HIP-28 Fee Collection

Governance Validator DAO
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Hello, ONE community!

TLDR -
Harmony commits to utilizing the treasury for the Recovery One plan, rather than minting new tokens.
Continuing to support vital network services and partnerships is vital and will require new methods of funding.
This proposal is to collect and use network transaction fees to fund these necessary services and partners.
This change would require a hard fork, and there will be a vote.

Introduction
Blockchain and Web3 projects must adapt to current market conditions. This proposal is for the current burning mechanism of transaction fees to be shifted toward utilizing those fees to fund the blockchain’s required services/partners in order to continue development.

Background
Harmony relies on vital services and partners (such as server infrastructure, oracles, endpoints, multi-sig, etc.), without which it cannot continue to build and develop into the future. Given that Harmony has committed to not minting new tokens and to using the Harmony treasury to recover de-pegged asset value, a new and innovative way to procure funding for these services/partners is needed. An obvious source for this funding comes from transaction fees that users already are paying. Recovering the de-pegged asset value and continuing to move forward in development go hand and hand for the success of Harmony.

Mission
Any change to the coding on the chain requires a hard fork, which certainly applies to this situation. This proposal will remain on the Talk forum for 2 weeks for community engagement purposes and feedback. A poll will be attached to gauge sentiment, which is not to be considered as an official vote. After 2 weeks, a Snapshot vote will be posted, at which time validators will have a week to vote.

Blockers
Snapshot will need to be tested and brought up to speed if needed to ensure governance is possible. The move to the official Snapshot in the past caused issues.

Thank you for taking the time to read this proposal, and please provide any feedback you may have. The core team is aware of this thread, and I will be tagging a few of them to ensure they see this. @lij @Globey.one @sophoah

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Please vote below on this proposal to use transaction fees in this manner.

  • Yes
  • No

0 voters

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Idea is good.

But as i know, a hard fork requires maintenance in all the structures which harmony blokchain is already connected with. Like cointrackers, cex/dex exchanges, dApps etc. This could lead the team go under an extremely hard work.
I have not voted yet. Gonna wait until the last day to see if there are other opinions/information that i do not know :slight_smile:

Have a great weekend.

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I’d use any means to help victims who have their assets frozen in the AAVE protocol. After victims are able to remove their assets and be back in control of their tokens, there could be ideas for the growth and improvements.

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This thread seems to have fizzed out into nothing unfortunately. Hopefully we can revive it.
But I would like to shift the focus slightly.
I believe the proposal for collecting transaction fees in a multisig/DAO not exclusivity for the usecase of repegging, but overall for future development of the protocol of be a benefit overall.

Tokenomics:
For all the talks about arguing about deflationary or inflationary currency, a more important part is forgotten, stability. Harmony’s model of today resembles Ethereum’s model of inflationary, but be deflationary with high transaction volume. I would argue that this is not a good model.
A stable inflation of the 441 million tokens issued to staking, with no burning of transaction fees would create a more stable tokenomic model in my view.

Decentralization:
Harmony has stated that they want to decentralize the protocol over time, here is a great chance to start that process. Letting the future funds of the protocol being left over to a Treasury DAO controlled by the community. In which we the community could (over time) will gain more and more influence over the protocol treasury as the foundations treasury dries up. And eventually the cummunity would be funding the foundation if/as we see fit.

Here were just some short rambling hoping to start a discussion.

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Let’s use it to unlock frozen assets from AAVE.

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A few questions on this:

How much ONE do we think will be repurposed? What inflationary effect will this have?

How will the collected fees be allocated?

State of the treasury

  • How much runway does Harmony have left, factoring in recovery plan?
  • What is the current income versus outgoings? - i.e. What is the actual shortfall that necessitates this change?
  • How much does Harmony earn through staking rewards? Can they stake more?

What cost savings have been looked at?
Can infrastructure costs be reduced by decentralising? What about introducing light clients?
What is being done to encourage more opensource/community contributions to the project?

How much support does the current recovery plan actually have (given there was no vote!)?.

At what point do we go back to burning fees (if ever)?

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Hi @sophoah to add what DK said and being realistic here:

Currently there are around 40k TX per day (in a good day), rounding the gas fee to 0.01 one per TX, treasury would be earning 400 ONE per day, to be honest even a validator with 40 M one staked would be earning more than that from collected fees than this initiative. I could be wrong in my math, please help me understand if I’m calculating wrong.

Also, even swapping and burning the earnings from the Staked 200 M initiative could help more

For how much time would gas fees would go to the recovery plan? This year we had 2 “temporary” increases that doesn’t make sense anymore since even the arbitrage bots are not spamming the network with requests.

Even with the fork will harmony continue helping Recovery initiatives? Modulo, Tranquil and RecoveryOne (@Pioneer, @mbarret3?)

How would you set the voting in snapshot? We all know voting is broken (besides binance) and if you do it by stake weight, you would only need top 8 validators to agree to pass any vote, in other words, it wouldn’t matter if 140 validators think different than those 8.

Thanks in advance
Hound

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I support the hardfork.
And I would like to reiterate that I believe this should be a permanent solution, the the multisig/wallet being a Treasury DAO controlled by the Community/Community Members
Thereby the transaction fees would not only be an arbitrary cost to perform a transaction or value to deter spam transactions, but in essence a tax to use the blockchain, and this tax is then used to maintain and develop the blockchain.
Yes at current transaction volumes, the collected amount would be honestly pathetic amount, but we have to look forward and build for the future.

To @HoundOne_Validator You as validators still have the final decision making in upgrading your node. So in the extreme case you outline you’d have a powerful voice if 140 validators refused to go along with the upgrade. But yes the voting mechanism must be done something about.

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Hey

I don’t have the answer here since it depends on the number of transactions.

No inflationary effect as we are not minting new ONE here, instead our original hope for deflationary will not happen until we decided to burn it again

Strictly for infrastructure including cloud cost and partners such as maintaining our multi-sig (protofire) which is essential to the network.

I’ll check with @lij and come back with what I can

For the past few months we have been :

  • retiring many infrastructure, remaining instance type in AWS were reduced to minimum,
  • moving instances from AWS to other cloud provider (ie, latitude.sh), AWS S3 to storj
  • updated explorer backend logic and database storage reduction
  • removed unessential backend service
  • exploring other idea like making our erpc cluster redundant only for non archival traffic
  • S0 snapDB reduced disk space used validator from 2TB to <1TB then S0 epoch sync download has reduced it from <1TB to <1GB

Since our peak at >500k a month in 2022, we are now closed to 100k and should go further down in the coming month. Note the above doesn’t account for the man power cost.

We are open to decentralization especially if that can be bring our cost down.

We discussed about that last time but I have no update on this

My only personal view on this is that right now we need to rebuild the trust, attract community and open source project. We are also trying to settle things internally. When things get better, i am sure we are going to re-open for grant and etc …

I don’t know at all to be honest here. Maybe @Pioneer knows

No idea, something we can revisit later. I would say if the entire chain operation is decentralized, maybe never since there will always be some infra cost to pay.

That’s correct.

you may be right but are you suggesting the foundation or community to create its own validator ? and use all ONE foundation currently stake to community validator to this one ?

the fee collection feature is a long term plan and while we still are in bear market and transactions are low, if one day we can get to our previous high, we had like ~4M ONE in fee collected in a month

Maybe, I can’t speak much in the defi world here, however defi has its own risk.

from the latest update, the collected fee would be used for infrastructure and cloud cost. This will help the treasury with the cloud and infra expenses.

Yes we’ll continue to help.

Unfortunately this is a network change and hence requires validator vote. I’ll plan to announce in advance the block for the snapshot to be taken so everyone is aware. Validators and delegators will have to talk to each other or at least validator should announce the vote in advance so delegator can eventually decide to move their stake.
In regards of the top 8, I unfortunately don’t have any solution right now.

Thanks @HoundOne_Validator @DKValidator for the great questions

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We have runway for the core team to keep building for 4 years, but we need to build stronger traction/adoption factoring the recovery plan.
Both our runway and the recovery plan are dynamic and the monthly allocation takes into account the market conditions and our budget at that time.

We don’t actually have any income today except from staking reward (however see below) and that fee collection feature. All come from the treasury only. As mentioned above already, one reason this fee collection is proposed is because we still require significant resources to support the overall network, explorer, and RPC (ie $100k that we are working on reducing).

we have not used the staking rewards yet; the original idea was for the validators to think about how to use those rewards.

hope I’ve addressed all the questions. Thanks

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Thank you @sophoah

Are there any other chains that are using fees in this way?

I have three main concerns here:

  1. Harmony is highly centralised in it’s current form and I continue to participate in the network with the understanding that Harmony core is working towards decentralisation. Having transaction fees re-routed into Harmony core treasury is obviously a major step in the wrong direction.

  2. Time and time again I’ve seen people/investors ask questions about Harmony’s inflation. The satisfactory answer is that inflation is necessary for network security, but inflation is reduced by network activity via fee burning. I think we need to consider how important fee burning is for current and future investors (even if it is negligible at current transaction levels).

  3. I think we’re all expecting some regulatory pressure in the blockchain space, and this is especially concerning (I think) for US based blockchain businesses. If the US based Harmony core business is being paid transaction fees by network users are there any additional legal concerns that need to be considered?

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I’ve already explained the tokenomics to too many people at this point. The fact that we’d never have the chance the be net 0 inflation would make me out to be a liar. For that reason, I’m against this course of action.
Still waiting to find out what’s going on with the rewards from the 200 million ONE staking initiative?

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I do not know.

Thanks for expressing your concern

  1. I believe we need to work on introducing more HIP and to help with the decentralization piece
  2. Agree with you, and hence why we have this post and hope to involve more validator into the discussion
  3. I can’t comment much here
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Kinda interesting to see that this proposal is being made without any examples. Remembers me of the early TRON days. Non-data-driven decisions doing harm to core ecosystem users…

Tse shared some cryptic messages on his Twitter. If one did a deeper dive one could see that he was looking into FTM operational expenses etc.

as far as I know, FTM has been bootstrapping their funds for years (including non-degen yield farming plus backing their onchain projects BERIEVE) but most importantly, have such a fee structure as this HIP does!

Source: Fantom: an inside financial peek at being a “crypto company” | by Andre Cronje | Medium

Income / Revenue

Validators — Fantom runs 9 validators, for a total stake of 60,708,615 FTM. This earns us ~ 4,182,823.5735 FTM / year.

Delegators — Fantom delegates approximately 60,000,000 FTM to Fantom validators. This earns us ~4,100,000 FTM / year.

Network revenue — Fantom ecosystem earns 10% of all transaction fees.

With an average daily transaction fee of 30,000 FTM this earns us >1,000,000 / year. The average fee per transaction is less than $0.005.

Defi revenue — Fantom earns ~$5,980,000 from various defi strategies across the Fantom and Ethereum ecosystems.

Fantom currently earns >$10,000,000 / year, excluding any capital gains.

We are cash flow positive.

We are still scaling up.

Would make a lot of sense to look around for best practices and back those practices up using data, especially with competitors that have been doing/performing great.
Classic startup mantra; Try, Fail, Adapt/Learn, Iterate, Overcome.

Am feeling that a lot the h1 leadership could learn a lot from those best practices and lessons learned from others (and how to prevent them in the future).

Imagine a transparent 200M staking initiative that showcases:

  1. Partly Transparent Financial Records of the protocol
  2. transparent revenue for long term ecosystem/infra support
  3. Treasury growth if executed well
  4. Harmony is learning and improving on the past
  5. Importance to community sentiment

Edit: made some changes to clarify further. wasn’t in the clearest mind while writing this originally.

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Wait 24.825m ONE gets unlocked per month for Ecosystem and Operator where does this go to?
Can not some of the partner be cutted? For example that multi-sig, would it not be better to speak with gnosis directly and don’t have a forked Version?

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It looks to me like there has been very little research and diligence done with this plan on part of the Harmony team after over a month now. No solid numbers have been gathered and crunched nor shared here. “We have 4 years of runway” doesn’t say much at all, I could say that about myself (although it would be a lie). Show us some numbers. Prove to us (with facts and numbers) why this is such a vital piece of the puzzle and details of what it would help and how it will be used (not just a blanket infrastructure, what part of the infrastructure, what is that costing now and how much will this offset that cost). I can appreciate the core team’s ambition but you guys need to step it up a notch with stuff like this. It always seems like this team takes sophomoric approaches to the most important things. Expecting a vote with little to no math, details, numbers for people to look over isn’t how this should be done.

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Though I support the hardfork, I must agree with ILL_DIE_TRYING.
Some facts, figures and an actual plan for the future is essential.
If there is vital infrastructure that cannot be decentralized to the network/nodes, there needs to be an actual plan for future funding. Not just a “it will work itself out somehow” attitude.

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Why not use that ONE to restore the peg :eyes::money_mouth_face::blue_heart:

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I do not support the idea for a Hard Fork. Stick to the plans that have been set forth and do not change what is written in the white paper. If R1 plans to work, it will work without the need for a hard fork.

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