Why We Let You Pay Fees in ZRX: A Comment on Value and Governance
As you might have noticed, The Ocean is getting closer and closer to live trading. Right now, we’re announcing partners, stress testing our platform, and onboarding market makers.
We also released our launch fee schedule:
- Takes pay gas plus 5bps for each trade
- Makers pay half that — to incentivize additional liquidity
- OCEAN token holders get an additional discount — to incentivize early adoption
- And you can pay fees in either the native token or ZRX
By offering this option, we maximize user choice and increase our stake in protocol upgrades through collecting ZRX, the governance token of the 0x ecosystem. In light of last week’s “controversy” around the value and utility of the ZRX token, I wanted to expand upon this design decision.
The Ocean, and many DEX projects globally, are building off the work of Will Warren, Amir Bandeali, and the rest of the 0x team. They asked a simple set of questions: Why isn’t cryptocurrency and token trading wallet-to-wallet, given that blockchain technology (in theory) can support such behavior? Why are the current on-ramps to the crypto world all centralized — generating similar risk and repeating the same mistakes found in the traditional financial world? Can’t we build something better to transform the way that value flows?
In response, we and other relayers use the 0x protocol — a smart contract that enables trustless, no counterparty risk settlement between two Ethereum wallets — to build such a world. We’re excited to be building something that solves the needs of individual traders, institutional players, and the global financial system. But it’s also difficult to implement new models and ways of thinking — less because the building is challenging, but more because adoption of anything new means replacing what’s old, familiar, and comfortable.
Decentralized protocols present a rare opportunity to rethink how society interacts and transacts. It’s one of the reasons why the blockchain industry has captured the imagination of technologists and amateurs alike. The economic and governance models generated by this space are both thoughtful and thought-provoking, and only time will tell time which models have the best chance for long-term value creation.
This also applies to the concept of corporate governance. If you’ve spent any time in the traditional financial or corporate worlds, you’ll often find decisions made there are purely motivated by short-term financial gain. Corporate executives repeatedly make choices based solely on stock price manipulation rather than value creation. And it’s this detrimental trend that generates opposing discourse like the Long Term Stock Exchange, in an attempt to refocus companies — and investors — on what what matters.
When I stumbled upon this piece on the ZRX token, which details its “shortcomings” and suggests the first solution is to “burn the token”, it reminded me of these sorts of corporate governance debates. You’ll often hear stories of activist investors who agitate for specific actions or overtake certain companies, all in the interest of “creating value” and “saving shareholders from management”. In some cases, this is true, and these investors have real insight and expertise that can unlock value. More often, however, these investors are more concerned with personal short-term gains that do not fundamentally improve the value provided to the end consumer.
I left the traditional financial world in large part because I wanted to “build something worth governing” (stealing some of Will’s wisdom here). I take pause when someone suggests a revised token model whose primary objective is to “consistently accrue value to the token” — not to generate more value for the end user of the protocol, and as a result make the protocol (and the token) more valuable. To me, this sounds like the short-sightedness of the old financial world — which I thought many of us came to disrupt.
We allow traders on The Ocean to pay in ZRX or the native token because it boils down to choice and stake. We want to maximize the number of choices that users have on our platform — from what to buy, when to buy, which wallet to use, and how they want to contribute to our growth. And we, as a company, want a stake in the direction of 0x protocol development. Thus, we accept fees in ZRX to help us achieve these goals.
At the MIT Bitcoin Conference earlier this year, I overheard an interesting point. Someone compared the value of technology stocks to the number of unique nodes connected to the Internet over time. The number of nodes has grown exponentially since the 1980s. Contrast that with the value of technology stocks, which have experienced booms and busts over that same period (just ask anyone who was around for the dot-com bubble).
It’s easy for all of us to be focused on price. But price isn’t necessarily reflective of value. No one thinks that the bankruptcies of Internet companies in the early 2000s made the Internet fundamentally less valuable. Thus price — or “value accretion to the token” — isn’t necessarily the right focus. Instead, it should be building good decentralized solutions to traditional centralized problems. That’s what 0x is doing, that’s what we’re doing, and that’s the type of projects and people we want to work with in this space. And if we focus on that, then everyone’s investments will pay off.
At The Ocean, we recognize that we’re only successful if we build a product that people want and that’s worth using. That’s the lens through which we view all our decisions — not just why we accept ZRX, but also how we’ve built our execution engine, and why we’re working actively with regulators on the right compliance framework for this space. I encourage you to join us on our journey — follow us, register now, and be on the lookout for live trading in just a few weeks!
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