We propose an operations model, team, and budget for a six-month, experimental initiative funded by the community treasury. The overall goal is to actively drive value creation and capture for the 0x protocol. We explain our thinking behind the proposal and why we think the community and broader 0x ecosystem will quickly and sustainably benefit from the initiative.
Recognizing the ever-changing dynamics and increasing competitiveness of the broader cryptocurrency environment, the 0x community ambassadors propose an ambitious, experimental initiative focused on value creation and capture for the 0x protocol and its broader ecosystem. We’re confident that taking a bold approach upfront will create an immediate source of differentiation for 0x and enable us to most efficiently and effectively allocate community treasury funds. More importantly, if successful, we envision this initiative will turn into a sustainable source of meaningful, long-term value that will accelerate the flywheel of reflexivity and help to manifest the larger vision for the 0x ecosystem.
The 0x protocol’s mission is to create a tokenized world where all value flows freely. After years of development and cultivation, it is clear that the protocol has achieved significant product-market fit.
0x Protocol has now enabled over $15B in trading volume across more than 250,000 unique traders worldwide while powering the backend exchange infrastructure for dozens of top DeFi applications. Additionally, with the token economics originally introduced in v3 of the 0x Protocol, the network has generated over $2.5M in fees paid to ZRX holders and market makers, underscoring the value that the network can create while aligning long term incentives for token holders and network participants alike.
(source: https://blog.0xproject.com/0x-labs-has-raised-15m-to-bring-decentralized-exchange-markets-to-a-global-audience-e374c29c6ac1 note: total fee number updated here from the original)
Recently, the protocol began to actualize a phased approach for evolving into a multi-chain, crypto-economic primitive. As the prime developer of the protocol, 0x Labs has positioned itself well to drive and execute this technological maturation.
In parallel, with the establishment of the 0xDAO and the community treasury, the 0x community is now positioned to take a more active and accountable role in protocol development.
We initially felt that a grant program – similar to those that other protocols are implementing – would be the right first step for our community treasury. However, after putting more thought into it we’ve concluded that taking a more aggressive approach could provide additional flexibility to proactively seek out and invest in high value-add projects in a way that aligns incentives across stakeholders and maximizes our strengths. Specifically, we believe that an initiative that leans more towards “venture” than “grant”:
- Allows us to take a more proactive posture by ensuring we’re not entirely dependent on reacting to incoming proposals,
- Builds critical experience and skills for long-term protocol governance, and
- Provides a greater degree of strategic flexibility and speed-to-execution as we identify opportunities in a rapidly-evolving ecosystem
To be clear, we still expect grants to be a part of what we do, but not the only thing we do.
Leveraging the 0xDAO community treasury, best practices from strategic innovation methodologies and frameworks (such as Jobs To Be Done, Design Thinking, Lean Startup, etc.), and a scrappy team of community members, we aim to deliberately – and with rigor – begin the process of direct community governance with an initial focus on ecosystem value creation and capture. Passage of this proposal will formally authorize the initiative and provide funding for operations.
Using the contextual framework described above, we have loosely categorized potential areas of experimentation below. Initial prioritization will be determined by the team and the strategy they develop once the effort is formally established. We welcome and will continue to actively seek out community input. It’s important to note that this list is meant to be illustrative in nature, and not meant to be all-encompassing or presented in any sort of priority order.
- Adding features and improving protocol functionality
- Performing tokenomics review, optimization, and potential revamp
- Incentivizing and improving support for new and existing market makers
- Providing liquidity to select ZRX pairs
- Incentivizing order flow and trading volume, including via relayers, dApps, etc.
- Improving the user experience for staking
- Building and updating developer and user tools, including documentation refresh
- Developing more sophisticated research and analytics capabilities
- Assisting with dApps and new integrations, especially projects using order books
- Experimenting with new business models and monetization paths, including new use cases for Mesh
- Strengthening our community through outreach and rewards
- Ramping up marketing
- Driving support for strategic initiatives
- Conceptualizing and executing social media campaigns
- Hosting and advertising 0x hackathons
- Engaging with emerging developer communities, such as BSC, Polygon, Solana, etc.
In considering the scope and how to best execute to achieve our intended goals, we sought input from the community regarding operations models. Augmenting the feedback we received with our own research and observations, experience, and vision of what this optimally could be, we’ve landed on a model that has a full-time lead who will be responsible and accountable for overall administration and day-to-day management; a core team who will drive strategy development, execution, and decision-making in their areas of expertise; and a council who will assist as needed and approve the disbursement of funds (most likely via Gnosis Safe multisig). Like many successful funds, we also plan to enlist a small group of external advisors to provide a more expansive perspective and to perform oversight.
Using this model to jumpstart our efforts does not mean that the community will take a back seat – quite the opposite, in fact. We’re hoping this approach enables us to proactively create opportunities for the discovery, acceleration, and synthesis of pathways to high-impact outcomes, while also expanding the opportunities for our growing community to be active participants.
To get started, the team will identify our most immediate needs, gaps, goals, and opportunities and create a strategic plan and roadmap that’s aligned with 0xLabs and the broader 0x ecosystem. We expect this process to take no longer than 2-3 weeks. Then, using proven innovation strategies and techniques, we will begin executing on the plan. As a preview, our discussions to date have uncovered opportunities in marketing, integration, trading/liquidity incentives, and other areas that we expect to include in our strategy and execution planning.
Part of our ethos in establishing this effort is to empower community members who have demonstrated operational capabilities, maintained a sustained commitment to growing the ecosystem, have demonstrated a willingness to dedicate the time required, and have expertise in domains that are critical to our desired outcomes. Initially these consist of innovation strategy and execution, marketing, finance, and engineering.
With that in mind, we propose the following:
In the spirit of bold experimentation, we propose that compensation should maximize skin-in-the-game incentives through the use of crypto-native constructs wherever possible. To this end, we propose basing compensation in the protocol’s native token (ZRX), and we intend to use a streaming distribution mechanic (such as Sablier or Superfluid) to facilitate compensation payments. While we acknowledge that using a native token for baseline values is somewhat provocative and may result in significant swings in USD value – both to the upside and the downside – we feel strongly that this type of experimentation is crucial for learning and informing future efforts. Importantly, crypto-native funds and projects that have implemented a similar approach of compensating directly in a native token have had early success.
In determining an appropriate budget, we reviewed the budgets and best practices of other projects and considered our unique needs and goals. As a result, we feel we’ve landed in a place that feels “right” for us, and is the best balance of short-term aggressiveness and long-term prudence.
Currently, the community treasury holds 2M ZRX and the external development pool holds 103M ZRX. While 0x Labs has indicated an openness to allocating additional funds to the community treasury from the development pool in the future, we intend to operate this initiative with the goal of becoming self-sustaining, rather than a cost center.
Using a compensation rate comparable with other projects ($100), and with the goal of incentivizing long-term value creation, we propose that the lead, core team, and council be compensated at the rate of 73 ZRX per hour. We arrived at this number using the average price of ZRX over the past 180 days (data source: CoinMarketCap), weighted towards the most recent 30 days as shown below.
We estimate initial “startup” costs – including legal review and various costs related to fund disbursement – to land in the $40k-60k range. Importantly, while the team will be incentivized via native token compensation, expenses will be calculated and disbursed in USDC (or another USD-pegged stablecoin).
Not knowing when the expenses will be incurred, for budgetary purposes we are using the last 30-days ZRX price average ($1.82) as our reference point. We expect that some of the efforts undertaken will not incur discrete costs (other than team compensation). Additionally, we leave open the possibility of using supplemental treasury funds for potential initiatives (e.g., liquidity provision), which we expect would be subject to a community vote.
If approved, the effort will begin operating shortly after the proposal passes and will run for a period of six months (26 weeks), at which time it may be extended or modified by a community vote, or will simply expire, depending on learnings and results. If warranted, interim adjustments may be made prior to the end of the six-month period via the on-chain governance process. Progress, operational, and outcome metrics will be reported to the community on a regular basis.
We expect success to be measured objectively and subjectively. Specific metrics will be developed as part of the strategy formulation process.
For instance, the lists below are notional, but objective success metrics could include:
- Level of community engagement
- Performance against metrics for workstreams
- Number of ecosystem partners
- Number of engaged external developers
- ZRX trading volume
Additionally, subjective success metrics could include:
- Improved sentiment and goodwill within the community and broader ecosystem
- Improvement in 0x’s brand and positioning in the market
The DAO as a concept is still nascent and rapidly evolving, and we’re in an ideal position to capitalize on the learnings, successes, and failures of others while still being early enough to shape what “best-in-class” looks like. While lofty and aspirational, our desire for this initiative to explore the true potential of a community-run DAO aligns well with the ambitious vision set forth by 0x Labs. They’ve done an incredible job laying the foundation; it’s time for us to help blaze the path forward.
While there’s much work to be done over the next six months, we anticipate that the community and broader 0x ecosystem will quickly benefit from this initiative. Even though it may feel like we’re “building the airplane while in flight,” we’re confident that there’s plenty we can do right now that will add noticeable, high-impact value to 0x stakeholders, even as we iterate, experiment, test, and learn. We hope all stakeholders are as excited as we are for this next step in our shared journey, and we look forward to hearing your feedback, answering your questions, and further improving this proposal before it is submitted for a vote.