Summary
The goal of this proposal is to enact an upgrade to FOX tokenomics that more closely aligns the DAO with the THORChain ecosystem of which it is a vibrant part.
As part of its operations the DAO treasury receives and holds RUNE. This proposal would upgrade FOX tokenomics by paying a portion of the RUNE the DAO receives on a regular basis as “real yield” to FOX stakers in RUNE, as well as using a portion of that RUNE to buy and burn FOX.
Abstract
The ShapeShift DAO has been building through the bear market, consistently improving the interface/product offering as well as adding a number of THORChain related features in particular (such as streaming swaps, Metamask Snaps, and soon lending). Most of the focus during that time has been on improving the product and attempting to acquire users (as it should be), however the tokenomics of the DAO have not gotten nearly as much attention. This started to change slightly with SCP-153 when the community approved using FOX as a way to get discounted fees when trading. This proposal suggests, on the back of SCP-153, that the DAO should further embrace its alignment with the THORChain community by upgrading FOX tokenomics to enshrine that alignment with RUNE and the THORChain ecosystem at large.
Motivation
ShapeShift was and is one of the earliest THORChain supporters, well before others in the ecosystem recognized its value and even before the DAO launched, ShapeShift integrated THORChain for crosschain swaps. ShapeShift has consistently supported THORChain features as they are made available and most of ShapeShift DAO’s trading volume comes from users utilizing THORChain. The main motivation here is to encourage the ShapeShift community to further embrace and strategically focus on the THORChain ecosystem as its best opportunity. One of the best ways to do that is through an upgrade to FOX tokenomics that further aligns the ShapeShift DAO and THORChain communities together.
Specification
If passed, this proposal would dictate the following:
- X% of all new RUNE accumulated by the DAO treasury (from whatever source, whether donation, fees, or any other revenue stream) is paid out to FOX stakers as real yield every week (pro-rata across those who are staking). The definition of ”New” here means any revenue source that adds additional RUNE to the DAO’s treasury that wasn’t previously in the treasury prior to this proposal passing.
- X% of all new RUNE accumulated by the DAO treasury (again from whatever source, whether donation, fees, or any other revenue stream) is used to buy FOX from the open market which is then burned by being sent to 0x0000000000000000000000000000000000000000
- The remaining X% of RUNE would continue to be held and used by the DAO treasury as governance sees fit.
- In order to effectuate this new change, it will become required that in order to get FOX staking benefits (such RUNE yield and whatever else the DAO deems a “staking benefit” in the future), a user must stake their FOX in a staking contract (this staking contract will be chosen and implemented by Product and Engineering workstreams) as well as sign a message or transaction to assign the RUNE address where their yield will be paid. It should become standard that “unstaking” FOX takes a minimum of 28 days henceforth (though the receipt asset could still be liquid and transferable). To be clear this proposal passing would setup a simple single sided FOX staking mechanism for this purpose, it does not allow the DAO to use the staked FOX for other purposes, though future governance proposals may alter or evolve this to do so.
- New software will need to be prioritized and built by the Product and Engineering workstreams in order to allow a user to sign a message or transaction and assign a RUNE address where their yield will be paid. The user will also need the ability to update/edit this address at future dates by signing a new transaction.
- The DAO multisig will effectuate these RUNE and FOX transactions on a weekly basis based on the RUNE revenue numbers from the prior week.
- If this proposal passes, indicating the community has passed the overall tokenomics upgrade model, it will trigger an additional and immediate 7 day long snapshot vote where the community can vote on 1 of 3 options for the starting parameters (which will set the X%’s above). Those three options will be (a) 25% of RUNE to staking yield, 25% used for buyback and burn, 50% held by the treasury, (b) 25% of RUNE to staking yield, 25% used for buyback and then treasury locked, 50% held by the treasury, and (c ) 10% of RUNE to staking yield, 10% for buyback and burn, 80% held by the treasury.
If this starts to see increasing success and scale (in terms of overall RUNE volume, users staking, and number of transactions needing to be made by the multi-sig on a weekly basis) then it will make sense for engineering to create a bot for use by the multi-sig to make these transactions automated and more efficient (e.g. a hot wallet which the mutli-sig fills up every week that does the transactions automatically). This is not necessary to get it going, but would become a necessary upgrade once any sort of scale increase is needed. Ultimately this proposal leaves this implementation detail and timing up to the discretion of the product and engineering workstreams unless superceded by a subsequent governance proposal.
Effectively the specification of this governance proposal would setup 3 parameters that governance could affect going forward: (1) % of RUNE accumulated that powers FOX staking yield, (2) % of RUNE accumulated used to buyback FOX from the market which is then burned (or treasury locked if (b) is the winning option) and, (3) % of RUNE accumulated that is held by the treasury. While this proposal passing would set the initial starting parameters for all three of these (via the contingent subsequent snapshot vote), governance can modify this with a subsequent proposal in the future to alter any of these, including setting any of them between 0-100%.
Benefits
The major benefit to this proposal is upgrading FOX tokenomics in a sustainable way that more closely aligns the ShapeShift DAO with the THORChain ecosystem. With this alignment, the better RUNE and THORChain does, the better the ShapeShift DAO does as well. This creates ongoing yield opportunity for FOX stakers to earn RUNE (something which does not exist in many fashions outside of running a RUNE node or LPing on THORChain) and it starts to consistently burn FOX on a regular basis, all in a sustainable manner.
Another potential benefit to this proposal is that it could establish the foundation for a further upgrade to veTokenomics in regards to governance and for voting on how and where revenue the DAO earns is used on a more active basis. That is better served for a future proposal due to further complexity, but this proposal passing would setup such a natural evolution for subsequent tokenomic upgrades being successful.
Drawbacks
The major drawbacks of this proposal are the time and priority of the product and engineering workstreams in order to make these changes and operate the system on an ongoing basis.
It also could create some additional ongoing burden and workload for the Operations workstream who would have to field and respond to user questions and issues around this tokenomics upgrade and its effects.
There are opportunity costs to aligning with the THORChain ecosystem further, such as not aligning further with other ecosystems the DAO may wish to pursue or other engineering and product features which do not get prioritized as a result.
Finally the obvious drawback of aligning the DAO further with the THORChain ecosystem could have negative effects for FOX whenever RUNE is in a downtrend (such as in a bear market).
Vote
Voting “For” this proposal would enact the tokenomics changes for FOX as stipulated in the specification of this proposal. The initial parameters will be set via a contingent secondary vote if this proposal passes as described in (7) of the specification section. A “for” vote also serves to prioritize the product and engineering work streams to enact this proposal as quickly as reasonably possible.
Voting “Against” this proposal would enact no changes.
