I think there are some difficult decisions for the Sundae community to make about how these funds are leveraged, especially before we know how much revenue is being generated by the new contracts, and while that revenue is small.
There’s so many compounding variables, including the vote on the new fee calculation, which make it difficult to estimate protocol revenue. Just for the sake of discussion, however, lets do some napkin math.
A fairly low end estimate for revenue:
- Lets assume that the middle-of-the-road option B (0.332 ADA + 1.418 ADA) from the fee check passes
- Lets assume Cardano does an everage of 5000 swaps per day, and that we (for now) secure 10% of that traffic with the new contracts, for a total of 15,000 orders per 30 day month.
- Lets assume our average batch size is 5 orders
- That’s 22,266 ADA per month in protocol revenue.
A more optimistic projection:
- Let’s assume that cardano does an average of 8000 swaps per day, and that we (for now) secure 30% of that traffic with the new contracts, for a total of 72,000 orders per 30 day month.
- Lets assume our average batch size is 5 orders
- That works out to around 106,876.8 ADA per month in protocol revenue.
Assuming we match v1 TVL, we can anticipate another 20,000 ADA a month or so from staking rewards.
The question, then, is how much of this do we allocate to different purposes.
For example, it’s important to continue to pay scoopers to run their infrastructure. In a previous thread, a few scoopers weighed in, estimating their costs at around $200 to $300 a month, not counting labor or profit incentive. That works out to roughly 550 ADA a month at current prices, or 16500 ADA per month across all 30 scoopers. Several of the scoopers have said they would be willing to operate at a loss temporarily to help Sundae regain some of the market, but it’s unlikely that can be sustained indefinitely.
We’d also humbly ask that the DAO consider a budget for Sundae Labs to pay for some of the infrastructure costs that we incur by running some key infrastructure for the protocol. While the protocol can continue to operate without us (there are now multiple front-ends, etc.), we still provide one of the most reliable and nicest user experiences for interacting with the protocol, as well as the yield farming infrastructure, and several APIs used across the ecosystem. We have operated this infrastructure out of our pocket for 2 years, and will continue to do so if the DAO deems it strategic to focus on other incentives, but eventually we feel it’s only fair to help offset these costs with, say, 8,000 ADA a month.
For our pessimistic calculation, that leaves 17,766 ADA to either accumulate as protocol revenue to be spent in the future, or put to another purpose like staking incentives.
For our optimistic calculations, that leaves around 102,376 ADA per month to allocate as the DAO sees fit.
I’ll leave it to others to weigh in on comparisons to other protocols and what kinds of returns / discounts the average users have come to expect.
I’d just ask that everyone consider that a long-term, sustainable outlook will generate far more potential long term than a mad dash to spend the revenue as fast as possible.