Thanks for getting this conversation started @Link and @mintcloud!
Some thoughts on protocol adoption and value capture (see also: [temperature check] community treasury MVP thread)
It has become generally accepted that for a protocol to achieve adoption and accrue value, it must:
- Be useful
- Be able to capture value
- Have a defensible moat
The 0x protocol’s vision is to enable the peer-to-peer exchange of assets on the Ethereum blockchain. Assuming that #1 (above) is proven, the focus of this post is mostly on #2, which should in turn contribute to #3.
Up until now, peer-to-peer asset exchange has mostly consisted of speculative trading and, more recently, increasingly exotic defi protocols and applications designed mainly to deliver yield.
The potential exponential value that the 0x protocol can enable and capture is bigger than defi or any other discrete category of applications/protocols, because asset exchange is a fundamental primitive that underlies them all, both those that exist today and those that will be developed in the future. This idea is similar to the fat protocol thesis but is more directed towards intrinsic value than to dollar value.
The question at hand is how to accelerate and broaden the use of the 0x protocol to enable it to participate in that exponential value creation and capture? There are some obvious (admittedly maybe only in retrospect) ways to do this for existing use cases. For example, Matcha fills a market gap for a user-friendly trading application with highly-competitive pricing. Fee-less 0xAPI limit orders fill a market gap for people who want a guaranteed price with minimum fees.
However, outside of expanding integrations for existing use cases, the real near- and mid-term value capture will be determined by how quickly and effectively the protocol can expand and evolve to incorporate the new business models and crypto applications that will emerge and be enabled by the underlying primitives.
I won’t go into the details of what I think some of those might be here, because what I think is most important now is to create an efficient, transparent process for proposing, evaluating, and funding efforts to advance the protocol outside of the efforts of ZeroEx and 0x Labs. This capability can most effectively be jump-started through a community treasury administered within some initial authority and operating parameters.
Many other projects have already implemented community treasuries, so we have the opportunity to learn from them, particularly with regards to avoiding negative dynamics and outcomes.
For example, some initial things to consider include (not intended to be comprehensive or to apply in all models):
- Establishment authority
- Fund management and disbursement authority: direct (e.g., Uniswap model), representative council (e.g., Synthetix model), or a hybrid
- Compensation (if model other than direct)
- Period of service (if model other than direct)
- Source of ongoing funds and operating budget
- Investment themes and priorities
- Proposal process and format
As a long-time supporter of the 0x vision and mission, I personally am super excited to have the opportunity to participate in the project in a more substantive way and hope that moving forward with this idea will create many opportunities for others to do so as well.
