Fee-Sharing Model Proposal

https://app.tornado.cash/governance/3

Just came across this fee-sharing proposal in governance…

It’s something that is craved by the community here… Who will start coding a smart contract for this fee-sharing model?

“Currently all rewards go to LPs, reducing utility value for token holders who are just getting diluted for nothing. Split token rewards and fees 50/50 between LPs and token holders as per Curve Finance token model - rewards can optionally be time-weighted to create velocity sinks and incentivize long term thinking.”

• from the proposal

I disagree with the value-extraction philosophy behind this proposal as I think it’s short-sighted and not appropriate for one of the most reputable and utilized protocols on ethereum with an actual use case.

The only point I could see in worrying about TORN price not dropping too much would be related to security within a POS environment (i.e. more affordable to hijack proposals) but as long as we are in the three digits range there is no need to stress.

How is it short-sighted? it’s adding a revenue stream for token holders, which would make the token more sought after, and bring more users to the platform furthermore growing torn protocol?

why have the token if you’re not incentivised to hold it and vote etc?

I disagree with your disagreement

This isn’t short sighted. Allowing the TORN token to have absolutely no utility beyond voting IS short sighted.

At the moment, there is absolutely 0 reason to hold TORN, even if you were interested in participating in governance. You would currently be better off holding ETH or another token that can be used to farm or earn interest (aave eth pools, yfi, curve etc), and converting to TORN temporarily to vote, then selling your TORN once your TORN is unlocked.

Also you mention that “as long as we are in the three digits range there is no need to stress”

TORN is barely holding onto that range. It is currently $132.14 at the time i’m writing this post, and it has fallen -54% in the past 14 days alone!

At the rate, TORN will be well below $100.

It currently only costs $3,300,000.00 to purchase 25k TORN and single handedly reach the quorum threshold for governance. In my opinion that is already a dangerously low amount of cash required to potentially hijack the most popular mixing service on Ethereum.

Not to mention, the current rate of decline shows no signs of slowing down and will likely continue as more TORN is redeemed via vTORN vouchers

Additionally, once AP mining is fixed, a HUGE amount of TORN can potentially hit the market all at once.

Assuming the decline continues due to the 2 reasons I stated above, It is very possible (and in my opinion, very likely) that TORN will continue to decline another -50% or more in the next few weeks. Eventually it will only cost ~$1M to purchase 25K TORN. Which is simply absurd and will very likely result in disaster.

I am not a fan of “just do nothing” approach that you (no offense) and other community members have towards adding utility to the token. The “value extraction” philosophy has been battle tested with dozens of other popular protocols, and many of them have enjoyed long term success. There’s no reason to shy away from it just to satisfy some misplaced sense of moral high-ground/superiority.

@Graham_Hancock
Pretty much made my point here:

@skybizze

I take no offense; perhaps we both do something but move in orthogonal directions. I believe stressing out if the token price drops or cheering when it goes up leads to little benefit, on the other hand I see discussion on possible future protocol changes and participation in governance as the real propelling factor for quality and innovation.
And no moral high grounds talk here - am reasonably active on twitter and discuss optionality and price moves all the time. I am all for a strong TORN price and believe this will be the case eventually, but see any rush as counterproductive - hence I used the term “short sighted”.
Have my TORN locked and can’t care less about temporary price swings as I know TC kicks serious ass and am here for a longer ride.

I think youre missing my point entirely. The price of the token matters because of the 25k threshold to pass new proposals.

At the moment TORN is down another -7% today, priced at $127.38 at the time i’m writing this post.

Do you not see an issue if the token price falls low enough for someone to acquire 25k tokens with a trivial amount of funds and fundamentally change the protocol anyway they see fit?

You mentioned that you were comfortable as long as the price was “in the three digit range”, well that is very likely to no longer be the case within a few days, so are you still comfortable?

That’s fine if you have your TORN locked, but most people don’t and have no reason to, because there is simply 0 incentive to do so. In fact, locking your TORN is a fundamentally bad financial decision at the moment, since you could be earning interest on your ETH instead and just convert to TORN when a new proposal to be voted on goes live.

We need to incentivize people to participate in governance, full stop.

@skybizze

As I mentioned earlier, I agree with a strong TORN price being important for security purposes but disagree with you on the means this shall be achieved. Quoting myself:

Also do note that 25,000 TORN merely constitutes a quorum, i.e. minimum number of votes within a deliberative motion necessary for official decisions to be made by voting; condition necessary however not sufficient for passing a proposal.

Yes, I understand the 25k quorum requirement. But as the price falls, people will (literally) become less invested in the protocol and the value of their tokens relative to gas costs required for voting will decrease

If someone has 25K TORN, then the community can make an offer to raise the rate to 35K TORN and vote for this proposal. And then the whale will have to buy more coins. And then the community can make a proposal to increase the quorum to 50K TORN and so on.

This problem can be solved

It doesn’t work that way, TORN barely got 25k votes for the first proposal to make the token transferable, what makes you think reaching 35k or higher would be so easy? It would arguably be more difficult as many of the people who voted in Proposal #1 sold their tokens when it became possible to do so.

Also, people could simply vote “No” on such a proposal, it would be very hard to overcome 25K + whatever amount of other “no” votes come in from community members.

It’s much more likely that if such as an attack occurred, people would simply de-risk by selling their tokens until the future of TORN becomes more certain, rather than locking up their tokens to vote, paying the gas fees to do so, and then waiting for the actual outcome of the vote (which might be the wrong outcome for them).

So you’re saying that it’s hard for entire community to reach 25k votes, but a single attacker can easily do that?