Future Venture
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Future Venture

Raise Transaction Fees

A New Revenue Stream for Holders

Lithium has always been driven by a clear mission: to become the world’s simplest launchpad. We make it easy for your Dad to invest in early-stage crypto projects. We’ve written at length why making this bet is a good one, why appealing to the early majority cycle will serve us in the best stead in the next bull-run, and why our whole product offering is built around eliminating steps in the user journey. Today though, we want to talk about a feature we built that didn’t work — and how we are going to make it right.

On Instant Staking

The premise of instant staking was pretty simple. Many users wouldn’t be willing to commit to the Lithium ecosystem right away. While our game is to attract long-term holders, holding a Lithium tier is not an impulse purchase, it’s a thought-out investment where customers must understand the cost-benefit of buying and staking our token and participating in our raises.

The hypothesis was clear. If we can give people an option to participate in a Lithium raise, with minimum investment, we’d be able to convert a portion of those people into Lithium believers. The concept of instant staking was born.

Instant staking is a very simple concept, you can purchase a Lithium tier for a specific raise, stake instantly, and then sell your tokens after. If you like the experience enough, you’d stick around. Before we dive into the mechanics of what went wrong, let’s explore the economic model behind staking.

User buys $IONs at 8% buy tax → User stakes at 5% fee→ User participates in raise → User unstakes → User sells $IONs at 10% (average) sell tax.

For the purpose of the example, assume the price of $IONs remains constant throughout. In reality, some will sell for lower and some higher, but on average, the delta will be close to 0.

Instant staking was not used as much as we hoped.

Effectively what we are doing is here is charging an 18% tx tax fee for users to participate in a single IDO, plus a 5% staking fee. This fee would be redistributed to holders in the form of EVP90 rewards. Sounds good right? We get middle-of-funnel users, and holders get rewarded, oh and we fill more raises.

The problem?

No one really used it. The instant staking feature has only generated a few thousand in transaction fees, hardly moving the needle for our EVP90 investors. It’s also not bought many new people into our ecosystem, purely due to the fact that not many people have used it — the good news is that a decent proportion of the customers who did invest using instant staking, went on to lock their tokens after participating in their first raise.

Why Instant Staking Isn’t Used Much

After performing a few months of user research, and critically analysing our current model, the Lithium product team came to a few conclusions about instant staking:

  • Many users don’t understand the feature
  • The users that do understand it, don’t think it’s a good deal
  • The feature has too much friction, there are far too many steps involved if I just want to participate in a single raise, or test the water.

So that got us thinking: how can we deliver the same rewards to our holders that instant staking fees provide, while massively increasing the number of people who use the feature?

It all comes down to providing a far improved user experience.

Raise Transaction Fees

The majority of people aren’t used to having to buy a token to invest in a crowdfunding project. The majority of the population don’t understand what staking is. The crypto-native population that does understand these things are also smart enough to figure out when they are having to make a significant outlay to take part in a single raise.

There is one thing that everyone understands though: Paying a transaction fee at the point of sale.

Transaction fees are well understood by web3 natives and normies.

If I use an e-commerce site, I’m not going to be surprised to pay a delivery fee when I check out. If I use Binance to buy Ethereum, I’m not going to be surprised to see a transaction fee.

Perhaps you’re connecting the dots here, by charging a fee at the point of sale, rather than beforehand, we could massively increase the number of people who ‘dip their toes’ into the Lithium ecosystem.

We’ll be releasing the exact details in the coming weeks, but effectively, we are going to start trialling this approach with a few raises. Broadly how this will work

User who doesn’t hold $IONs → Invests in a raise at 20% tx fee, with a small max allocation (say $200)

What project transaction fees could look like.

We’ve eliminated about 5 steps in the user journey from instant staking, all while maintaining a very similar, and arguably more consistent revenue stream.

OK, but how does this benefit me, as a holder? How do I see an upside from this model? This is where a bit of magic comes in.

The 20% fee that we’ll charge as a transaction fee will be used in two ways

  • to buyback $IONs
  • to distribute rewards to EVP90 holders.

This will ensure that non-stakers investing in projects will contribute to $IONs buy pressure, without having to buy themselves.

In other words, non-stakers will be able to take part in raises with a small allocation by INDIRECTLY purchasing $IONs tokens. The difference is, that these tokens are paid for in USDC as a transaction fee, and then converted into $IONs automatically.

Looking Forward

There’s a lot of work to do in terms of refining this model, and as it's a fairly significant change to our platform that we won’t just implement as a standard across all our raises. Here’s the rough approach we’ll take

  • start gathering feedback from the wider community on the change
  • push out a few more articles with more details on suggested mechanisms
  • trial the feature on a low-risk raise

We’re really excited about the potential of this feature. With a few UX improvements, we think we can really crack the problem that instant staking was implemented to solve, and as always we’d love your feedback.

WAGMI,

Team Lithium x

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Lithium

Lithium

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Lithium are a seed and pre-seed crypto venture capital and incubator platform. We exist to power real utility in early-crypto.