SIP | We Like the $RARE

Title: We Like the $RARE

  • Author: Kyle Olney, Director of Product @ SuperRare Labs
  • Status: Passed
  • Type: Governance
  • Implementer: SuperRare Labs
  • Sponsor(s): TBD
  • Link to Temperature Check Poll: Discord
  • Created Date: 02/04/22

Summary: Waive network fees for platform transactions paid in $RARE

Abstract: With the passage of the Shut Up and Take My $RARE SIP, users would be able to purchase artworks on SuperRare using $RARE as a payment mechanism. This SIP proposes to waive network fees for any transaction paid in $RARE, creating further utility for its continued circulation and use in our ecosystem.

Motivation: As we expect an increasing number of $RARE tokens to be distributed through a variety of token distribution programs in 2022, SuperRare Labs would like to create as much utility for $RARE token holders as possible.

One of the most obvious benefits that can be provided to $RARE holders who transact on SuperRare is to waive the 3% network transaction fee for any purchase executed using $RARE. By waiving these fees, we create an incentive for $RARE to become the primary payment instrument in our marketplace, as well as increase the velocity of tokens in circulation - both in aggregate, and more specifically into the hands of those artists/collectors who are most active on the platform.

Specification: If passed SuperRare Labs will deploy two minor changes necessary to update the marketplace and auction-house smart contracts such that network transaction fees will be voided for payments made in $RARE.

Benefits: Similar to the Shut Up and Take My $RARE SIP, this change benefits the network in multiple ways by i.) increasing utility of the $RARE token, and ii.) promoting further distribution of governance tokens to artists/collectors who are active participants in the network, while boosting token velocity and providing additional reasons to accumulate $RARE.

A further benefit of this program is that it creates an organic “demand” signal in the market to help offset the “supply” signal of increasing token distribution from the DAO treasury - which should help stabilize price discovery.

Drawbacks: The sole drawback to implementing this proposal would be lost revenue that would otherwise accrue to the DAO treasury by continuing to maintain the 3% network transaction fee.

This loss of network fee revenue will require require that collector royalties on qualifying transactions executed in $RARE be paid out utilizing existing assets held by the DAO treasury (either ETH, or potentially $RARE).

Outcomes: Once implemented, $RARE-based transactions on SuperRare will no longer be assessed the 3% network transaction fee.

Further impacts to marketplace health are hard to ascertain at this stage and may justify the inclusion of a sunset provision so the DAO can check-point whether the cost of this program outweighs it’s expected benefits before making this change permanent.

10 Likes

Will royalties be paid out in RARE if the purchase is made in RARE?
What if RARE is more volatile than ETH is that a concern?

Incertain tokenomics/DAO consequences indeed, but if the other SIP works, yay for this, interesting. Changing my mind about trying to consider $RARE as just a governance token.

One thing that I’d like to call out is that there might be a lot of ways the DAO could want to earmark pieces of that 3% network fee for different initiatives in the near or medium term. Approving this proposal would limit the DAO’s ability to allocate fees to other ideas.

Since purchasing with $RARE isn’t switched on in the marketplace yet– there is no baseline for how popular a transaction type it would be. It’s possible this would only impact a small amount of sales, or a great number– we just have no idea. So no good way to assess what is gained for what is given up.

Basically it’s precommitting a lot at the moment when we kind of know the least.

And to be clear it’s not about collecting the fee for the sake of funding, IMO we are hoarding way more than I think we should– it’s more about eliminating the ability to leverage the fee as a configurable part of any scheme / mechanism– like we do for collector royalties, which is also a portion of the network fee. It’s just one less lego block.

Some alternative models:

  • Drawdown a fixed amount. Set aside a budget for this proposal at, say, 500,000 $RARE. Waived fee’s expire when they hit that budget ceiling (and of course the DAO could vote to raise the ceiling at the time if it’s working great). If the DAO commits the funds needed to cover the fees– then any other proposal could still include the network fee as a part of their mechanism– it would just have to be configurable to work from that same $RARE pool. Again thinking of Collector Royalties as a case study, leaving them untouched– they would now have a clear funding source. This could also be combined with a buy-back off the market with ETH from treasury reserve to fund.
  • Cut it in half: Only pay 1.5% network fee on sales made in $RARE– The tradeoff is that feels less sexy.
  • Cover it somewhere else: Waive 3% fee on sales made in RARE– but increase the fee on ETH sales to 4.5% or 6%.
1 Like

Royalties will be paid in whatever the base currency of the transaction is.

Both RARE and ETH are volatile instruments compared to stable’s, but that vol applies on the upside as well as the downside so it becomes a personal choice around risk tolerances.

I LOVE THIS IDEA!!! Waving the fee is a great way to encourage usage of the token and I would happily receive my royalties in RARE. I believe in this platforms longterm growth and as such I would be excited to earn RARE in as many meaningful methods as we can develop.

3 Likes

I agree with this SIP, @RareKoko. Seems like a no brainer given that if the community passes it, then we all as RARE holder stand to gain (more RARE functionality + less fees for purchasing art = more transactions on the platform). At the least, having RARE and a stable option (e.g., DAI) will improve the collector experience.

One unintended consequence of this will be an increase in wash trading to pump up some artists stats.

When you remove SR fees, you allow people to easily buy artwork from themselves with no penalty (anonymously of course), just like what happens with CryptoPunks.

2 Likes

That’s a great call-out regarding the secondary market @VanArman, we definitely want to avoid wash-trading incentives at all costs.

Maybe the marketplace fees should only be waived on Primary sales? Or is there another mechanic you can see working that incentivizes the use of RARE for artwork acquisition without introducing wash-trading concerns?

It could also be a discount rather than completely waiving the fee to help prevent wash trading.