Integrator fee analysis

Username

ml_sudo

Grant Description

A research effort to determine a suitable rate of fee sharing by the protocol with integrators

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

The fee split with integrators is a key decision that will have heavy impact on SNX stakers' revenues and the long term motivation of integrators. Coming to a data-driven decision is important for the long term health of the Synthetix ecosystem. While the fee split for Andromeda/Base has already been set, this piece of work can be used to make adjustments in the longer term when more information on the success of the experiment is available.

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

Funding Request

1660 SNX upfront, 1660 SNX on delivery of report