Revenue Model for Instadapp

Governance
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Hello dappers! :wink:

Great to see Instadapp on the DeFi leaderboard this morning. We’re writing up a brief request for proposal to discuss an obviously interesting question for the community: what is InstaDapp’s revenue model?

Quick disclaimer: This is our first request for a proposal. If we’ve missed something, please feel free to flag.

Context

At the time of writing, Instadapp has $7.8B of liquidity locked up. This number will likely go up as DeFi gets more sophisticated. It is clear that the innovation will not stop at traditional financial primitives (like lending, derivatives etc.). We’ll see entirely new DeFi-native products emerge in this Cambrian explosion. This means hundreds and possibly thousands of protocols?

Instadapp’s advantages in this world are promising:

  1. Bootstrap users/liquidity for new protocols.
  2. Simplify usage for users.
  3. Make integrations easy for developers.

This is an opportunity to discuss what Instadapp’s revenue channels should be. The question of revenue is not about extracting fees as much as it is about coming up with a framework for making the right product tradeoffs. For example, if a protocol wants to advertise to Instadapp users – should we allow it? (especially as the userbase grows beyond DeFi natives who can independently judge protocols, risks etc)

Admittedly, these are difficult, fact-specific choices but we’ve seen how marketplace businesses in Web2 (like Uber and Instacart) can get quickly messy if this philosophical grounding is not established early. Ultimately, InstaDapp’s monetisation model will reflect these choices.

Our options would be to pick from one or more of the following:

1. Fees from protocols. Consider this example - a derivatives protocol wants to fast track bootstrapping liquidity and attracting users. They could partner with Instadapp, pay to be on a featured section, offer enhanced liquidity mining incentives directly to Instadapp users etc. As DeFi grows, Instadapp could tap into opportunities to monetise with new protocols and dapps while helping them bootstrap their first billion users/dollars.

2. Fees from users. This is straightforward. Instadapp could charge a fee from users to make various types of transactions that are native to Instadapp – such as for – swap transactions, flashloans, lending interest rates etc.

3. Fees from developers/dapps. Instadapp could monetise products built exclusively for developers. This feels early, but could be opportunities here as developer tools build out over time? For instance, you could imagine enterprise DeFi smart accounts with additional functionality.

Looking forward to hearing + learning from the community!

Thanks

Akshay
On behalf of Superpumped
Delegation address: 0xbB644A48De45C840B84AdEEfd873e837d6B131A3

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Very good to discuss. My point is when Instadapp reaches the top of the DEFI TVL, then let’s count on making revenue.

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First let me say welcome @akshaybd ! Happy to have you on-board as a delegate. I wanted to add a few comments to this discussion:

In the past, Instadapp has charged small fees for more complex transactions such as multi-protocol refinancing. We have completed around 12B in flashloan volume and we are the largest users of flashloans on Ethereum. If we were to add a small fee to this volume it could generate decent income.

There may be some opportunity for Instadapp to offer a ‘bootstrap launchpad’ of sorts, newer applications probably won’t have quite as much funds to pay to be featured, but we could potentially exchange for a stake in that protocol. Similar to how Yearn incorporated other products into their ecosystem.

I believe there is institutional interest for customized Enterprise accounts. Compound has recently started to offer Compound Treasury, specifically for traditional and larger institutions. I think this is something we could explore in the future when we have more developers on board. We could create an implementation of Instadapp with specific features, plugins and integrations for this crowd, such as: Fiat on-ramp, compliant book-keeping, account yield, and position automation.

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The revenue model should be tied to Inst token.

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Hi all. Thank you for starting this topic of discussion I 100% agree with the importance of establishing the “philosophical grounding” as early as possible. Do we have any metrics on the most used functions (both in terms of # of transactions and notional amount) within the INST platform? To me , this would help me understand where the INST fee roadmap should go.

I believe fees from users would be the easiest to implement, would have the least amount of seasonality and possibly would require the least centralization or coordination. I would imagine managing ongoing campaigns from #1 or #3 would potentially be more labor intensive and require more governance decisions.

Lastly, do you think if we incorporate a revenue model we also have to concurrently decide on the establishment of a Treasury Collector account? (similar to what AAVE has implemented)? Or does the community want INST revenue to buyback and burn model. Personally I think the buyback and burn model is inefficient and a Treasury Collector account could potentially see a return on the assets in the account.

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I personally think it would make more sense to keep the funds versus burning them, so they can be used to support biz expenses and protocol contributions. Otherwise you would be depending on the value of INST to appreciate due to the burning of tokens (not always guaranteed). Plus as you stated, the funds can be converted or used in ways that will appreciate in value over time.

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Hey @akshaybd! Interesting proposal.

Liked your thoughts around the 3 different revenue stream broadly.

Now Instadapp can have multiple revenue streams from multiple sides of course there should be a balance between users and token holders.

Here are some of my thoughts on where revenue could be generated in the near to mid-term.

  1. Swaps: Maximum (more than 95%) of swaps on Instadapp happens through strategies like collateral swap, leverage etc. Since the time DSAs are live (April 2020), Instadapp has had over $3B of swaps most of which are in the past few months.
  • Total mainnet swaps - $2.75B (stable coin pairs: $1.44B & non-stable coin pair : $1.31)
  • Total polygon swaps are around ~$0.5B.
  1. Flashloan: Instadapp is the biggest flashloan user with an overall flashloan use of above $12B on mainnet. (don’t have the proper stats for Polygon yet).
  2. Automated DeFi Limit Orders: Automated DeFi Limit Orders on top of lending protocols
  3. Instadapp’s own flashloan (forum post coming soon): Inhouse flashloan of Instadapp protocol. Most deepest & biggest flashloan.
  4. Automations.
  5. Earn governance tokens directly from new protocols to allow them to grow by making them composable with existing protocols.
  6. token transfer & refinancing bridge: Move tokens or debt position from any chains (L1 or L2) to any chains (L1 or L2) within minutes.
  7. Payment modules: Payment is one of the biggest markets, making smart accounts extendable to let them set payment limits, recursive payments, subscriptions, borrow & pay from Aave/Compound, etc. Paying anyone from any chain to any chain making a super simple payment infrastructure.

As the Instadapp protocol grows there will be multiple revenues stream from multiple sides. The things we see right now might not even be the main source of revenue for the protocol in future. Although is it the right time to start generating revenue or the community, token holders, investors & team should just be focused on growing the protocol and giving all the benefits to the users using it or developers building on top of it.

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hello! in the near future, it is necessary to realize the receipt of income from the platform to inst holders - this will be the best advertising and will attract new users.

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Interesting topic.

I think 1. Fees from protocols is good idea but it may need to go through a bit of cautious governance, as we have to be careful about protocols safety and legitimacy etc.

Following the @Seb_EthMonk and @samyak comments, I strongly believe 2. Fees from users can be a sufficient revenue source for sustainability of the protocol (I’ve been an Instadapp user long time and I would be happy to pay fees for strategies like leverage, save, refinance etc).

Although I think now is not the time to charge fees, discussing more about where/when should INST holders get fees and where/when should not is the one of the most important topic in future.

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The fee from protocols would generally be the fees in their governance token. In this way, INST token holders & governance will also have a share of all new protocols and Instadapp governance can also propose new updates in other protocols.

Fee from users makes the obvious sense for sure.

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Can be possible. This decision also depends on governance and token holders.

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You should able to find answers for most your questions here - Revenue Model for Instadapp - #7 by samyak

So the current treasury account is also a DSA at this address and is owned by governance.

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I’m excited to watch Instadapp grow! I believe moving to a cashflow positive model will be best for investors.

2. Fees from users. seems like a good start

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That’s such an interesting discussion!

I think there are 2 ways to make Instadapp bigger.

  1. Correct fee from the users.

  2. Not correcting fees from users. Keep integrating with other protocols like Liquity. I think Instadapp has enough power to invite other protocols with no additional fee. It will make Instadapp bigger and raise token price too. Such as Uniswap doesn’t correct fees as protocol revenue.
    DeFi Protocol Revenue Charts: Uniswap, Aave and SushiSwap

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Can you please elaborate on “not correcting fees” this seems promising, but I am not aware of how this works.

Thanks

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I’m very sorry but it’s typo. I’d like to say “Collect” not “Correct”.
Thank you for your indication.

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No big deal. Just trying to understand. I guess my main concern is that even with the second largest TVL the project isn’t getting priced the way other defi projects are even when looking at the fully diluted market cap vs TVL. I assumed it was from the lack of revenues…

I agree pushing a large percentage of users away traffic isn’t the answer, and I may just not understand the numbers well enough.

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My idea is that collecting fees from users will be a 2nd step. I think 1st step are these points.

  1. Consider how to expand the project using Instadapp as middleware. If we collect fees from the end user, it may be a barrier to apply other projects to use Instadapp as middleware.
  2. Increase the project who connect with Instadapp like Liquity.

I’m very welcome to discuss several kinds of ideas.

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I think we are here. #1

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Amongst the three key stakeholder groups (users, developers, protocols), we could potentially think of charging based on the “value added” for different functions, and not charge for functions that are not. Which is basically building on the “freemium model”, largely popularised by SaaS/Fintech companies.

But how do we quantify the amount to be charged?

We would suggest taking a data driven approach to look at the current set of features and corresponding volumes, as well as corresponding potential savings generated for the users. As an example, using flash loans to refinance between AAVE and Compound, how much gas fee is potentially saved? Charging a percentage of this “saving” could be a transparent way of retaining the value and still providing savings for the end user.
Furthermore, In cases where Instadapp is aggregating services from other protocols and is able to charge B2B discount from the protocols, perhaps it’s advisable to waive the fee for users.

Happy to do the number crunching with some help from the team!

Would love to hear everyone’s thoughts on this approach :slight_smile:

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