After participating in the popular revenue thread, we’ve put together a proposal to implement fees, taking into consideration the varied opinions in the community. This proposal is to add fees on all swaps.
We propose a fee placed on all swaps, this could come in the form of a flat fee (.05% for example) or the fees being separate for stablecoin swaps and non-stablecoin swaps ( Eg:- stable pairs: 0.01%, 0.02%, 0.03%, 0.04%, etc & non-stable pairs 0.1%, 0.2%, 0.3%, 0.4% etc.). We believe that targeting an average fee of .1% or less will not have a significant impact on the user experience or costs and could drive significant revenue to the DAO. Hopefully, through the comments on this post some consensus can be made on what the appropriate fee amounts are, if any. Initially, these collected fees should be deposited to the DAO’s treasury account. Changes to the tokenomics should be addressed at a later date, once we have a plan for consistent revenues.
To give an idea of the potential revenue and view the daily and cumulative volumes on swaps please see this Dune Dashboard. Using that data, since the launch of the DSA v2 accounts (94 days at time of writing) there have been 1.9b in swaps performed. If this volume is consistent, you can assume a yearly swap volume of roughly 7.2b. To create an example, if there was an average fee of .05% applied to these swaps we would see $3.6m in annual revenue brought to the DAO. To get an idea of how swaps are used, using data provided by the team, 77% of swaps happened while using strategies and 23% were user directed swaps (rounded to the nearest whole percent.)
While the benefits can be explored more in the comments, three strategic goals would be achieved in applying a fee and making the DAO revenue positive.
- Value Proposition - The value proposition of the INST token will be more clear by having revenues. Instadapp has incredibly high growth in volumes, users and TVL. Having the DAO benefit from that growth will promote long term thinking around owning the INST token. Because of our LM program, users of the InstaDapp platform are able to accrue INST tokens. The right revenue model further incentivizes a long-term ‘stickier’ userbase because of the added value in accrual of the treasury account.
- New Tokenomics Options - It opens the door for further tokenomics discussions. There are many popular token models out there that can be utilized once there are revenues. These models vary and can address different systemic security concerns, or drive token holders value, or a combination of both. Exploring more tailored tokenomics options should happen after fees have been adopted and have proven to not significantly slow user growth.
- Treasury Diversification - Currently, the treasury faces low liquidity when selling and has no payment options without liquidating INST (generating selling pressure.) Having an inflow of stablecoins and other tokens will give the treasury an option to pay in USD or other currencies without liquidating INST. As it is now, relatively small sales can have an outsized impact on the price.
- Possible Slowed Growth - Fees could make the platform less desirable to use; Instadapp’s growth and competition needs to be heavily considered. Further, there is a balance between user interests, tokenholder interests and developer/security interests. Taking this balance into consideration when any changes are made is important when designing a system that best serves all parties.
- Governance - Treasury management is important for all DAO’s, taking this into consideration early can avoid exploitative actors from draining funds. Discussion around future treasury management may be needed before implementation.
- Implement a fee on all swaps via Instadapp with the proceeds going to the treasury. This may require creating a new connector.
- Update Instadapp UI to reflect these changes; to inform users of fees being charged.
Voting - (To happen after %'s are finalized)
A vote “Yes” would be for implementing a fee on all swaps.
A vote “No” would be to leave the fees at 0 (no change.)
Thanks to Miscao and Hillbilly_Chess and data/advice from the Instadapp Team for helping me put this proposal together!