SCP-197: rFOX 3.0 Phase 1: Fee-Sharing Structure (Vote 1)

Proposal Discussion
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Phase 1: Fee-Sharing Structure (Vote 1)

Summary

This vote chooses how ShapeShift DAO will distribute trading-fee revenue under our new Mainnet staking model (55 bps flat on all trades; no FOX discounts; rFOX burn buckets eliminated). Voters will rank four options:

  1. A. Flat 25% of all fees → stakers; DAO retains 75%
  2. B. Tiered by Platform Volume (see “Specification” below)
  3. C. No Fee Sharing (100% of fees → DAO)
  4. D. No change to the current rFOX program (maintain 25%/15%/10% burn schedule)

Abstract

We’re moving staking from Arbitrum → Ethereum Mainnet, capturing 100% of trading fees into the treasury, and replacing passive token burns with direct staking rewards. This vote picks the fee-sharing paradigm; subsequent votes will set the staking product and ratify the full migration.

Motivation

  • Unified Incentives: Under a flat 55 bps fee with no FOX discount curve, rFOX stakers should earn directly from every trade.
  • Growth Alignment: A tiered structure that re-applies a higher share percentage to all volume once a threshold is crossed gives stakers a powerful incentive to drive platform volume.
  • Simplified Mechanics: A single vote on fee-sharing avoids fragmenting governance decisions and ensures engineering clarity.
  • Community Engagement: Rewarding stakers more as we grow creates a flywheel: higher volume → larger share → more incentives to trade on-shape.

Specification

  • Method: Ranked-Choice Voting (Instant-Runoff) on Snapshot
  • Choices (rank 1 → 4):
    • A. Flat 25% of all fees → stakers; DAO retains 75%
    • B. Tiered by Platform Volume
      • Thresholds & Share:
        • 5% once monthly volume ≥ $0 – $5 M
        • 10% once monthly volume ≥ $5 – $10 M
        • 20% once monthly volume ≥ $10 – $20 M
        • 30% once monthly volume ≥ $20 – $30 M
        • 40% once monthly volume > $30 M
      • Whole-Volume Application: When volume crosses into a new bracket, the new percentage applies to the entire month’s volume (not just marginal).
      • Example: If we hit $12 M of volume in a month, stakers earn 20% × (12 M × 0.55 bps) on the full $12 M, not only the $10–12 M slice.
    • C. No Fee Sharing: 100% of fees → DAO treasury
    • D. No change to rFOX: Keep current 25% single-sided / 15% LP / 10% burn schedule

Benefits

  • RCV Majority Preference: Prevents vote-splitting between similar options.
  • Stronger Volume Incentives: Tiered whole-volume jumps create a “volume flywheel” – rFOX stakers benefit more as we grow, so they’ll trade, refer, and promote to hit higher tiers.
  • Predictability vs. Growth: Option A offers stability; Option B offers exponential upside.
  • Engineering Certainty: One clear outcome accelerates contract updates, audits, and deployment.

Drawbacks

  • Complexity for Voters: Tier mechanics (whole-volume application) require clear communication and examples.
  • Longer Governance: Instant-runoff tallying takes slightly longer than a simple plurality.
  • Potential Treasury Variance: Tiered sharing could reduce DAO take at high volume months.

Vote

When the Snapshot poll goes live, please rank your preferences:

A. Flat 25% → stakers; DAO 75%
B. Tiered by Platform Volume (whole-volume application)
C. No Fee Sharing (100% → DAO)
D. No change to rFOX program

Thank you for voting!

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Final proposal will have KPIs

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https://snapshot.box/#/s:ideation.shapeshiftdao.eth/proposal/0xcc0493b953161120503a103d1aba1f79c726cadc51fd08eff259af3ab8c8e524 Ideation vote

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I’m strongly in favor of Option B: Tiered by Platform Volume, as it aligns incentives and fosters community-driven growth.

Why Option B Stands Out:

  • Aligns Incentives with Growth: As platform volume increases, stakers receive a higher percentage of fees, motivating them to promote ShapeShift and drive more trades.
  • Gamifies Participation: Clear volume thresholds create tangible goals for the community, encouraging active engagement and a sense of achievement.
  • Flexible and Scalable: The tiered structure allows for adjustments as the platform grows, ensuring sustainability and continued motivation for stakers.

Proposed Enhancement:

To further incentivize growth, consider setting aside a portion of fees (e.g., 10%) as a bonus pool. Upon reaching specific volume milestones (e.g., every $200M in volume), distribute this pool among stakers as a bonus reward. This approach adds an extra layer of motivation without altering the base fee-sharing structure.

Conclusion:

Option B not only rewards stakers for their commitment but also turns them into active promoters of ShapeShift, creating a virtuous cycle of growth and engagement. Let’s empower our community to be stakeholders in our success.

Some examples of other protocols that do/did this:

1. dYdX DAO – Volume-Based Fee Sharing

The dYdX DAO has discussed restructuring its fee model to align staking rewards with trading volume. This approach aims to incentivize users to increase platform activity, as higher trading volumes would lead to greater rewards for stakers. Such a model encourages community members to promote the platform and contribute to its growth. dYdX Forum

2. Raydium – Liquidity Mining with Volume Incentives

Raydium, a decentralized exchange on the Solana blockchain, offers liquidity providers rewards that are influenced by trading volume. By integrating with Serum’s order book, Raydium ensures that higher trading volumes can lead to increased rewards for liquidity providers and stakers, fostering an environment where users are motivated to boost platform activity.

3. Lido DAO – Staking Rewards Tied to Network Activity

Lido DAO provides staking services for various blockchains, including Ethereum and Solana. The rewards for stakers are influenced by network activity and transaction fees, meaning that as the network sees more use, stakers receive higher rewards. This model naturally encourages users to support and promote the network to maximize their returns. docs.solana.lido.fi