Decentralization Steps and Fees for the web3 Protocol
A thought from a news.
Good morning.
Mitsui from web3 researcher.
Today I will write about what I came up with from a news item.
📕SafeDAO proposes charging swap fees as income
🤝Foundation is not truly diversified either
💬It doesn't look like fees will be free
📕SafeDAO proposes to collect swap fees as income
As we posted on X, we discovered news that the community at Safe, a multi-sig wallet provider, is considering a proposal to establish the first independent revenue stream for the project's DAO.The proposal was made as recently as August 29.
Safe launched Native Swap in May, allowing Safe Wallet users to exchange assets directly within the wallet via the CoW protocol, a DEX.
The Safe Ecosystem Foundation's (SEF) proposal is to channel transaction fees generated from native swaps into SafeDAO's treasury.In this case, the fees would be converted to SAFE tokens and transferred to the project's financial reserves.
The point is not to collect new swap fees, but to transfer the fees currently collected by SEF to the DAO and place them under the control of the token holder.
If passed, this proposal would be Safe DAO's first ongoing source of revenue.
The comments on the forum have been generally favorable, and we expect to enter the voting phase in earnest.
🤝Foundation is not truly decentralized either
Now, here are my own considerations.
Although the proposal states that its aim is to increase the influence of Safe DAO, I expect that it is aiming for true decentralization.Currently, fees are allocated to the Foundation and used to expand the Safe ecosystem, but the Foundation's operations are not completely decentralized.
Many current protocols have a development company that exists as "XX Labs" and separate token issuance and management from the "XX Foundation".On top of that, there is a DAO, and the DAO is governed by the token holders.
However, there is still very little that can be decided by the DAO, and in effect, Labs and Foundations often hold the majority of the decision-making power.
Personally, I do not think this event in itself is a bad thing.There will be time for decentralization, and in the end, it is often better to improve products in a centralized manner.
However, since web3's ideology is to eventually implement the product in a completely decentralized manner, many protocols are designed to land on a decentralized basis.
What I am trying to say is that this move by Safe could be one use case for gradual decentralization.
Create a product that is used frequently
Secure commission income
Transfer that commission to the DAO
The DAO will have an ongoing income.
This is the step.The point is to gradually shift income to the DAO, not to suddenly transfer decision-making authority.
This may be similar to a business succession.The business is operated centrally and stabilized, and then transferred to the DAO.This may be a bit of a misnomer, but even if DAO revenues are generated, the funds are not suddenly put to good use.It is not only in terms of where the money is spent, but also in terms of whether the governance works, whether the voting rate is high, and so on, and the funds cannot be used well all of a sudden.
I think history will speak for itself here, and we need time to acclimate for diversification.So, I envision that only one source of income for one business will be carved out and transferred to the DAO, while Labs and Foundations create another source of income on a different axis, while the governance of the DAO matures.
I don't know if that is what Safe is trying to do, but it seems like a good step toward full diversification, first shifting some of the stable fee income to DAOs.
💬It does not appear that fees will be free
Also, from a slightly different angle, it seems that not every fee will be waived in a world where web3 is pervasive.
Safe also charges a swap fee, and every chain has a cost to use it in the form of gas to begin with.
In the web3 world, it is sometimes said that commissions will be eliminated because it is decentralized and all protocols work, but it seems that the correct understanding is that commissions will be overwhelmingly lower.
MetaMask's swap commission is 1%, but 1% is sometimes criticized as too high.However, 1% commission is very rare among current services.The commission rate is usually 10%, and even for payment services, it is 3~4%.
So, it is clear that this will be a cheaper era compared to the past, but it is still likely that there will be some fees to be incurred for the use of the infrastructure.
If you think about it, it would be better if the demand for tokens is basically stimulated every time they are used, because the protocol will not work well unless there is a timing when the proprietary tokens are used.
I would like to understand and imagine this area correctly.
In summary, this is not a particularly conclusive article, but it was an installment in which we often predict the background aims and future trends from the larger proposals of major protocols, so we thought we would write about them if we had the chance.
If the results of the proposals are interesting, I will write another article about them!
Disclaimer：I carefully examine and write the information that I research, but since it is personally operated and there are many parts with English sources, there may be some paraphrasing or incorrect information. Please understand. Also, there may be introductions of Dapps, NFTs, and tokens in the articles, but there is absolutely no solicitation purpose. Please purchase and use them at your own risk.
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mitsui
A web3 researcher. Operating the newsletter "web3 Research" delivered in five languages around the world.
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The author is a web3 researcher based in Japan. If you have a project that is interested in expanding to Japan, please contact the following:
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*Please note that this newsletter translates articles that are originally in Japanese. There may be translation mistakes such as mistranslations or paraphrasing, so please understand in advance.