[1IP-28] Discontinue Swap Surplus Collection

Author: RoundElephant.eth

References

• What is a swap 'surplus', and where does it end up when my swap is completed? | 1inch.io

• Revenue stream | 1inch Network docs

Simple Summary

• Discontinue Swap Surplus collection to provide a more consistent user experience.

• Positive slippage will instead be redirected back to the user.

Abstract

This proposal calls for discontinuing the collection of the Swap Surplus (also called positive slippage). Swap Surplus has been highly inconsistent as a revenue stream and can negatively impact a minority of users.

By prioritizing user experience and long-term growth, the 1inch Network aims to increase its market share and explore alternative revenue streams like the resolver fee mechanism of Fusion Mode. If passed, would-be Swap Surplus funds will be automatically redirected users with the ultimate goal of increasing user satisfaction and promoting the long-term success of the 1inch Network.

Motivation

The primary motivation behind this proposal is to enhance user experience on the 1inch platform.

For the DAO, the Swap Surplus revenue stream has proven to be highly inconsistent over time, with monthly collections varying significantly. In December 2021, revenue collection was approximately $2 million per month, but in recent months, it has dwindled to a few hundred thousand.

For users, the Swap Surplus collection has led to unpredictability. Though the vast majority of trades are not impacted by Swap Surplus, a small minority have experienced reduced returns of up to 10%. By discontinuing the collection of Swap Surplus revenue, we aim to create a more consistent trading experience for all users.

Specification

This proposal serves as a signal from the 1inch Network DAO to 1inch Labs. Once passed, the 1inch DAO calls for 1inch Labs to make the following changes to the protocol backend:

• Discontinue the collection of Swap Surplus revenue within the 1inch Aggregation Protocol.

• Automatically reroute any Swap Surplus funds back to the user during the swap process.

Rationale

Calling for the discontinuation of Swap Surplus revenue collection is based on the belief that prioritizing user experience and long-term growth will ultimately yield greater benefits for the 1inch Network. With the revenue stream being highly inconsistent and its impact on users varying greatly, the potential drawbacks of continuing to collect Swap Surplus outweigh the benefits.

Furthermore, the introduction of Fusion Mode opens the door for alternative revenue streams that can be more consistent and less controversial. By focusing on these new opportunities, the 1inch Network can work towards increasing its market share and ensuring a more robust and sustainable revenue model.

Considerations

Security

The proposed changes do not pose any significant security risks, as they primarily involve altering the distribution of surplus funds. By rerouting these funds back to the user, the platform remains secure and transparent, with no additional vulnerabilities introduced.

Governance

In the short term, this proposal will mean a complete cessation of revenue being collected by the DAO treasury. However, by focusing on long-term growth and user satisfaction, the 1inch Network can strengthen its position in the market, potentially leading to increased revenue in the future.