Introducing the Braintrust Fee Converter
Most crypto-economies today depend on growth from incoming new users and capital, strengthening network effects and connections, and speculative potential. These are important factors in a new economy and critical for their bootstrap phase, but can’t continue indefinitely.
At some point, all crypto-economies need to provide real fundamental value for their participations and convert that growth into sustainable value. There are multitudes of ways that crypto-economies can generate value, whether through providing products and services to their participants or through value capture in their marketplaces.
The Braintrust Fee Converter
Today we’re launching the Braintrust Fee Converter. This is the first major step for the Braintrust Economy towards sustainable value-creation and value-capture that breaks out of pure speculation and growth-driven economics. The Braintrust Fee Converter is a dapp and smart contract that nodes on the Braintrust network use to inject a portion of their GSV/revenue into the Braintrust Economy. Nodes are currently expected to use 10% of this revenue as a fee to Braintrust. The converter takes in this fee and uses it to buy back BTRST tokens off the market which are then returned to the BTRST treasury.
This has various long term implications for BTRST token holders. It adds a mechanism both for token growth for the BTRST token, and returns ownership of the Braintrust network back to the treasury and incidentally back to longer term BTRST holders.
How does it work?
The fee converter is implemented as such:
- An on-chain converter contract: This is a fairly simple smart contract that accepts USDC. Any USDC submitted to the contract will be converted to BTRST via Uniswap and converted it into BTRST that is then sent to the Braintrust Treasury. The smart contract also has basic capabilities for slippage protection to protect nodes against market manipulation.
- A fee converter frontend: The frontend helps nodes submit their USDC payments. It does some slippage checks and suggestions to nodes for what slippage they should allow and shows them the expected outcome of their payment, including how many BTSRT tokens will be bought and sent to the treasury, and their expected execution price
The mechanism and functionality is fairly simple from a technical standpoint, but the implications for the Braintrust Economy are significant, and this milestone represents a shift into real long term sustainable value for token holders and their economy.
This is the first small step in that direction, but opens the door for Braintrust’s upcoming roadmap with many improvements and additional cryptoeconomic mechanisms to look forward to that will continue to grow the value creation and capture of the network.
The contract is deployed to Ethereum mainnet here: https://etherscan.io/address/0x438e6416fe63863c434e4d6ee0c39d8f96880186
What liquidity pools do the contracts tap into?
The contract is currently focused only on the BTRST/USDC 1% V3 pool (0x0170915a0a6de6eb8dfc4e0f7415ad5a5a2be180). BTRST DEX liquidity is still low, and most of it is concentrated within this pool. In time as BTRST spreads into other pools and DEX’s, the converter can incorporate them and improve with more powerful routing functionality that gets better pricing.
What if slippage is too high on Uniswap or liquidity runs low?
Slippage is currently checked and submitted by the frontend. There are some default values set by the frontend, but it is left up to nodes to modify those values and double check that they are comfortable with them.
One thing to keep in mind is that slippage can actually be good for the Braintrust Economy: Given that the purpose behind these contracts is to act as a token buyback mechanism, high slippage means that the buyback is more effective and increases the price of BTRST more than low slippage, making the mechanism even more powerful. Having said that, if this slippage leads to price increases that are not aligned with other markets (eg: CEX liquidity), then some of the buyback value may be captured by arbitrageurs from those markets, rather than by the BTRST economy.
It is likely most efficient if the slippage on execution is close to that of other exchanges and/or execution happens more slowly over time to prevent massive arbitrage gaps from opening up.
This initial converter leaves this up to the end user (the particular node) to be aware of, but future versions could incorporate an on-chain Oracle and/or a slower automated buy drip to increase conversion efficiency.
What if nodes don’t use the tool, and just keep their fees to themselves?
Node revenue in the Braintrust economy is still mostly offchain, and so paying their dues is something they need to actively opt-in to and do. At the moment, because the amount of nodes and size of the economy is small, an honesty and offchain reputation based mechanism is sufficient to ensure node participation. Nodes that don’t participate will risk losing their access to the Braintrust talent and client network and damaging their reputation.
This is also problem we’re working on solving next. Future on-chain BTRST token mechanisms will act to further secure Braintrust against nodes that attempt to leech of the economy like this and allow us to scale up nodes in a much more permissionless, trustless way. We’re exploring mechanisms including token staking, slashing, on-chain reputation and others to enable this kind of future scaling.