Proposal to add the option of "creator fees" in factory pool

Proposals
#1

Summary:
Proposal to add the option of “creator fees” in factory pool.

Abstract:

It is proposed to support the option of “creator fees” by deploying new type factory pool.

Motivation:

The “creator fees” function of the NFT market encourages artists to sell their artworks through NFT. Artists are able to profit from artwork transactions with “creator fees”, which can only happen in the Web3 world.

Curve v2 is a perfect protocol for asset base liquidity. Asset issuers can be further encouraged to create basic liquidity in Curve with the “creator fees” function. In addition, asset issuers also have more motivation and passion to join in the bribe market to reward the veCRV economic system.

For:
Add the option of “creator fees” in factory pool.

Against:
Do nothing.

9 Likes
#2

Wouldn’t this just encourage “squatting”? Basically just create bunch of pools when gas is cheap with the idea of reaping the creator fees later if the pools takeoff. There’s no requirement for a pool creator to add a lot (or any) liquidity to the new pool.

4 Likes
#3

I don’t think people will added liquidity for these pool ,or they give Tasty reward for liquidity provider.

But it’s still meaningful, because creator fees can help more protocols use curve for build Basic liquidity.

4 Likes
#4

Those royalties on OpenSea are collected from each sale and paid to the original NFT creator.

If this kind of pool creation royalty is the share of transaction fees or admin fees, and paid on a regular basis, that would be juicy for those pool creators. It probably encourages some sort of wash trades, which will benefit LP and veCRV holders anyway.

3 Likes
#5

I think this proposal is very meaningful. It will help more FTs to create liquidity on Curve. Not only that, it will be creative if it supports NFT assets to create liquidity and can obtain royalties for pool creators , opened up the NFT trading market.

2 Likes
#6

It could. But, squatters won’t have liquidity to make the pool “real” for all of them whereas protocols likely will.

Plus they will have the marketing (links on site, social, etc + bribes/incentives) to make their pool the preferred one that gains liquidity.

Biggest consideration is how do you clean up squatter pools effectively as they will def proliferate

#7

In favor. This makes the case for projects to choose Curve a no brainer when deciding where to prioritize liquidity.

#8

Propose that this would be better if more flexible. Can specify arbitrary $ of addresses to receive arbitrary % of revenue.

Can imagine a protocol wanting to split revenue between a contract that buys more voting power for sustainable bribes in addition to a “dev salary fund”.

Question:
Can these fees be updated once deployed? Aka, can the % shift over time to veCRV once a project has gotten off the ground or vice versa?

#9

Integrated splits would add cost overhead to every single user while very few are actually going to benefit.

Seems like a very illogical decision considering protocols such as 0xSplits (https://www.0xsplits.xyz/) are specialized in doing this better than a half-built product ever could.

#10

Living products that already support this mechanism, such as Sudoswap, quantitatively contest this and this will only become more prevalent as NFT aggregator markets grow in market share.

Feels rather misguided to have such a pivotal proposal be built on many incorrect assumptions.

#11

sure. this proposal needs some refinement indeed.

#12

I don’t see why pool „creators“ should be paid at all. The real creators are those who provide liquidity by nature of using public infrastructure developed by curve. So if there anyone who should be paid then it’s the LPs, the DAO subsidising LP rewards and lastly devs/contributors.

The only thing that does make sense (quoting fiddy’s tweet here) are maybe pool manager fees. Someone who is responsible for optimising the pool parameters. But that brings us to dozen more questions:

  • How is the pool manager selected?
  • What qualifications should a pool manager bring to the table?
  • How do we verify them without potentially exposing his identity or risking LP losses due to a misconfigured pool?
  • What if he fucks up? Should he have a stake to align interests?
  • What if he still acts maliciously? Even with a stake > Shorting somewhere else with size e.g.
  • Should the pool manager justify his changes every time via a DAO vote or is he allowed to act autonomously?
  • How much should the pool manager be paid?
  • What are the tradeoffs that could potentially hurt the efficiency of pools? > Paying fees to PM = Less LP yield = less liquidity = pool less efficient = net negative for curve and its LPs?
  • How much more could LPs realistically make with a PM that does optimising as a full time job?

Skipping the burden of trying to answer all these questions and going down to first principles.

If the DAO wants more pools that can be crated by every Joe like @ Uniswap we better have a top notch pool creating UI with a bomb UX that explains every inch in detail. As far as I know @JustJousting is working on this already.

Secondly we have @chanho and @nagaking who are dealing with stuff like pool optimisation (amongst other things) and who are both highly qualified.

Its initiatives likes these that should be funded by the DAO.

I would even say there is no other choice except for direct funding since PM fees in pools can easily be circumvented. Once optimised, liquidity can be migrated to a pool (made by someone else) without any fees. And there is no solution to that, that would not involve centralisation or potentially open up vulnerabilities.

Furthermore, I think there are far more important issues within the DAO that deserve more attention than this, involving both governance discussions but also dev resources.

Disclaimer: These are just my personal 2 cents. I appreciate that we have this discussion at all, there are no stupid ideas

3 Likes
#13

Impressive! Glad to know there are some community members working on this.

Many crypto projects are looking for some sort of “brokers” to form the pools for them here. As far as I know, most of them have just retreated from CEX and are keen to participate in the Curve war but have no clue.

So I think it is not about setting the bar high in terms of what we expect from the “pool manager”. We could refine the “pool manager” qualifications or bring the DAO official optimisation services later. For now, those projects need someone to help them get rid of that complicated stuff and form the pools on Curve.

#14

Agree with this proposal, encourage more high-quality artists and publishers to participate in the creation of liquidity, make good use of the positive role of Curve ecology, and make NFT have better liquidity.

#15

A great solution that balances the interests of all parties. Will it bring more changes? very worth looking forward to

#16

You make the important point that marketing is the key. This means those with marketing clout will likely benefit the most from this. If you consider higher-order effects beyond the simple ones envisioned in the proposal, it’s not so clear to me the endgame is beneficial to Curve.

Why couldn’t an entity with a huge raise to gain marketing clout, issue their own token, say “CLOUT”, and add it as rewards to their pools? Any pool with creator fees can then be copied with slightly less creator fees + CLOUT tokens. Since marketing is the key to driving liquidity, their pools would be the dominant ones.

Ironically, since their pools would be receiving volume, they would probably not have an issue with getting CRV emissions, further reinforcing their dominance.

Now you might be wondering, why is this bad? If CLOUT drives liquidity + volume to their pools, isn’t this good?

I think the thing the OP forgot (and you may be) is that LPs are taking the biggest risks here, and sometimes they are considerable. Tail risks should not be underestimated. Anything that takes away from LP fees is skewing the risk-reward ratio unfavorably to those taking the real risks. It’s ok for the DAO to get fees (although arguably the system never envisioned the veCRV and LP separation that resulted from Convex etc) because the DAO aren’t rent-seekers but worker-owners of the protocol.

In my scenario, CLOUT is a pure rent-seeker. The market is only willing to pay X amount of fees, and CLOUT is siphoning that way from the ones with actual skin in the game. Someone could try to create a fairer pool but they wouldn’t be able to charge more fees. They’d have to charge at most the same fees, which results in:

  1. they gain the market share, which means there was no point to creator fees
  2. they lose market share, which means the rent-seekers win over LPs

This is actually the crux of the matter. What value does CLOUT add to the system?

Some people have suggested that CLOUT may employ R&D to optimize the pool. Ok sure, they can. But they won’t. Because that loses from a very simple game-theoretic argument.

Suppose another entity BRAIN decides to optimize pools for the creator fees. They also have a certain amount of marketing spend. Let’s say their total spend is X + Y, where X goes to R&D and Y goes to marketing. CLOUT counters with their own pool with copied parameters, where they spend 0 for R&D and X/2 + Y for their marketing spend. Since marketing determines the winner, they win with less total spend. BRAIN can’t win because every “innovation” they come up with is copied by CLOUT immediately.

The higher-order effect here is that in this system there is no point to innovating, only to marketing. This shouldn’t be that hard to believe for those that have been in crypto for a few years!

Is this what we want?

3 Likes