokens, the total FOX/ETH liquidity increases. A deeper pool means lower slippage for traders and a more robust market for FOX (better aligning with decentralization and token health). This can attract more trading volume and integrators to FOX.
- Aligns Rewards with FOX Market Strength: By paying rewards as FOX/ETH liquidity, a portion of each reward cycle effectively buys FOX on the market (using half the distributed fees to acquire FOX for the pool). This creates regular buy pressure on FOX and ties rewards to the token’s market presence. In essence, the DAO would be reinvesting in FOX’s market each cycle, which could support FOX price and liquidity – a virtuous cycle for token holders.
- Earn Trading Fees: LP stakers not only get the 25% fee revenue as rewards, but by virtue of providing liquidity, they also earn the standard swap fees from the FOX-ETH pool itself (e.g. 0.3% on trades in most DEXs). This can boost their overall ROI. High-volume days would mean more trading fee income on top of the protocol reward. (Option A stakers, by contrast, do not earn trading fees.)
- Incentivizes Active Ecosystem Role: This model rewards those who both hold FOX and contribute to its ecosystem liquidity. It aligns incentives such that participants help make FOX easier to trade while being rewarded by the DAO. This could attract participants who are more committed to FOX long-term (since LPing requires confidence in both FOX and ETH) and reduce purely “idle” staking.
- Cons / Trade-offs:
- Higher Complexity & Barrier to Entry: To participate, users must provide a FOX-ETH pair, meaning they need to own both FOX and ETH in equal value. This is more complex and capital-intensive than single-asset staking. New or smaller FOX holders might be discouraged if they don’t already hold ETH or don’t want to split funds. It could result in fewer total participants compared to Option A, potentially concentrating rewards to bigger LPs.
- Impermanent Loss (IL) Risk: LPs are exposed to price divergence between FOX and ETH. If FOX’s price changes significantly relative to ETH, LP stakers could end up with less total value than if they simply held their tokens separately. The USDC rewards of Option A have no such risk. This IL factor means the reward rates under Option B must be attractive enough to compensate for that risk, or some FOX holders will prefer not to engage.
- Uncommon Among Peers: None of the surveyed wallet/aggregator peers require LP staking exclusively for revenue rewards. Most favored single-token staking for simplicity. Requiring LP tokens would be a novel approach in this sector – it could be innovative, but it also means less precedent to gauge user interest. Some DeFi protocols (DEXs) do reward LPs (typically via inflationary token emissions), but sharing actual protocol revenue to LPs is more similar to how THORSwap included THOR LPs in its fee split . ShapeShift would be somewhat unique in making LPs the primary beneficiaries of affiliate fees.
- Rewards in Volatile Assets: Unlike the stable USDC payout, LP token rewards are composed of FOX and ETH – both volatile assets. The value of the reward will fluctuate with market conditions. For users seeking stable income, this is a downside. An LP reward today could be worth less next week if FOX or ETH prices drop. This introduces more uncertainty in the eyes of participants looking at the ROI.
- Operational Complexity: Implementing this may be more technically complex – it requires converting fee revenue to two assets and providing liquidity on an external AMM, then distributing LP tokens. This involves more contract interactions (and potentially more gas or timing considerations) than simply distributing a single stablecoin. Ensuring transparency and fairness in how often and at what prices the FOX/ETH additions occur will be important.
Comparison to Peers & Community Alignment
Option A (FOX staking for USDC) closely aligns with the prevalent practices of our affiliate peers that have introduced real-yield tokens. It mirrors THORWallet’s approach of single-sided staking with stablecoin rewards and resembles THORSwap’s uTHOR model (stake THOR, earn USDC ). The advantages are well-understood by the DeFi community, likely making FOX more attractive to hold and stake for a broad range of users. It emphasizes rewarding FOX holders in a straightforward way, which is in line with the DAO’s principle of sharing value with its community. However, Option A does not directly address FOX liquidity – an area where ShapeShift may still need separate initiatives (like liquidity mining or partnerships) to remain competitive. Peers like THORSwap and THORWallet launched separate liquidity programs for their tokens alongside staking, whereas Option B attempts to tackle both rewards and liquidity in one mechanism.
Option B (FOX-ETH LP staking) takes inspiration from liquidity mining paradigms (commonly used by DEXs) and applies it to affiliate revenue. This is distinct from most peers’ current models – none of the listed wallets condition rewards solely on LPing, although THORSwap does share some fees with THOR LP providers . Option B aligns with a long-term DAO goal of deep liquidity and token utility: it effectively uses part of ShapeShift’s earnings to strengthen FOX’s market by increasing pool depth and creating buy pressure. This could set ShapeShift apart as a more trading-focused ecosystem where token holders are encouraged to also be liquidity providers (much like how some centralized exchanges incentivize market makers via fee rebates, but here in a decentralized, tokenized form). The approach resonates with the DeFi ethos of aligning incentives – those who contribute more (in this case, liquidity) get more rewards. That said, the DAO must consider community inclusivity: Option B might favor more advanced users or larger holders, whereas Option A is accessible to anyone with FOX. Ensuring our approach doesn’t alienate small FOX holders is important for decentralization and broad participation.
Pros and Cons Summary
To summarize the trade-offs between the two options:
- Option A (Stake FOX, earn USDC):
- Pros: Easy single-asset staking; no IL risk; stable, predictable rewards (USDC); proven model used by similar projects; directly rewards FOX holders and could increase demand for FOX.
- Cons: Doesn’t improve FOX/ETH liquidity; rewards not automatically re-invested in FOX; lower share of revenue (25%) than some competitors; variable regulatory considerations (must frame as user rewards).
- Option B (Stake FOX-ETH LP, earn LP tokens):
- Pros: Directly improves FOX liquidity and trading depth; creates constant FOX buy pressure from revenue; LPs earn extra trading fees; rewards those who add value to FOX’s market; aligns token utility with liquidity.
- Cons: More complex and requires dual assets; risk of impermanent loss for participants; untested model among wallet peers (could limit participation); rewards are in volatile assets (FOX/ETH); more moving parts to implement.
Voting Options
Snapshot voting will be used to determine the community’s preferred path. FOX token holders are voting on how ShapeShift should distribute 25% of protocol fee revenue going forward:
- Option A – FOX Staking for USDC: Implement single-sided FOX staking. FOX stakers receive 25% of ShapeShift’s fee revenue, paid out in USDC (real yield from platform earnings). This option focuses on broad FOX holder rewards and simplicity.
- Option B – FOX/ETH LP Staking for LP Rewards: Implement LP staking incentives. Users who stake FOX-ETH liquidity pool tokens receive 25% of fee revenue, paid as additional FOX/ETH LP tokens. This option focuses on rewarding liquidity provision and strengthening FOX’s market depth.
Each voter may choose the option they believe best advances ShapeShift’s mission. Both options redirect a share of revenue to the community; the choice comes down to how we want to align incentives – primarily towards holding FOX vs providing FOX liquidity.
Conclusion
This proposal seeks to enhance FOX token utility and align ShapeShift with the best practices observed in the ecosystem, while also addressing the unique needs of our DAO. Distributing a portion of fees to token holders will cement FOX’s role at the center of ShapeShift’s economy, similar to how our peers have fostered loyalty through revenue sharing. Option A follows a proven, user-friendly model that many DAO members may find attractive (rewarding holders with stablecoin yield, akin to a DeFi dividend) – it prioritizes inclusivity and immediate value to FOX holders. Option B takes a more pioneering approach by tying community rewards to liquidity provision, potentially amplifying FOX’s growth and stability – it aligns with the long-term vision of a liquid and widely traded FOX token, though with added complexity.
Both options embody ShapeShift’s DAO ethos of sharing value with the community (unlike certain competitors that keep all fees, ShapeShift would be returning value to FOX owners). In choosing between them, the community should consider its priorities: maximizing broad participation and straightforward rewards (Option A) versus boosting FOX’s liquidity and market robustness (Option B). There is no “wrong” choice, but each reflects a different strategic emphasis for the ShapeShift DAO. By voting on this proposal, FOX holders will directly guide how the platform’s success feeds back into the FOX token economy. The selected option will set ShapeShift on a course that either mirrors successful affiliate models in the space or carves out a novel path to strengthen our token’s utility.
Empowering FOX holders with protocol revenue will strengthen the bond between the ShapeShift platform and its community. This proposal ensures the DAO continues to innovate while staying true to the principle that our users and token holders should directly benefit from the growth of the ecosystem. We ask the community to weigh the above comparisons and cast their vote for the option that best aligns with ShapeShift’s goals and the interests of FOX holders. Together, we will shape the future of FOX tokenomics and the value proposition of being a member of the ShapeShift DAO.
