Integrator Fee Analysis

Username

ml_sudo

Grant Description

Investigate a fair and motivating fee split to integrators and model out the financial impact on the protocol.

Overview

== Problem

We don’t have a quantified approach for determining a fair and motivating fee split to integrators. We are starting with a simple flat 20% fee share on the Andromeda/Base experiment, but we need better decision-making information for the longer term (when the Base deployment is at scale and for future deployments)

Paying too little or too much result in incentives that are misaligned with Synthetix stakeholders (stakers and token holders)

== Goals of the project

Gain clarity on the revenues earned by integrators

Propose more nuanced payment structures (e.g. tiered fees)

Value to Synthetix

This is the first time we will be splitting fees with integrators, and represents a potential long-term change to the economics of the protocol and ecosystem partners (frontends).

It will benefit the protocol to make such a decision in a considered way, with numbers to quantify fairness and reasonableness.

Project Implementation Plan

1. Interview selected integrators to understand cost structure and other constraints and motivations

Questions to answer (not exhaustive):

• How much does it cost to build and maintain a frontend for Synthetix?
• How much do other backends serve as current or future sources of profits? * * What are their considerations with respect to building and maintaining frontends competing protocols?
• What fees do they make today and in history through Synthetix?
• What other sources of funding have they had (token raise, VC, staking, grants/retro-grants, etc)?
• What are other expenditures they could make and how might that increase volume (e.g. a marketing budget)?

2. Financial model

Build a model to answer:

• What revenues will integrators earn under different volume assumptions, separately and in total?
• What is the break even volume an integrator needs to be self-sustaining?
• Under bear and bull market considerations, how will revenues change? At what point will a frontend go bust or be earning excess profits which would be better directed back to stakers or Treasury to save for lean times?
• What is the financial impact on the protocol?

3. Final report

• A summary of the findings based on interviews and the financial model
• One or more proposals on fee and non-fee payment structures
• This report can be updated based on feedback (if updates are material in effort, an additional grant will be discussed)

Additional Information

Expected timeline: 3-4 weeks from grant approval (subject to integrators being available)

Funding Request

Cost: 1660 SNX upfront, 1660 SNX on delivery of report

(Value: $10,000 value in SNX, priced at $3.00/SNX, at a discount to current price since SNX is at a high relative to ~$2.50 average over last 12 months, probably due to short term bump from BTC/ETH ETF news)