SCP-198: rFOX 3.0 v2 Burn Notice

Proposal Discussion
1

Summary

This proposal updates the rFOX program (rFOX 2.0 v2) on Arbitrum to directly distribute 25% of ALL Shapeshift revenues in USDC to participants, introduces a targeted FOX token buyback and burn at a monthly volume threshold of $200M, and removes the existing general burn mechanism.

Abstract

The proposal simplifies and enhances the existing rFOX program by directly rewarding users with USDC and introducing a targeted FOX buyback and burn mechanism activated at high trading volumes. This aims to increase market impact, simplify user experience, and strengthen community engagement.

Motivation

The current rFOX system needs an update. Currently, it includes regular burns irrespective of trading volume, resulting in minimal impact and ineffective capital usage. By restructuring fee distribution and focusing the burn mechanism on achieving a substantial volume milestone, this proposal maximizes FOX token economics and provides clear, measurable objectives for the community.

Specification

  • Fee Distribution: 25% of all Shapeshift revenues earned by the DAO are distributed monthly as USDC directly to individual Thorchain addresses of rFOX participants.
  • Targeted Burn: When monthly trading volume reaches $200M, 50% of the DAO-owned revenues (75% of total revenues) will be used to buy back FOX tokens for burning.
  • Removal of General Burn: The ongoing general burn approach will be eliminated in favor of the targeted burn strategy described above.

Benefits

  • Zero Additional Engineering: Easy implementation with minimal resources.
  • Expanded User Base: USDC rewards incentivize current and new participants.\
  • Expanded Reward Base: 25% of all fees generated on shapeshift > just 25% of thorchain (rune) fees.
  • Simplified Messaging: Clear and concise reward and burn strategy.
  • Enhanced Platform Engagement: Promotes user activity within the ShapeShift ecosystem. Reinforces the use of a shapeshift wallet (to link 0x and thorchain address)
  • Community Goal Alignment: Sets a clear, unifying target to galvanize collective action and potentially boost FOX market performance.

Drawbacks

  • Dependent on Trading Volume: Benefits from the targeted burn only activate upon reaching substantial trading volume ($200M monthly), which may not always be predictable.

Vote

  • For: Adopt the revised rFOX 3.0 v2 program with direct USDC rewards and targeted burn mechanism.
  • Against: Keep the existing rFOX program unchanged.
  • For (with changes): I like it, but I don’t like this about it: _____ (insert in forum, please!)

Revenue and Burn Impact

Monthly Volume Fees (55 bps) rFOX Share DAO Retained Burn FOX at $0.04 FOX at $0.10 FOX at $0.04 (% of total supply after 12 months)
$50,000,000 $275,000 $68,750 $206,250 $0 0 0 0%
$100,000,000 $550,000 $137,500 $412,500 $0 0 0 0%
$150,000,000 $825,000 $206,250 $618,750 $0 0 0 0%
$200,000,000 $1,100,000 $275,000 $412,500 $412,500 10,312,500 4,125,000 12.38%
$250,000,000 $1,375,000 $343,750 $515,625 $515,625 12,890,625 5,156,250 15.47%
$300,000,000 $1,650,000 $412,500 $618,750 $618,750 15,468,750 6,187,500 18.56%
2 Likes
2

So, burns that actually work? What a concept :handshake: :clap:

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Key Performance Indicators (KPIs)

KPI Definition Success Criteria
Monthly Trading Volume Monthly volume traded through ShapeShift Success: $150M/month; Smashing Success: ≥ $250M/month; Failure: < $100M/month for 3 consecutive months
FOX Buyback and Burn Impact on circulating FOX supply (1B total supply) Success: Decrease by ≥10% annually after first burn; Failure: <10% annually after first burn
USDC Distributed to Users Monthly total USDC rewards distributed Success: ≥$40K/month; Smashing Success: ≥$80K/month; Failure: <$25K/month for 3 consecutive months
Unique rFOX Participants Number of unique addresses receiving USDC rewards Success: ≥50 monthly; Smashing Success: ≥100 monthly; Failure: <35 monthly for consecutive quarters
Staked FOX Tokens Percentage of circulating FOX tokens staked Success: 10%; Smashing Success: 15%; Failure: <10% sustained
ShapeShift Wallet Usage ShapeShift wallet usage following rFOX distributions (Mixpanel) Success: ≥50% activity rate within 7 days; Failure: <25% sustained for 3 distributions
Staker Retention Rate Percentage of users who continue participation Success: ≥30%; Smashing Success: ≥50%; Failure: <20% for two quarters
FOX Price Impact Post-Burn FOX token price appreciation 30 days after burn event Success: ≥10%; Smashing Success: ≥20%; Failure: ≤0% sustained after multiple events
2 Likes
4

After lots of consideration, I wanted to let people know that I am considering a “For with changes” proposal that looks something like this:

Burn starts at 2% of fees when volume is 10M. Burn increases by 2% until we hit our goal, of 100M volume. Once we get to 100M volume, burn increases by 3% for each tier.

The above part is uncontroversial, and I think will be/is accepted as a good course of action going forward.

The second part is it we split the share of the burn: who is responsible for the part of the burn. It starts out with the rfox stakers paying for the burn, and decreases dramatically until it stays at 0% and the DAO pays entirely for the burn past the 100M volume mark. This is a bit more controversial, as this would lower the APR for the rfox stakers (though the APR right now is variable since its in RUNE and would be More stable with rewards in USDC). The APR would never lower past 20.5%, and it would give the rfox participants some skin in the game to incentivize pushing volume to the platform. What are y’alls thoughts?

Take a look here.

1 Like
5

So I like this update a lot and thinks it generally aligns incentives better.

In general though I would be careful about lowering the APR (which we want to incentivize stakers to stake) at the beginning when it’s a relatively immaterial amount to the DAO but a large amount APR wise for stakers.

Either way I think this is a better proposal but I think you accomplish a lot of what you want without taking that small cut from stakers (and the DAO is getting +25% of the total pie anyway compared to right now in this newer version of rFOX).

1 Like