[Discussion] Creating SafeDAO’s first revenue stream through Community-Aligned Fees

[Andre]

Title: [Discussion] Creating SafeDAO’s first revenue stream through Community-Aligned Fees

Authors: @Christoph (Safe Ecosystem Foundation), @Andre (Safe Ecosystem Foundation)

Created: 2024-08-29

Abstract

This proposal introduces SafeDAO’s first revenue stream which strengthens token utility, community governance and empowers the vibrance of the ecosystem.

Proposal types

State which proposal type this proposal belongs to.
SEP: Constitutional Proposals
SEP: Governance Proposals
Other SEPs

Proposal details

Purpose & Background
As part of a larger effort toward economic sustainability, The Safe Ecosystem Foundation (“SEF”) has taken the initiative to orchestrate the first revenue stream for SafeDAO. As part of this, SEF has taken the recently introduced Native Swaps in Safe{Wallet} as an opportunity to create an alignment of ecosystem products and solutions with the community brand. More specifically, SEF utilizes its Safe-related trademarks to facilitate revenue generation of third-party integrations within Safe{Wallet} via a license model with Native Swaps as the first integration of this kind. It should be particularly emphasized that Safe{Wallet} does not extract any value around Native Swaps. Instead, revenue streams are pledged to SafeDAO. The intention is to give SafeDAO more agency regarding the use of funds. For details around sustainable ecosystem building and the concept of Community-Aligned Fees, see here.

This proposal suggests ratifying that SafeDAO accepts the revenue transfer for Native Swaps through the Safe{Wallet} integration.

Fee Conversion and Acceptance of Funds
For Native Swaps, a fee conversion mechanism collects the fees in the assets accepted by CoW Protocol, using the proceeds to buy SAFE tokens on the open market and then (upon ratification) brings them under community control. This means, upon ratification of this proposal, the revenue streams will be transferred to an account which is designated for SafeDAO. As such the SEF or a fully-owned subsidiary serves as the legal wrapper for the revenue streams of the SafeDAO treasury.

Resource Allocation
The funds received from 3rd parties would be part of SafeDAO’s treasury and as such they can be allocated according to SafeDAO’s governance and resource allocation frameworks (i.e. Outcomes-Based Resource Allocation).

Annex 1:
Fee details:

For more details check Introducing TWAP Orders and Tiered Fees in Safe{Wallet} Native Swaps, How does the widget fee work for native swaps? | Safe{Wallet} Help Center and Support. and Cowswap - Partner fee calculation.

Effects and Impact Analysis
If the proposal is accepted, the revenue generated from Native Swaps will be allocated to SafeDAO and become part of its treasury. As such it can be allocated according to SafeDAO’s governance and resource allocation. This will be the first income stream for the DAO and allow for a more sustainable resource allocation governed by SafeDAO.

Looking at the generated fees during the first month of Native Swaps and considering a hypothetical stagnant development, this income stream would create an annualized amount of ~$2.5M of community-aligned fees already. However, limiting an assessment to such a conservative view would completely disregard the fact that there are multiple areas for optimization, e.g. raising awareness for the feature and rolling it out to more networks.

If the proposal is rejected, the revenue generated from Native Swaps will remain under the control of the Safe Ecosystem Foundation. It will be allocated in line with the Foundation’s purpose: fostering the Safe ecosystem. However, this revenue will then not form part of the SafeDAO treasury and will not be governed by token holders or SafeDAO delegates.

Alternative Solutions
An alternative to the introduction of the community-aligned fees would be not to focus on financial sustainability.
Another alternative would be not to have the revenue governed by SafeDAO.
We don’t see this as a valid alternatives as this will limit the DAO in its ecosystem funding.

Implementation
Own implementation possible
Own implementation but with funding (how much % to implementation)
Request for technical support through Safe matter experts:

• Who is needed?
• Did you reach out?
• Is there a roadmap?

For the implementation the SEF or a fully-owned subsidiary of SEF under the surveillance of the Foundation Council will operationally set up a wallet attributed to SafeDAO with the same setup as the SafeDAO treasury.

Open Questions

None

Acknowledgements
Will be added during the discussion.

Copyright

Copyright and related rights waived via CC0.

[corbinpage]

I strongly support this proposal with the goal to ensure long-term financial stability for SafeDAO.

Central to this goal is the implementation of Native Swaps as a first method for value capture. Native Swaps are effective because they offer the 1) best prices, 2) market research convenience, and 2) a familiar UI that can be trusted. This is particularly beneficial for Safe users, who face cumbersome multi-step transaction signing. Although some may oppose fees, they have the option to opt-out and use other apps integrated with Safe.

Revenue from this feature should support the SafeDAO Treasury directly and potentially flow directly to SAFE token stakers in the future, reflecting the crypto industry’s current move towards sustainable positive cash flows.

I look forward to Safe Community exploring further value capture methods for the DAO:

• Fees for on/off-ramp services
• Bridge fees and yields on bridge-held assets
• Profits from Safe-branded ETH or stablecoin derivatives
• Income from selling .safe usernames.

SafeDAO is the leading wallet protocol in all of crypto, has outstanding metrics on TVL/users/activity, and has a vibrant community of builders and advocates. Proposals like this position SafeDAO as the best example of a perpetual, regenerative internet organization that can operate for decades to come…which has always been a central goal of the crypto space since the founding of Ethereum and Bitcoin.

[LuukDAO]

I am completely in favor of this proposal.

Safe Swap, especially with its robust technology and shared history with Cow Swap, is a solid first revenue stream. It shows the ability of Native Apps to generate significant value while providing a best-in-class experience for end-users.

Community-aligned fees provide a clear pathway for bidirectional value creation between Safe and its ecosystem partners. I’m excited to further explore and standardize the paths for any third-party solution to become a part of the Safe App ecosystem and, in some cases, progress to become a Native App with a community pledge.

I look forward to further exploring and realizing community-aligned fees and other forms of revenue generation to ensure Safe becomes sustainable and continues to redefine Ownership!

[felix_greenfield]

Fully supportive of this proposal!

We have the chance to leverage the strong position with sticky TVL, growing usage metrics and the trust the safe track record and brand has created as a sort of “meta aggregator” in the web3 space. Let’s focus on aggregating the supply of secure and useful services further (e.g. also the example @corbinpage mentioned).

Imo it’ll be critical to continue offering best-in-class UX at the interface layer (while staying true to the ethos of preventing lock-in and allowing access to safes via other means, not least to further encourage it to be used as a standard). The interface should just be so convenient that everyone wants to use it!

[nanobro]

Great way to capture revenue. Support this.

[loscrepos]

What is even that? Community-Aligned-Fees? Is this Newspeak? Just say that you are going to collect fees from swaps.

All the collective intelligence of Safe and that’s what you came up with? Swap fees? There are a thousand ways to monetize this and that is what you came up with?
What about a premium version of Safe? Or cap the amount of funds someone can hold?

Finally, the article reads very off and it’s borderline embarrassing. You have built great stuff. You can do better.

[jengajojo]

I believe this is an important conversation to be had when it comes to sustainability of the DAO operations and I am fully in favor of charging a fee on native swaps

@Andre

a fee conversion mechanism collects the fees in the assets accepted by CoW Protocol, using the proceeds to buy SAFE tokens on the open market

I agree with this strategy for non-stable swaps, but for fees on stable swaps we must consider retaining stables in the treasury as opposed to swapping them back to the native token. The main reasons for this are:

• The DAO needs stables to fund externals/service providers
• Stables offer a cushioning effect in volatile times
• The treasury today holds negligible stables and from a treasury management perspective this is not healthy in the long term since the market for native tokens is extremely volatile

@corbinpage

• Fees for on/off-ramp services
• Bridge fees and yields on bridge-held assets
• Profits from Safe-branded ETH or stablecoin derivatives
• Income from selling .safe usernames.

These are some great points to consider for future sustainability initaitves

[chris]

Totally agree! First step to safeDAO income.

[fin_areta]

I fully support this proposal as an important first step in generating revenue for the SafeDAO ecosystem and moving toward long-term sustainability.

Establishing native swap fees as the initial revenue stream seems like a logical starting point for ecosystem fee generation, and something that can be built on down the road. It’s encouraging to see the thoughtful discussion already emerging in this thread on how best to implement swap fees in an effective and community-aligned manner. We feel this kind of dialogue is important for ensuring that SafeDAO remains not only financially viable but also true to its core principles.

I’m excited to see how these ideas evolve and contribute to the continued success of SafeDAO.

[Ibrahim313]

In favor for this proposal as a starting point. Looking forward to seeing more being done during this bull cycle though.

Adding a premium paid version as an option and charging a percentage fee based on storage quantities as others have successfully done should definitely be put into the works during this cycle sooner rather then later , as this can prove for the best time to try and stabilize the token for long term sustainability.

I know the reputation of most involved is to move slowly and cautiously but i believe with all thats going on with rate cuts, money printing and the overall easing of momentary policy over the next few month’s can be a great time to take advantage and step out of the comfort zone and move more quickly with implementation of fees and services. Timing can make all the difference this time around.

[qianwan_lv]

Good proposal. Half of all income can be used to repurchase safe tokens, and the other half can be used to distribute to users who hold safe tokens, so as to achieve dividends for holding coins!

[wolfcoco]

Finally, a proposal that makes sense.

[karpatkey]

karpatkey has provided a detailed response in the Draft thread here: [Draft] Creating SafeDAO’s first revenue stream through Community-Aligned Fees - #2 by karpatkey