Should we reward Sundae token holders by adding a 2.5 ADA swap fee for distribution?

Should we reward Sundae token holders by adding a 2.5 ADA swap fee for distribution? I’ve included the full proposal to be submitted for a vote if this question passes the temperature check.

Title: Rewarding Long-term Sundae Token Holders

Description: The SundaeSwap DEX will add a 2.5 ADA fee to every swap, which will be distributed to Sundae token holders on a monthly basis.

This proposal aims to decentralize earnings by providing a fee generating feature to the SundaeSwap community. The purpose behind adding a fee generating feature is threefold:

  • Incentivize and reward Sundae token holders for holding their tokens long-term

  • Provide attractive defi economics to the Cardano ecosystem

  • Strengthen SundaeSwap’s value proposition to its holders and fortify its position as Cardano’s number one decentralized exchange

The SundaeSwap team and community have strongly expressed their disinterest in developing a Sundae-for-Sundae staking mechanism. The arguments to avoid this type of yield farming are compelling enough to develop alternatives to generating yield on SundaeSwap. Staking the governance token, such as offered by other popular decentralized exchanges, doesn’t provide meaningful value for the sustainability of SundaeSwap, unlike mechanisms for liquidity providing and yield farming, which both incentivize users to contribute liquidity to the exchange. Right now, yield farming is set to expire in four months and continuing the yield farming program hasn’t generated strong interest. In hopes of maintaining and strengthening the SundaeSwap community, alternatives to the current yield farming program should be explored. Revenue sharing is an attractive alternative and will add a much-welcomed new feature to being a Sundae token holder, passive income.

When looking at other DEXs such as UniSwap and PancakeSwap, a 2.5 ADA fee does not diminish the value users get with SundaeSwap. UniSwap and PancakeSwap’s estimated transaction fee structures are as follows:

UniSwap
Protocol Fee: 0%
LP Fee: 0.01%, 0.05%, 0.3%, 1%
Network fee (Gas): $100 - $400

PancakeSwap
Protocol Fee: 0.08%
LP Fee: 0.17%
Network fee (Gas): ~$0.00000626

The proposal will implement the following transaction fee structure (monthly break down included below):

SundaeSwap
Protocol fee: 2.5 ADA per swap (~ $2.5)
Scooper fee: 2.5 ADA per swap (~ $2.5)
LP Fee: 0.01%, 0.3%, 1%
Network fee (Gas): ~ 0.17ADA (~ $0.17)

Relative to the other exchanges, adding a 2.5 ADA transaction fee would still make SundaeSwap one of the most capital efficient exchanges in the crypto space. One small, but important, aspect of the proposal. By charging a flat fee instead of a percentage, the SundaeSwap exchange is not punishing liquidity providers for the success of their pools. As the value of the paired tokens rise, almost all of the success will be captured by the LPs and their token holders.

Sundae token holders will be required to stake their Sundae tokens for 30 days, similar to the current yield farming process, in order to be eligible for their ADA distribution. ADA will be distributed via the SundaeSwap faucet on day 31.

Proposed Timeline: The addition of the transaction fee will begin April 1, 2022. Distribution of ADA to Sundae token holders will occur at the end of each month (April 29, 2022 in this case). Sundae tokens not in circulating supply or not staked will not receive distributions.

Governance: This proposal is vote-dependent on the DAO’s upcoming governance portal.

Summary: The DEX will charge a 2.5 ADA fee for every swap, which will be distributed to Sundae token holders every 30 days. Distributions will be handled identically to the current yield farming program, where Sundae tokens are earned based on a 30-day holding period. Distributions will be through SundaeSwap’s faucet.

  • Yes
  • No

0 voters

18 Likes

This will be huge for the SundaeSwap ecosystem. It’s a perfect way to provide utility to the SundaeSwap token while we wait for on-chain governance (which right now is a very very long ways away).

Many early investors aren’t very technical people and are not in the finance industry / traditional investors, or even from the Cardano ecosystem at all, they just heard about SundaeSwap via social media and were told that it was a great investment opportunity, so they bought Sundae. The short term price action of the coin, even if it pans out over the course of the year, is going to make a lot of the early investors resentful and they will move to other platforms… SundaeSwap is many people’s very first step into the Cardano ecosystem, so it is critical for the entire ecosystem that it provides a good first investment experience for newcomers to our ecosystem. If the price continues to plummet, all people that SundaeSwap brought into the ecosystem could start flooding out to other chains.

  1. For many people sundaeswap is their first step into the cardano ecosystem. And if the short term price action of their first investment in cardano plummets to dirt then they are going to be disillusioned with the entire ecosystem and go somewhere else.

I am extremely worried about this, because I have seen this happen first hand on other ecosystems. If you look at vvs finance on cronos, the exact same thing occurred there. It took the devs too long to release profit-sharing / governance for their token, and people flooded out of the ecosystem.

In eth, luna, avax and cronos users always go to the most profitable DEXs. For most defi users, when their investment drops continuously, they’re spamming “slow rugpull” and “scam” all over social media. They don’t wait for utility, they will move to DEXs that have it. If you look at the announcement section of the sundaeswap discord, “top 10 DEXs by tvl growth” the one ahead of SundaeSwap, MM Finance, was the first to implement profit-sharing in the cronos ecosystem, and as a result they took all the user volume from vvs finance.

VVS finance is backed by Crypto Dot Com, had marketing campaigns, is featured in the Crypto Dot Com Defi wallet, and used as the default platform for the earn app, but none of that mattered because their coin has been slowly declining this whole year with no profit sharing and insufficient utility. Now if you go to their reddit or discord or any social, you’ll just see hundreds of users spamming about how it is a scam / slow rugpull, and how happy they are that they moved to MM Finance.

Meanwhile, MM Finance has basically zero marketing, was from an unknown dev team with no support from Crypto Dot Com, and yet the TVL is skyrocketing daily because everyone is freaking out over the profit-sharing.

I don’t want sundae to be the next VVS.

Down the line, when their clarify their proposed profit-sharing model, or when someone architects a buyback and burn mechanism, we can always just shift to those, that’s the benefit of SundaeSwap DAO. But given that on-chain governance is postponed until transaction size is increased, we need utility for the token ASAP. Otherwise it’s just vaporware.

I really want to see this project succeed. The only reason I am so passionate about this proposal is because I have seen too many times the slow bleed that happens to projects who release platform tokens without utility.

16 Likes

I don’t think additional (protocol) fees are negligible. Yes it’s nothing compred to eth gas fees but I believe any additional fees are small negative element for the dex. Yes it
has also several good reasons to implement (I would be happy to receive rewards) but from the “customer” perspective I would try to look for another dex to swap which won’t take additional 2.5 ada from me if there is another option. I don’t have idead that is median trading volume but I thint many ppl are swappimg
quite small amounts and those might avoid sundaeswap.

24 Likes

The alternative means that the lack of utility for the Sundae token could continue to result in the tokens price crashing; which would make a lot of early investors aggravated and likely cause them to move to other platforms.

3 Likes

I think this would be very bad for sundaeswap as it increases the total fee to 5 ADA (including scooper fee) per swap currently. This increases the barrier of entry as you need more ADA to make up for the 5 ADA. I don’t think this is the moment to add this type of utility to sundaeswap…

20 Likes

Small swappers won’t be kind to increased fees, which have potential to drive them off, and thus harm liquidity providers and the DEX in general. It could be foolhardy to proceed without knowing what proportion of users are going to be impacted most by any changes. To prevent alienating any one party the fee structure must account for all parties represented, and we need viable data to properly establish a sane rule that is both equitable and sustainable.

8 Likes

We need some type of tangible utility to this token now.
Not 6 months from now when other new dexes will have thiers baked in from the start. As much as I hate fees, what is a good alternative? Why would anyone new even want to hold Sundae for any length of time, anyone?

1 Like

I think the scooper fee is such an important matter, it deserves its own temperature check and proposal. I’m going to leave it to someone smarter than me to figure out how to address it as a separate matter.

1 Like

In my view, Sundaeswap was very clear since the beginning that the Sundae token is a DAO token, not an investment vehicle.

Cardano is meant to be a place where micro finance can be enabled. The 2.5 ADA scooper fee is already counterproductive to this, but is necessary to incentivize scoopers to make the DEX scalable until Hydra.

Having another fee on top of that would be ridiculous.

To those who think that this token needs an investment yield, did you do your research before you participated in the ISPO, yield farmed, or bought the token? I hate to come off this crass, but this proposal comes from a greedy desire in my opinion.

If you are a real investor, you would have done your research and saw in the Sundaeswap discord the multiple times the SS team said explicitly that the Sundae token is not meant to be an investment vehicle.

As far as I’m concerned, the value of the token comes from the decision making power in the DAO, the DAO that runs the first and most popular DEX and smart contract in Cardano at the moment. That’s still pretty outstanding.

A $5 dollar fee (this reply is written at a time where a 5 Ada total fee would be worth approximately $5) to even begin swapping would not help someone with less capital starting out in this ecosystem.

21 Likes

For decision making power in the DAO.

No, I hear you on this. I do think that while the Sundae team made it very clear that the token is a DAO token, that doesn’t mean that the DAO can’t change that. I think it’s up to the DAO to decide on what it wants to do/be, not just the SundaeSwap team. It wouldn’t be very decentralized if it worked that way. Hence my temperature check/proposal to the Sundae DAO.

5 Likes

greed is voting for yes. I understand that, but this won’t help token from the value perspective at all. there is a risk ppl will leave sundae for another exchange (muesli isnalready now cheaper) and sundae will be left aside. I agree the scooper fees seem to be even today quite high but I do not see into the background to judge. That’s just my view.

1 Like

Agree to not be greedy, it will disincentive small investors like me

3 Likes

On-chain governance won’t be ready for a long time. In the meantime the price of the asset will continue to crash, which will turn early investors away from the platform, make them resentful and cause them to seek alternate DEXs.

3 Likes

if other dexs on cardano do not have the fee it might make them go there

2 Likes

Base fees are rising entry point for trades. with 5 ada fee it costs more than 10% to swap 50 ada. 5 ada is close to 5$ now, but can easily go up let say 3x, and it is then 15$ base fee to make the trade.

In future small fee could be introduced that does not hurt small nor big investors. some small % for trades below 50$, and small constant fee for bigger trades. This could go to DAO treasury and be voted on to give incentives to users or holders/LP.
Forced utility just because we could use some is not a good idea. Especially if users are the one to pay for it.

5 Likes

So… i agree with both sides here, honestly i do.
May i ask, why 2.5?

Personally, if this same exact proposal is resubmitted with a value… hmmm say .5 .3 .08ADA
As a fee instead…

I genuinely think this will pass.
I voted yes… but i completely understand the opposition

4 Likes

I just did a quick check and MinSwap & Muesliswap both have fees that go to their token holders.

3 Likes

That’s a great question! I started backwards and found that getting to 0.01 ADA per Sundae token per month is attractive enough to keep folks around without being too greedy. This takes into consideration that there is a large amount of Sundae that’s going to go into circulation after the ISO, RISO, and Yield farming events are over. In other words, the 0.01 ADA will go down over time, but slow enough to where folks will want to stick around.

As I was thinking about what the SundaeSwap community will look like over the next year, it occurred to me that the DAO doesn’t have strong incentives for members to stick around. I think this will keep the members around longer than with what we have right now.

Well… the good news is, and someone please correct me if im wrong… but as a community as an (amm) style dex. Falling short on incentives clearly unacceptable. I say this is good news, because its beyond obvious their will be a (number/fee) to the tune of this proposal at some point…

Its actually inevitable.

I understand all of you who claim greed ( makes alot of sense)
Fact is … its amm style… and you have to keep your incentives up to par.

Love the proposal…

Perhaps we start the “wiggle&dance”
Reguarding the sizing

2 Likes