WHAT
Proposal Title: Activate Protocol Fee Switch
Summary: A protocol fee switch can help to generate transaction fees into the Soft treasury. This opens the door to substantiating the protocol’s economic value so it can be accurately compared to other projects and ecosystems. There are two flows of concern that can capture value - the first is the sale of tokens itself, and the second is the distribution.
Related Links: Tally Proposal Coming Soon
WHY
Purpose and Benefits:
Fee collection is critical for Soft Protocol for two reasons:
- Economic Sustainability: Generating transaction fees can provide a revenue stream for the protocol, increasing viability and sustainability.
- Value Substantiation: This mechanism allows the protocol’s economic value to be measured in ways comparable to other blockchain ecosystems.
This proposal aligns with Soft Protocol’s mission to provide open-source, onchain tooling for secure token launches.
NOTE: Soft Protocol will soon be implementing a crosschain governance system that will make fee collection & storage fully trustless. In the meantime, a ‘Soft Guardians’ wallet 1 has been deployed on select chains - in the case of fees in ETH/native, funds will be bridged mainnet, then deposit to the treasury. In the case of fungible tokens collected on distributions, these funds can be simply held until the governance upgrade.
HOW
Sales Flow
Protocol fees will be set via the Soft Protocol governor. This proposal, if approved, will initially set them at 1% - though that rate can be adjusted by another governance vote.
The sales contracts within Soft Protocol carry specific rules to manage token sales. The proposed fee switch will account for currently implemented processes, and bring additional functionality:
- Fee Collection:
- When an investor sends Ethereum into a token sale, a fee (e.g., 1%) is collected.
- For example, if an investor sends 1 ETH and the fee is set at 1%, 0.01 ETH is collected and sent to the treasury.
- The remaining 0.99 ETH will be sent to the designated wallet of the sale recipient.
Distribution Flow
Soft’s token distribution contracts within handle the distribution of tokens after a sale or for airdrops. The proposed fee switch should work as follows:
- Fee Collection:
- A percentage of the total tokens placed into the distribution contract will be allocated as fees.
- For instance, if 100 tokens are allocated to be distributed to participants, the distribution contract will transfer 101 tokens from the distributing user, and 1 token will be charged as a fee.
- The fee will be collected as a one-time transfer during the deployment of the distribution contract.
Cross-Chain Support
To ensure effective fee collection across multiple chains, the following steps will be taken:
- Implement fee collection at the smart contract layer
- Fees generated will be pushed to Soft Protocol treasury. Until crosschain governance is implemented, these fees will be managed by Soft Guardian wallets on their respective chains.
- Make updates at the application layer to support SC-layer fee collection, and display fee information to users.
Funding and Resources:
- No additional funding is required at this stage. Existing development resources will be allocated to implement the fee switch.
VOTING
Date/Time for Voting: Onchain voting via Tally will open Friday, 19 July, 2024.
Consensus Method:
- On-chain Vote: This proposal requires on-chain action to implement the fee switch within the contracts. Hence, it will be put to an on-chain vote.
UPDATES
July 16, 2024: Initial proposal draft submitted.