Author - Zach Kolodny
Status - Raw
Type - Protocol Param Update
Implementor - Yours Truly
Sponsor - [insert sponsors here]
Temp Check - 98.6 degrees Fahrenheit
Summary
SuperRare’s fee structure is something that has been around for a while with little to no change occurring over its life span with the difference being if a sale is a primary or secondary sale. This proposal aims to standardize the fees breakdown having the same structure for both primary and secondary in order to simplify the protocol, and be more competitive.
Abstract
SuperRare has operated since its inception with the same fee structure treating primary and secondary sales differently. Much like how the overall cryptoart movement has changed, I believe it is time for the SuperRare fee structure to change as well. The current structure on a primary sale is buyers pay 103% of what the artwork is listed for with 85% going to the seller, 15% primary sale fee going to the DAO, and the additional 3% going to the DAO as well. Secondary sales change this by having royalties paid out according to the RoyaltyRegsitry, the remaining (100% - royalty%) going to the seller, and the DAO taking their 3%. This change proposes the fee structure to be the same for primary and secondary sales removing the primary sale fee, applying royalties to every sale, and changing the 3% network fee to be anywhere from 5%-7%.
Motivation
This simplifies the network fees making it easier to aggregate and handle 3rd party contracts which are tough to tell in a programatic, on chain way if they’ve sold or not. In addition, this aims to incentivize artists to continue to mint artworks on SuperRare, removing the ability for them to go to another platform for a higher take home.
Specification
The spec is simple and is as follows: Update MarketplaceSettings to treat everything as a secondary sale; in this scenario, if the artist is the one selling the artwork they will receive the royalty giving them 100% of the sale (the buyer still pays 5%-7% on top of the sale price which goes to the DAO) and in the event that the artist is not the seller, the royalty will go to the artist and the rest will be paid out to the seller (again the buyer still pays 5%-7% which goes to the DAO). Once the marketplace settings has been updated and the bazaar connected to it, we can set the network fee to be 5%-7%. This is all that is needed to make this change. Since this applies to spaces as well, we’ll need to update the SpaceOperatorRegistry to return a value of 0 for platform commission.
Benefits
Simpler fee structure, will make aggregating and 3rd party contract integration easier.
Incentivize artists to remain in the SuperRare ecosystem and not mint somewhere else.
Smaller artists, who the 15% matters more to, who still mint on SR get a bigger take home
Spaces get more revenue that can be split with artists or help them sustain their business.
Drawbacks
Less fees to SuperRare DAO
Outcomes
Outcome is a higher volume on SuperRare and more cadence from the bigger artists.
Discussion Items
Is this something that actually benefits the network?
Looking at SuperRare historically, how would this have affected the DAO’s treasury?
What is the right percentage to change the network fee to be?
Does this take into account spaces and them only paying 5% vs 15%? Eth wise its tough to see the value, any breakdown on the artists who have been minting/selling lately?
I love how quickly @Keegan jumps in with analytics I’d caution against making too much of the -3617 ETH value because we have no idea how this would have impacted the volume of transactions that took place on SuperRare had the fees been lower.
Is this something that actually benefits the network?
I think so. Despite having no idea on how to precisely value a new commission rate (5% seems appropriate), I’m supportive of this because i think this gives Spaces more headroom to create unique offerings to their respective Artists which should motivate competition and greater performance amongst the Spaces.
When SuperRare was smaller, SuperRare Labs was able to sustain a higher degree of care and attention to Artists and offered more consistent promotional support/advisory services, which justified the primary sale commission. And of course, the premier nature of the platform due to its tightly knit curation and relatively low # of mint txns fed into to the psychology of “expensive” and “scarce” art which helped make the 15% “make sense.”
Now with Spaces being launched, it makes less sense to spread the premium commission across the whole DAO, since Spaces themselves are the ones who are supposed to be sustaining the curation, care, attention, promotion, and art advisory services within their respective networks.
Flattening the commission helps Artists “stay on SuperRare” and helps the network stay price competitive, but I also think its consistent with a desired trend towards higher competition amongst Spaces since it gives them more freedom to extract higher commission (ideally in exchange for providing more value and support to Space artists)
another point to bring up is given that royalties are in flux from platform to platform, this would be one way to offset the potential loss of royalties for future sales and be a nice gesture to the artists
My main concern is just with the -3,6k ETH deficit. I’m not sure if we are in a position during a bear market to be decreasing revenue that substantially, even though I understand why it is important and how that changes the incentives to mint on SuperRare versus with competitors.
If I am understanding this correctly, the DAO currently makes 8% on sales from Spaces - 5% out of the artist’s side and 3% network fee out of the buyer’s side. Source: Value Capture in the Network - The SuperRare Network
So by just raising the network fee to 5% on SuperRare’s primary sales and eliminating all other fees, the DAO would be making 3% less than it makes on the primary sale from a Space.
Would it then make sense to decrease the primary sale commission from 15% to 3% so that the DAO earns the same 8% whenever there is a primary sale, regardless of who made it, and any value added on top by spaces reflects the value they add through curation and promotion?
It would be interesting to see what effect that has on the back-dated analysis that @Keegan performed.
yea i think thats almost there but it still requires this complex logic and doesn’t necessarily scale well with more external contracts being integrated into the protocol. The thing I have yet to fully figure out is the need for a primary sale fee in the broader context.
@Keegan could we get the same difference of ETH to the DAO since Jan '23 through March '23 under the proposed changes?
Back testing too far into the past can be misleading because as @elo pointed out, there was a point where SuperRare Labs was providing a solid amount of care to justify the 15% fee.
Would be interesting to see the number of sales required at different avg sale prices to equal the same amount of revenue into the DAO
There is no formal gate to SIP creation, so if you feel it is ready to be formally proposed you can create a new post in the Governance Proposals category. If you have any code changes already identified it would be good to link those in the specification section so that implementation is clear (the staking SIP may be good precedent here, though that is not strictly necessary). Once posted, you are encouraged to attend DAO townhalls (the next will take place on September 28th) to discuss the proposal. It will need sponsorship from at least one council member in order to be posted to snapshot, at which point it will require a majority vote with a 5 million RARE quorum.
As artist there have been a number of swaps I made for SR 1/1s, and therefore my 1/1 went to a collector without a sale. Some collectors then resold and as a result it counted as the first sale with no royalties, and a little confusion.
Makes sense to simplify. As current SuperRare Council Member would love to sponsor this.
I’d caution against making too much of the -3617 ETH value because we have no idea how this would have impacted the volume of transactions that took place on SuperRare had the fees been lower.