RE: Revamp Market Fees to Include 2% DAO Royalty
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Thinking about this a lot over the last few days, I am choosing to vote No.
Here's my reasoning:
- Although I believe in funding the DAO, I don't believe that increasing the cost of card transactions is the best way to do so. You might argue it's a "short term pain for long term benefit", but if that's the case then I believe now is not the right time given market conditions.
- Before implementing more things that fund the DAO, I would like more clarity on the DAO's spending plans. The DAO currently already has quite a bit of funding, and it's unclear how it will be using those funds.
- While this proposal would effectively reduce circulating supply of DEC, it doesn't remove DEC from existence. Also the scale of the impact on DEC would likely be tiny, therefore the impact on getting DEC to peg would be small while the relative impact on small players or 3rd party marketplaces would be larger.
- The main thing I'd like to see more of is Splinterlands the company getting a share of all transactions. Personally I think that's important as I care deeply about the continuity of Splinterlands. This proposal does not help with that. I like @jarvie's suggestion of giving some % to Splinterlands API servers, and feel that's more important than what's being proposed above.
This proposal mixes two things in one - redistributing transaction fees between listing and buying marketplace and sending funds to the DAO.
I am ok with the first part (adjusting listing/buying fees) but would distribute things differently than what's proposed here, putting more emphasis on ensuring Splinterlands gets a cut of every transaction. As some have said there is also the issue of giving PKM an unfair advantage, although I do think other marketplaces could catch up given new conditions (perhaps there should be some lead time notice before implementing this if we were to do it). For the record I only use PKM personally and love it, however I think one of the competitive advantages Splinterlands has is its diverse 3rd party ecosystem so we should be careful about doing anything that could harm that.
I have more problems with the latter because of lack of clarity on what the funds will be used for. I think we should separate these two issues and reconsider/rethink proposals with singular goals rather than mixing up several goals into one proposal.
Thank you for taking the time to voice your reasoning on voting no to this. To address your concerns:
The current market conditions is actually a really fair point I had not thought about. Perhaps this would be better proposed in a bull market? Not sure... However, I would argue that this proposal has little to no negative effect on the buy pressure of assets. If someone needs a card or if someone believes a card will go up, I honestly doubt that the selling fee of 6% instead of 5% would deter them from buying that card. Furthermore, I also don't believe this change will make anyone sell their cards if they weren't planning to already. Therefore, I believe it has no direct impact supply and demand. In fact, with reduced circulating DEC supply, we may actually see an upward pressure on price, increasing the utility and demand for cards. With that being said, I do agree that adding an additional fee in times of a long downtrend could leave a nasty taste in the mouths of many players. In fact, if this wasn't my proposal I'd probably feel the same! However, it is what you say, short-term pain for long term gain and in recognition of that I would still vote yes on this, since I am a large asset holder having been here from week 1. In fact, the players most affected by this proposal are the sellers who will only cop an increase in market fee without staying long enough in the ecosystem to reap the benefits of a reduced circulating supply of DEC.
The great thing about the DAO is that there is no "plan", it's up to us, the community to decide! Every piece of spending will need to be approved by us and although there is no team policy or team spending plan that I know of, but I can personally say I am against any further spending in the short term. I also don't believe the DAO would ever approve a proposal to sell or spend DECs until we are consistently at peg. Many years from now when SPS emissions end, @holoz0r pointed out 2% of market volume is enough to support ranked rewards, which would make it a great way to power our "play to earn" ecosystem sustainably. However, in the short term I am all for simply burning the DECs received by the DAO until SPS emissions end, but I know many supporters such as @davemccoy prefers it going to the DAO. Therefore, I see this as a middle ground, where it goes to the DAO for now but I plan to raise more proposals every couple of months to burn DECs owned by the DAO, which lets the community decide.
The issue with circulating DECs is addressed in 2. Furthermore, I would not describe the effect of this proposal as tiny. Even at current market volumes it is over 1 million DECs per day on average going out of circulation which is roughly 400 million DECs per year just from our cards market, not counting rentals, assets or lands. I also expect a huge uptick of volume around the release of lands 1.5. However, I do agree that this will have a larger impact on smaller markets since their fixed costs as a percentage may be higher, and smaller players since they tend to do less P2P deals and this proposal would reduce cashback services. One solace I have is hoping the reduced supply of DEC will benefit everyone, including smaller players and markets with increased earnings from SPS (as people begin to burn SPS for DEC) and more utility to cards bringing more volume to markets.
This point I understand well, and I spoke with @yabapmatt in depth about this before writing up this proposal. However, we both agree that funding the DAO makes more sense for now, since distributing to the DAO takes the DECs out of circulation in the short term which boosts the economy as a whole, thus bringing benefit to both the company and the players. If we fund the company directly, the DECs will be used to fund credit sales, which is beneficial to the company since they don't have to buyback as much DECs from the open market, but has no effect on the overall circulating supply of DEC thus no benefit to the economy. @yabapmatt also mentioned that changing the destinations and distributions of market fees is trivial once this passes, so if the company ever needs additional funds in the future they may simply put it through a vote.
Lastly, I don't believe any one of the top 5 third party marketplaces are going anywhere due to this proposal. Furthermore, I don't believe there are any new marketplaces planning to join our ecosystem anytime soon due to the current market conditions, and once we are thriving again, I do not believe this proposal would turn away any market places looking to join us. Therefore, I honestly don't believe this will do any harm to the diversity of third party services, apart from simply reducing their revenue.
For reference, here is a summary of their revenues (prior to cashback and server costs) over the month of April.
Thanks for the very thorough answer @cryptoeater. I've received several messages since writing my post above and am considering it all. For the time being I still am leaning towards a "No", however I'll think about it some more over the coming days.
Thanks for your consideration, and please message me privately if you want to regarding any further concerns around this proposal.
Hey @cryptoeater what a great reply. I love how you engage people.
Regarding the point you tagged me on, I would like to address my thoughts in more detail.
The DAO is the community. The community can decide what to do with funds it owns. It can use funds to create value, such as you mentioned by enabling ranked play rewards after the SPS drops stop.
There are many other ways to create value as well, such as the DAO can invest and support our ecosystem via LPs. The DAO can also contract 3rd party Devs to do projects that SPL doesn't have time/manpower/funds to do.
On top of creating value directly with the funds, the DAO can also decide to BURN any or all of their assets at any time. This is also a creation of value to the token holders as it would reduce the supply.
The reason I am so adamant in the DAO getting the funds directly is because whether we use the funds or we destroy the funds its really a separate decision for the DAO.
In my opinion, the DAO and the community are interchangeable words. So whenever there's a choice to give funds to the DAO, its really a choice to give funds to the community. And what the community (DAO) does with those funds will be best for the community. Why? Because the community will decide the fate of those funds, and you can't get a better system than the community controlling its own destiny.