I’m excited to get the ball rolling on the FOX Tokenomics workstream, a group dedicated to developing the optimal economic model for the FOX ecosystem. I am not applying to be a leader of this workstream, but plan to contribute in a meaningful and ongoing capacity, and am happy to act as a de facto leader until a better leader emerges (please post on this thread if this could be you!).
As Principal Product Manager of ShapeShift, I’ve led or been involved in all FOX-related initiatives since the token was launched in November 2018. Over the past year or so, I’ve been focused on evolving FOX from its original utility as a membership token that waived fees on ShapeShift trades to the governance token of the ShapeShift DAO.
What is the future of FOX?
How will the ShapeShift DAO generate revenue?
What should the ShapeShift DAO do with revenues it generates?
These are the questions that this workstream will answer.
If you’re interested in contributing in an ongoing capacity to this workstream…
- Reply to this post expressing your interest and what you can bring to the table
- In order to schedule a weekly 1 hour workstream-sync meeting, add your availability to this calendar poll. The first sync meeting will be scheduled for the week of August 2nd (after folks return from EthCC).
At the initial sync meeting, I’d like to share and get feedback from the community on a vision for FOX Tokenomics that I’ve been thinking a lot about over the past year. In the meantime, here’s an overview of this vision:
A future without fees
Initially the utility for FOX was simple: ShapeShift charged a small commission on each trade, but if you held FOX this fee was waived. The more FOX you held, the more volume you could trade without commissions.
This model made sense in a world where ShapeShift’s code was closed source and ShapeShift was the counterparty to each trade. Since then, we’ve changed a lot. We’ve embraced decentralized exchanges and exited the regulated the business of trading, embarked on a mission to open-source all of our code, and transferred ownership and control of the future of ShapeShift to FOX token holders.
Could we still add fees on top of decentralized protocols that the FOX token could waive? Of course. Governance has the ability now to enable fees on trades and fiat->crypto purchases as well as to enable FOX token to waive or reimburse these fees. And for many, this may seem as the obvious revenue strategy. After all, Metamask adds a 0.875% fee on all swaps executed in their interface and generates millions of dollars of revenue each month. I think this model is short-sighted, and frankly sucks. Personally, I got into DeFi to remove the middlemen, not to be one. I believe there is a better, positive-sum model in which no fees are ever added to protocols, and users can actually more by using a protocol through ShapeShift than if they interacted directly with a protocol from their own node.
In a nutshell, here’s how this model works:
- ShapeShift establishes partnerships with protocols and services willing to share a percentage of the revenues generated from ShapeShift users. Many protocols and services already have built-in affiliate models, including 1inch, Yearn, and OpenSea.
- ShapeShift incentivizes users to use these protocols through the ShapeShift interface by adding no fees and rewarding transactions with a proportional amount of FOX.
- The ShapeShift DAO earns revenues, and the user earns FOX tokens which can represent entitlement to those revenues.
In this model, ShapeShift can objectively be the best way to use these protocols and services.
The First PartnershipWe would like to propose the first partnership is established with Yearn, whose protocol has a built-in [affiliate revenue program](https://twitter.com/iearnfinance/status/1367508483952771075?s=20). ShapeShift users will be able to deposit to Yearn vaults to earn yield on their assets with no added fees, and will even earn some bonus FOX. This will make ShapeShift the best interface for using Yearn, with a higher APR vs. using Yearn directly or through any other interface. One hundred percent of the revenue generated through users’ deposits will go to the ShapeShift DAO, and the FOX Tokens users earn will grant them governance rights over how those revenues are allocated.
RevenuesFOX Token holders can choose to distribute revenues to holders, hold or allocate them to diversify the treasury’s portfolio, buy back FOX to either burn or to continue funding community incentive programs, invest in other projects, or any other initiatives the community manifests.
This no-fee added, affiliate revenue program can be applied to any protocol, application, or service that addresses the needs of crypto users, including fiat on/off ramp purchases (Banxa), trades (THORChain or 1inch), NFT marketplaces (OpenSea), all things DeFi (refer to our list of communities being airdropped to), delegated staking for POS chains (staked.us), even physical item purchases (earn FOX when you buy a Ledger or some MetaFactory swag, and the ShapeShift DAO earns some DAI).
Network EffectsHow does ShapeShift capture value in an open source, decentralized world? While open source code can easily be replicated, communities, partnerships, reputation, and the network effects these brew, cannot be.
FOX incentives can kickstart, accelerate, and solidify these network effects while also achieving the necessary, ongoing mission of distributing FOX widely, fairly, and to ShapeShift community members.
For protocols, blockchains, and any project willing to share a percentage of their revenue.
Blockchain projects will be able to add support for their own chains and tokens, with the option of sponsor bounties for any or all of the work.
Protocols or other crypto services (i.e., fiat ramps) that need an interface, web3/blockchain provider, and/or wallet no longer need to build this themselves; rather, they can integrate directly with ShapeShift at launch and gain valuable exposure to a growing user base and not worry about added fees or the risks and dependencies inherent with closed-source technology.
Any project that is willing to share a percentage of the revenue generated by ShapeShift users is eligible for bonus FOX incentives, as determined by governance.
Goals1. FOX token is most widely distributed governance token 2. The ShapeShift DAO is breakeven, and ultimately profitable (revenues greater than expenditures) 3. FOX is a top 10 governance token by market cap and/or volume
Success metrics (KPIs)1. # of FOX token holders 2. DAO Revenues; ratio of revenues:expenditures 3. FOX market cap and volume ranking
Thanks for reading! Looking forward to hearing your thoughts, feedback, and other ideas for maximizing FOX utility