Authors: @lukas, @Steven
Created: 2024-02-13
Abstract
This proposal outlines strategies to enhance the utility of the SAFE token (“SAFE token” or “SAFE”), inspired by ideas from the Safe community. The ratification of this SEP completes milestone E as specified under SEP #3 (“Towards clarity on milestones before voting on enabling transferability again”). It also plans for future token utility expansions, emphasizing community involvement in the further development of the SAFE token utility.
Proposal types
State which proposal type this proposal belongs to.
SEP: Constitutional Proposals
SEP: Governance Proposals
Other SEPs
Proposal details
Purpose and Background
This proposal outlines suggestions to expand the utility of the SAFE token. The token utility ideas that were collected from the Safe community served as a key input for this proposal.
In November 2022, SafeDAO decided against making SAFE transferable. As a result, the Safe community laid out milestones that should be completed before voting on transferability again in SEP #3 (“Towards clarity on milestones before voting on enabling transferability again”). These milestones are:
- Milestone A: The claim period has passed (Reached on 27.12.2022)
- Milestone B: An SEP on a constitution has been ratified (Reached as part of SEP #4 on Feb 23, 2023)
- Milestone C: An SEP on a governance framework has been ratified (Reached as part of SEP #7 on Oct 20, 2023)
- Milestone D: An SEP on a resource allocation framework has been ratified (Reached as part of SEP #8 on Nov 27, 2023)
- Milestone E: An SEP on token utility has been ratified (Pending)
The ratification of this SEP marks the completion of the final milestone (Milestone E). Important, this proposal itself is not a vote to enable the transferability of the SAFE token!
Token Utility Design Space
This section examines the primary goals and guiding principles that shape the utility of the SAFE token, ensuring strategic alignment with the Safe ecosystem’s overarching objectives.
SafeDAO Constitution / OBRA
Safe enables users to own their digital assets in a secure, convenient and interactive way, which will require smart accounts (also known as smart contract wallets) to become the default in web3. This is also reflected in the mission outlined in the SafeDAO Constitution:
“SafeDAO’s mission is to establish smart contract wallets as the default means for interacting with web3 […] As SafeDAO, we aspire to work towards this mission by establishing standards for composable smart contract wallets (the “Safe Protocol”).” (SafeDAO Constitution, “2. Mission”)
The SafeDAO Constitution further bases this mission on three strategic pillars / goals that impact the SAFE token utility:
- Foster a vibrant ecosystem: The SAFE token should benefit from a vibrant ecosystem, rather than a single product. Additionally, principle 2 of the SafeDAO Constitution states that any utility of SAFE should directly or indirectly add value to the Safe ecosystem. Furthermore, changes to token mechanisms need to consider the effects on different stakeholders including users, developers and token holders.
- Resilience through decentralization: The SAFE token can be used to achieve technical / economical / governance decentralization for critical components in the Safe ecosystem.
- Tokenize value: Mechanisms should be created to link the growth of the Safe ecosystem to the growth in utility of SAFE.
OBRA: The resource allocation framework OBRA derives strategies and initiatives from the above goals and establishes processes for resource allocation. While not impacting the token utility design space directly, OBRA needs to be considered for funding future explorations and implementations of token utility.
Strategic focus
The Safe Smart Account has become a trusted infrastructure in the web3 ecosystem, currently securing over $90bn in assets. Given the broad potential applications for the SAFE token, this section suggests a strategic direction and guidelines for developing and integrating token utilities, aligned with SafeDAO’s mission. This strategic focus serves as guidelines for future explorations and implementations of token utilities and the respective growth of the Safe ecosystem.
Any explorations of token utility should be merely seen as preliminary conceptual ideas, which are likely to be subject to substantial change, as token utilities could also be explored beyond the ones mentioned in this SEP as long as they fall into the SAFE token utility design space defined below. There is NO guarantee and NO warranty that any of the mentioned utilities are being explored and/or being implemented in the future.
At the core of this strategy is Account Abstraction, the foundation enabling smart contract-based accounts. For smart accounts to become a mainstream option, they must offer clear, tangible advantages to both developers and users. These benefits will be facilitated by the Safe Core Protocol, encompassing different ‘abstraction layers’. These abstraction layers can be implemented separately but will eventually be strongly interconnected.
1. Account Abstraction (“Smart Accounts”)
Account abstraction is the basis for enabling smart accounts to interact with web3 applications. Initiatives such as ERC-4337 empower and standardize smart accounts, enabling new use-cases such as passkey-controlled accounts, recovery schemes, or seedless onboarding. However, account abstraction itself is only a first step towards achieving mainstream adoption of smart accounts. Additional challenges have to be solved to fully unlock the potential of advanced security, payment and network properties of smart accounts.
2. Network Abstraction (“Smart Link”)
The Network Abstraction Layer aims to simplify the fragmented blockchain network landscape, enabling a seamless experience across different chains. This layer introduces a framework that significantly enhances cross-chain functionality, fostering a more interconnected ecosystem. An example of this abstraction layer is the ability of a Safe Smart Account to control assets on multiple chains and make cross-chain interactions (see also the discussion on the community forum).
3. Username Abstraction (“Smart Domains”)
Username Abstraction offers an intuitive way to navigate the blockchain’s complexity by replacing cryptic blockchain addresses with human-readable names, combining existing solutions like ENS (SafeDAO holds safe.eth) with smart contract wallets (e.g. leveraging solutions like Nameverse or similar). The SAFE token could potentially be used to e.g. claim usernames on a designated namespace. This abstraction layer not only enhances user experience but also paves the way for new economic models based on domain registrations or renewals (Some discussions were held on the community forum on this topic, including this thread).
4. Payment Abstraction (“Fee Engine”)
Traditional payment functionalities, such as recurring payments and subscription models, are still underutilized in the web3 space. The objective of payment abstraction is to bridge the gap between conventional payment systems and the evolving web3 payment infrastructure and enable economic sustainability for the Safe ecosystem. An initial proposal for payment abstraction is the Fee Engine. The SAFE token could potentially play a role around the concept of a payment splitter (suggested by @varunkcs). Additionally, the proposal also outlines the concept of an Ecosystem Contribution, which allows to support community-driven initiatives within the Safe ecosystem via SAFE token governance.
5. Security Abstraction (“Registry”)
Smart accounts enable opportunities to create new onchain security primitives that protect users. One example is the introduction of registries (e.g. by leveraging Rhinestone, ZenGuard or similar solutions) as a way to establish stronger security properties and enforce standards for smart account modules. An initial architecture can be found on GitHub. On the SAFE token’s role, several ideas were put forward by the community (@CryptoEconLab, @varunkcs and @Abraxas, @LongHash_Ventures and @LuukDAO). Examples include mechanisms around the curation on a module registry, or a “security module” that acts as a protocol-native insurance.
Future Abstraction Layers
There may be additional abstraction layers that become relevant for the Safe Core Protocol. This may include privacy abstraction, such as adopting a UTXO model or stealth addresses (as suggested here), or compliance abstraction that enables privacy without sacrificing on compliance. Generally, the Safe Core Protocol aims to enshrine components where the value of standardization is higher than the value of heterogeneity.
Out of scope
The SAFE token utility should intentionally not be part of the Safe Smart Account itself. Having the SAFE token be a requirement for developers using the Safe Smart Account may hinder its adoption or even lead to forks. This can negatively impact the ecosystem consistency as well as inclination of certain developers to adopt Safe Smart Accounts in their solutions. Having a commitment from the SafeDAO to keep the base smart account functionality independent from the SAFE token allows for a more aligned ecosystem to be built around the Safe Smart Account. This allows the ecosystem as a whole to become more valuable, which will ultimately benefit other layers of the stack such as the Safe Core Protocol.
Existing & Proposed Token Utility
This section lays out a proposal, to be ratified by the SafeDAO, on the SAFE token utility as well as potential opportunities for future explorations of additional utilities.
a. Existing Utility: Governance
SafeDAO is governed using the SAFE token (see SafeDAO Constitution). Governance should remain a key utility of the SAFE token, which was also indicated by the community (see for example token utility proposals from @varunkcs @LuukDAO around the votings on the allocation of resources, including grants).
SAFE token holders can vote within the scope of governance of SafeDAO. They can vote with their vested and unvested tokens and delegate their voting power.
The following domains are part of the governance of SafeDAO (for more details on the scope of governance see Section C of the Governance Framework):
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Constitution (see SEP #4)
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Governance framework: This encompasses the scope of governance, dynamic governance, decision-making process and principles of proposal implementation (see SEP #7)
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Resource allocation framework (see SEP #8)
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Assets held for SafeDAO (see “Treasury” in the Governance Hub)
- SafeDAO Treasury and joint SafeDAO/GnosisDAO Treasury
- Certain IP rights: ENS domain, NFTs etc.
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Safe Grants Program with funding and administrative support provided by SEF (see SEP #6)
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SEF governance signaling: Suggestion (“social signaling”) regarding the establishment and composition of DAO committees, once established by the Foundation
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Unpausing of SAFE token transferability (see SEP #2)
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Safe{Core} Protocol: Parameters and other governance-related aspects, once they have been transferred to the governance of SafeDAO
b. Proposed Utility / Use Case: Safe Activity Program
This proposal introduces the Safe Activity Program, which incentivizes Safe users to actively participate and contribute to the Safe ecosystem. By actively using the Safe Smart Account, users participating in the Safe Activity Program display dedication to the long-term success of Safe. In return, these users become eligible for discretionary activity rewards, such as additional functionality, discounts, or other benefits. The Safe Activity Program would be designed to benefit and involve the entire Safe ecosystem.
The exact scope of the activity rewards will have to be worked out. But rewards could consist of for example:
- Sponsored transactions: Ability to send a limited amount of free transactions
- Season NFTs: Ability to claim (Safe-bound) NFT for each governance season, enabling additional perks such as guaranteed access to key events such as Safe{Con}
- SAFE tokens: SAFE tokens would be distributed to participating users that are active with their Safe Smart Account
The SAFE token gets an additional activity related use-case as part of the proposed Safe Activity Program. Locking SAFE can boost/multiply the rewards the participants receive from their activity in the Safe ecosystem.
Any SAFE tokens that eligible users would be able to claim will be funded from the remaining user allocation. This discretional Safe Activity Program would run over a limited time of up to 6 months, afterwards it will be revisited for potential extension by the Safe Ecosystem Foundation. This allocation serves a two-fold purpose:
1. Expand the number of token holders: The Safe Activity Program increases the token allocation of each participating user. By providing additional utility, the Safe Activity Program should attract more stakeholders who do not currently hold a SAFE token and are active Safe users.
2. Strengthen the user allocation for active users: Offering Safe Activity Program rewards benefits all active Safe users. This gives each user the opportunity to individually influence their allocation relative to others through activity.
The initial Safe Activity Program rewards already provide various benefits for active token holders participating in the Safe Activity Program. The program should also help bootstrapping the adoption of the SAFE token. However, it is designed as a composable mechanism that can be adapted or expanded over time through future community initiatives, such as expanding the program to networks beyond Ethereum L1.
c. Future Explorations of Token Utility
This SEP should be seen as a first step / foundation for ratifying and exploring the token utility of SAFE. As the Safe{Core} Protocol evolves over time, the design space of utilities for the SAFE token will naturally expand.
The community is encouraged to be part of the exploration and implementation of future SAFE token utilities. More concretely, SafeDAO will be involved in the following parts of the process:
- Exploration: SafeDAO is invited to provide feedback on token utility ideas as well as put forward new ideas.
- Funding: SafeDAO can decide on the funding of initiatives around the research and implementation of token utility ideas (via the Outcomes-based Resource Allocation “OBRA”). Currently, the OBRA strategy “Research and implement SAFE token utility” can also financially support certain explorations as long as they fall into the requirements outlined in the token utility design space section.
- Ratification: SafeDAO can vote on the implementation of token utilities and signal the direction of future explorations.
Effects and Impact Analysis
The SafeDAO Constitution requires that any changes to token mechanisms “need to consider the effects on different stakeholder including user, builder and token holder.” (SafeDAO Constitution, Principle 2).
User
- The discretional Safe Activity Program provides active Safe users with additional perks, such as sponsored transactions.
Builder
- The discretional Safe Activity Program could have a significant positive impact on the adoption of Safe Smart Accounts and support existing and new builders leveraging Safe.
Apart from that, this SEP also paves the way for future enhancements in SAFE token utility. These potential enhancements encompass areas like payment-, security-, and network abstraction. These advancements hold promise for builders, offering them opportunities to refine the developer experience and foster economic sustainability.
Token holder
- The ratification of this proposal marks the completion of Milestone E as specified under SEP #3. As this is the final milestone. As such, it is possible for the community to propose a vote on enabling the transferability of the SAFE token in case this SEP passes.
- This proposal sets a strategic focus for the SAFE token utility meaning there is an impact on other aspects of SafeDAO governance, such as OBRA, given that the strategic focus should set guidelines for what types of initiatives are funded under a strategy like the proposed “Research and implement token utilities” strategy.
Note that a ratification DOES NOT guarantee an implementation. The token utility explorations should be merely seen as preliminary conceptual ideas, which are likely to be subject to substantial change. Before any implementation, extensive analysis is required to get a clear picture on aspects such as legal/regulatory risks, technical feasibility, resource availability, product roadmap etc. Nevertheless, the commitment is to act in the best interest of SafeDAO and make every effort to bring to fruition the ideas and desires expressed by it.
Any explorations should be merely seen as preliminary conceptual ideas, which are likely to be subject to substantial change, as token utilities could also be explored beyond the ones mentioned in this SEP as long as they fall into the SAFE token utility design space defined above. There is NO guarantee and NO warranty that any of the mentioned utilities are being explored and/or being implemented in the future.
Alternative Solutions
As specified above, the design space for SAFE token utilities is vast. However, aspects such as legal/regulatory risks, technical feasibility and the product roadmap need to be taken into consideration when prioritizing token utilities. As such, the proposal is to be viewed as a sensible starting point, deliberately leaving many future pathways open.
Alternatively, the token utility ratification could also be more descriptive and define a single pathway for the SAFE token utility to be further built out. However, given the various different possibilities and lack of validation / experimentation, it seems too early to limit the design space too much. Future token utility ratifications could further limit the strategic focus based on additional community input and insights from experiments.
Implementation
Own implementation possible
Own implementation but with funding (how much % to implementation)
Request for technical support through Safe matter experts:
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Who is needed?
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Did you reach out?
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Is there a roadmap?
The implementation of the Safe Activity Program requires development and coordination work. This process would be carried out by the Safe Ecosystem Foundation. The team will follow a rigorous process, including auditing any smart contract code that is used in production.
Open Questions
The community is invited to provide feedback on the overall proposal. The questions below could help to provide some guidance.
- Strategic focus
- From the abstraction layers that are mentioned, are there some that should be prioritized? Some that are not seen as important?
- Are there other “abstraction layers” that are not mentioned but important to consider as potential avenues for the Safe{Core} Protocol?
- How does OBRA play into the SAFE token utility exploration and implementation? What initiatives would be funded based on this?
- Safe Activity Program
- Any types of rewards that are worth considering for the program?
- Any ideas on mechanisms to distribute the rewards?
- Suggestions on how the ecosystem could be involved
Copyright
Copyright and related rights waived via CC0.
Thursday, Febrary 15th 2024 - 16:00-17:00 UTC
Thanks everyone who joined for the governance call on the Safe Token Utility SEP. For those that couldn’t make it, here is the recording: