December 5, 2022

How FTM Gas Monetization Changes The Network?

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Revenue streams are an important metric in determining the health of a protocol or a network. More revenues means more budget for improvements, more allocations for grants, and more demand for token utility. Despite the influx of revenues, it is also crucial to see how its earnings would be allocated - whether it's for grants, for liquidity bootstraps, and even for burning as a way to manage token supply. Just like a taxpayer, a user would definitely want their gas fees to return to them in the form of a better user experience.

As a permissionless, decentralized, and open-sourced Layer 1 platform, Fantom provides security and scalability in exchange for gas fees. These collected gas fees are then allocated by the Fantom Foundation in accordance with its strategy. It currently redirects 70% of its revenues to the Opera Network, and burns 20%. On the 1st of December 2022, the foundation released a new governance proposal that might change the numbers.

Fantom’s Proposed Strategy

Instead of burning 20% of the fees, the Fantom team proposes that only 5% will remain for burning and 15% of the collected fees is allocated to Fantom’s dApp Affiliate Rewards. This has the objective of rewarding and retaining high performing and value adding dApps, creators, and developers in the Fantom Network - the blockchain actors that provide sustainable products and services leading to the vision of Andre Cronje, “Fantom will become the Youtube/ Twitch of blockchain platforms.”

Key Considerations

Fantom Foundation’s intention of attracting talent, products and services to the network would be compromised by having a lower burn rate of FTM, bringing it down by 75%. This may impact token health in the case where the demand for protocol transactions and its burn rate does not exceed the selling pressure.

Another thing to note is that the affiliate rewards that the dApp receives would be spent at the discretion of the dApp. This may include allocations for the team payroll, token buy backs, research and developments, and more. With this freedom of use, it is possible that the dApp could misuse the rewards received and contribute to selling pressure, especially in peculiar market conditions.

Fortunately, the governance proposal acknowledges the risk of rewarding creators or dApps that are not necessarily in it for the long-term technology provided by Fantom. As such, a comprehensive eligibility criteria will be used by the Fantom Foundation in determining the deserving contributors to the network. Currently, entering the review process requires a minimum of 1,000,000 transactions and being on the Fantom Opera Network for at least 3 months. These terms are subject to change as the foundation tests the response of the community to the incentives.

There are multiple factors to consider in determining whether this would be beneficial for the network or not. The biggest question, however, would be “Would the dApp Affiliate Rewards increase token demand more than it would increase unnecessary selling pressure?” The best outcome would be an ecosystem where dApps constantly develop and provide usable products and services, which then support a positive feedback loop for FTM.

If you have made up your mind as a FTM holder, head on over to this link and cast your vote. Fantom Wallet | Secure DeFi wallet .