Summary of the 0x Ecosystem Value Experiment (0xEVE)
Note: As of 15 May 2022, v1 of the grants program is replaced by v2
The 0x Ecosystem Value Experiment (0xEVE) is designed as an ambitious, six-month (26 weeks), experimental initiative focused on value creation and capture for the 0x protocol and its broader ecosystem.
Potential areas of experimentation include:
Adding features and improving protocol functionality
Performing tokenomics review, optimization, and potential revamp
Incentivizing and improving support for new and existing market makers
Providing liquidity to select ZRX pairs
Incentivizing order flow and trading volume, including via relayers, dApps, etc.
Improving the user experience for staking
Building and updating developer and user tools, including documentation refresh
Developing more sophisticated research and analytics capabilities
Assisting with dApps and new integrations, especially projects using order books
Experimenting with new business models and monetization paths, including new use cases for Mesh
Strengthening our community through outreach and rewards
Ramping up marketing
Driving support for strategic initiatives
Conceptualizing and executing social media campaigns
Hosting and advertising 0x hackathons
Engaging with emerging developer communities, such as BSC, Polygon, Solana, etc.
Operations team:
Lead: @nikita
Core Team: @SonOfPegasus, @0xSHA
Council: @JoaoCampos89, @gabririgo
Advisors: @mintcloud + others TBD
A review of activity, results, learnings, and recommendations for the future
0xEVE was originally designed as a six-month, experimental initiative focused on value creation and capture for the 0x protocol and its broader ecosystem. To accommodate extenuating circumstances related to delivery timelines and other factors, the time period was extended at no additional cost to the original budget.
This report summarizes our overall activities, learnings, and recommendations. Because new opportunities with high potential have been developed during this experiment and because we haven't yet expended all allocated funds, we also summarize our plans to continue to drive these opportunities.
In our Half-time Report we described the activities and workstreams we undertook in furtherance of our objectives. Here we frame them in terms of strategic goals, execution strategies, and outcomes. Note that some execution strategies may be related to more than one goal but are shown with the most relevant and/or immediately impactful one.
Strategic Goal | Execution Strategies | Outcomes/Impact (Direct and Indirect) |
---|---|---|
The table below summarizes inflows and outflows of funds.
Note: Although it isn't listed here because the funding came directly from the treasury rather than our budget, we took on an active role in shepherding the $950k proposal and community-approved grant to trader.xyz (noted in the table, above)
MS1 is the original multisig wallet, used for operational and 0x-specific expenses MS2 is the second multisig wallet, used for joint 0x/Polygon initiatives
MS1 0xf9347f751a6a1467Abc722eC7d80bA2698dd9d6c MS2 0xAB66CC8FD10457ebC9D13B9760C835F0a4CbC487
Note: In addition to the overall learnings below, please see the Half-time Report for a summary of learnings from the first 90 days.
Scope - We feel the scope was appropriate, although including an expansive list of possible areas of experimentation in the proposal may have inadvertently set expectations that all areas would be addressed, rather than focusing on the ones we felt would have the most impact and probability of success (even though we did indicate that this would be our approach in the proposal). Similarly, in retrospect and as we indicated in our previous report, we would have placed more emphasis upfront on 0xEVE being a focused experiment, rather than a proxy for a full-fledged DAO. Finally, some of the areas where we hoped to have more impact were stymied by factors outside our control, most notably in the developer support and tokenomics areas, which were in many ways dependent on 0x Labs' prioritization and resourcing. That said, the 0x Labs team has steadily grown over the past year, adding team members in key roles. We expect this will lead to deeper engagement over the coming months, and we are confident that further improvements related to developer and technical support are on the horizon. Additionally, the recent 0x Labs Series B raise will have a substantial and positive impact on resourcing across all operations.
Budget - As described in the original proposal, we allocated compensation in ZRX at a fixed conversion rate for six months that in retrospect was too high (or too low, depending on how you look at it). This shifted risk from the protocol to the individual contributors and had the effect of compensating contributors well below the market rate for the entire period of the experiment. While it had the benefit of preserving capital and enabling the extension, this model clearly would be unsustainable over an extended period of time for full-time contributors without some upside, such as an additional vested allocation, and/or some portion of compensation in a stablecoin. To fairly compensate contributors for the extension period, a one-time, parity adjustment payment was made to offset the underpayment for the period 12/6/21 - 3/28/22, which was beyond the original commitment and financial risk / opportunity cost assessment. This retroactive payment does not change the conversion rate for the original commitment period, which was calculated last May and then fixed for 6 months (ZRX = $1.22), but accounts for the SMA price during the 112-day extension period (ZRX = $.64). See v2, below, regarding the updated compensation methodology for future payments.
Conduct more experiments, especially ones designed to create or amplify ecosystem agency over future protocol development and ones that are focused on specific networks and/or use cases
Convert some portion of the funding coming from the treasury for future experiments into USDC (or some other stablecoin) concurrent with (or prior to) the initial budget allocation
Establish an official grant program with a budget and charter commensurate with other similar protocols with similar growth goals, while keeping foremost the unique needs and dynamics of the 0x community
Establish an active communications and support channel between the grant program and 0x Labs development teams until robust, expert-level, protocol-specific technical capacity is readily available outside 0x Labs
Seek out treasury contributions from other networks and protocols deriving benefit from 0x protocol (especially new deployments and integrations) and develop a model structure to accelerate collaborative grant funding, especially if strategic in nature
Evaluate emerging organizational structures, such as foundations and trusts, that have the potential to provide a more sustainable legal and regulatory framework for grant operations
In our opinion, the most beneficial outcomes driven by the experiment so far are the recent upgrade of v4 to include NFT support, and the work being done by trader.xyz to accelerate the deployment of 0x-enabled NFT marketplaces, especially on non-mainnet chains. The strategic benefit of prioritizing protocol NFT support was recently confirmed when Coinbase chose 0x to power its social marketplace, and we expect to see additional second- and third-order effects going forward.
With that as context, we want to leverage this momentum to greater effect with a targeted initiative. Our hypothesis is that focusing on NFT projects on Polygon will have outsized impact, in large part because Polygon is aggressively growing its ecosystem via initiatives like Polygon Studios, which is highly concentrated around NFTs and gaming. Our goal is to grow awareness and adoption of 0x early in tech stack decisionmaking, where the impact could be exponential over time if 0x becomes the de facto standard. We hope that this type of focused approach will become a repeatable model for accelerating 0x ecosystem growth on other chains and networks.
We will also continue to work closely with the trader.xyz team and other teams building NFT projects using 0x technology. For potential opportunities that exceed our budget, such as the previous grant to trader.xyz, we will work with those projects to request funding directly from the community treasury and, if allocated, will also work with them during the delivery period to help de-risk, unblock, and accelerate.
Incorporating learnings from the experiment so far, the contributor compensation rate will be calculated using the 100-day SMA at the time of payment, and split 50/50 between ZRX and MATIC (split rate subject to change depending on market conditions and remaining budget).
Core team: @nikita, @0xSHA Council: @JoaoCampos89, @gabririgo Advisor: @mintcloud Twitter: https://twitter.com/0xCommunityDAO Discord: https://discord.gg/d3FTX3M
1- Grow protocol volume
Engage via social media and other channels (including Discord)
Award developer-focused grants
Support projects building on 0x
Conduct protocol fee experiments
2- Improve protocol functionality and usability
Advocate for v4 NFT upgrades
Update developer documentation
Improve developer support
NFT Swap SDK from trader.xyz (note that the streaming grant to trader continues through 10/22 and includes many additional roadmap items)
ZEIP to add NFT support to v4
Bitquery v4 API upgrades
0x Starter Project update to include v4 support
3- Extend protocol business model sustainability
Champion tokenomics and associated messaging refresh
Update on tokenomics refresh https://gov.0x.org/t/update-on-protocol-fee-experiment/1081
Follow-up on the insights and recommendations from Other Internet research
A review of activity, learnings, and results from the first 90 days
0xEVE is a six-month (26 weeks), experimental initiative focused on value creation and capture for the 0x protocol and its broader ecosystem. This report summarizes the activities and emerging learnings from the first 90 days. A second report will be produced near the conclusion of the second 90 days to inform a community decision on whether to continue, modify, or let the experiment expire.
Our overall goal as we got started was to get some operational constructs in place to set in motion the different workflows needed to accomplish the goals we had laid out in our establishment proposal.
Initially, this consisted of setting up a Google workspace for collaboration, Twitter account for social media, Gitbook for public-facing content, Gnosis multisigs, establishing connections with the team at 0x Labs, and group chats with other teams building on 0x. We also sought out legal services and conducted research around grant program best practices and treasury investment and diversification so as to learn from others and minimize missteps.
In parallel, we worked through some strategy exercises designed to identify areas of high potential and/or critical gaps related to the protocol's position in the marketplace. This helped us determine where to focus our time and efforts to achieve the most meaningful results. At a high level, we decided to align our focus with 0x Labs’ primary goal, which is to increase protocol volume.
The framework for a grant program was established, along with a scoring mechanism for evaluating grant applications. We engaged in outreach to projects already or potentially building on 0x to deepen or open channels of communication and support, particularly in the context of shaping grant opportunities, and published a summary of topic areas we want to fund. This proactive engagement led to two early grant awards (Thales and sudoswap). Now that a process has been established, we actively work with applicants and grantees to provide advice and assistance throughout the evaluation process and delivery periods.
An effort to better define how the 0x protocol mission can be reflected and enabled through a refreshed, sustainable tokenomics model was undertaken. We tackled the issue of improving the protocol’s business model and value capture by exploring two main paths: 1) paying for research, analysis, and recommendations on fee models from external, independent research organizations; and 2) enlisting the help of the data team at 0xLabs to perform similar work.
After community discussion and consultation with 0x Labs, we proposed experimenting with adjusting the protocol fee to assess the impact on volume and human behavior and hope to use the data collected to help determine a path forward for sustainable network economics. We also worked with the 0x Labs data team to prepare a dashboard for the community to track metrics during the fee pause period.
In addition to the work on tokenomics, we evaluated options for conducting brand positioning research and workshops to help guide us in how we tell the story of the protocol and its mission as we transition to accountable, community-led governance. We believe that a deeper understanding and more compelling articulation of the 0x brand may also inform the tokenomics model, as the tokenomics model functions as an economic expression of the protocol’s mission. To help us in this area, we commissioned research, workshops, and advisory services from Other Internet (https://otherinter.net/), a highly regarded, decentralized applied research organization specializing in social technology. For those interested in learning more, we recommend reading their Headless Brands and Market-Protocol Fit reports as examples of the areas we are seeking to explore.
We worked with the 0x Labs team to establish a more robust governance process, including integrating Snapshot for polling and expanding the information available in the governance portal. We also participated in day-to-day engagement with the community in the forum, Discord, and social media.
The table below summarizes payments made to date for grants and operational expenses. MS1 is the original multisig wallet that is used for operational and 0x-specific expenses, and MS2 is the second multisig wallet that is used for joint 0x/Polygon initiatives.
MS1 0xf9347f751a6a1467Abc722eC7d80bA2698dd9d6c MS2 0xAB66CC8FD10457ebC9D13B9760C835F0a4CbC487
Note: There was no fixed schedule for team compensation payments, but the first payment in August (shown above) covered the first 9 weeks, a second payment in October will cover the following 8 weeks, and the third (final) payment in December will cover the last 9 weeks, for a total of 26 weeks.
Learning is an ongoing process. Insights and conclusions can evolve over time, but here are some things we've learned so far.
First, as other early grant programs have noted, announcing funding availability does not immediately result in a deluge of quality applicants with compelling value propositions. We felt that most of the grants awarded didn’t present substantial technical or execution risk, but there was some general risk regarding how much value the community would realize in return for the amount of capital provided. We hope that in time more applicants will propose grants that provide even stronger risk/reward value propositions i.e., more potential upside, innovation, and differentiation.
Second, our plan to actively develop a recommended strategy for treasury investment and diversification became more complicated due to the increasingly hostile regulatory and compliance environment. Combined with the fact that EVE is a short-term experiment and this task wasn’t core to our success, along with a change in our team composition (SonofPegasus, who was our designated domain expert and lead for that effort, stepped back from an active role on the core team), we decided to table this workstream. Similarly, we decided to not engage in token swaps with other projects as part of a grant package, as we felt doing that could introduce some liabilities that might persist post-EVE. Given the current circumstances, we feel it is probably better that proposals for treasury investment and diversification originate directly from community members and external projects and be voted on by the community vs originating from EVE.
Third, even though we are consciously focused on protocol value creation and capture, operational mechanics and expectations can consume a great deal of time and energy and it is easy to fall into the trap of acting more reactively than proactively. We will continue to try to find balance here with regards to being involved in activities that aren’t necessarily core to our charter and would likely provide short-term impact, but at the expense of progress towards our longer-term goals.
In that context, we also struggled somewhat with regards to varying expectations from a mixed group of stakeholders across the community, the broader ecosystem, 0x Labs, and even amongst ourselves. For example, we became aware that even though we were seeing our work as somewhat bound and focused, others may have been expecting a much more robust and expansive portfolio of responsibilities including broad DAO "management" functions. As a small team with only one full-time person, context switching, remaining current, and depth of knowledge for diverse subjects is challenging. Technical engineering, in particular, continues to be a difficult area to maneuver as deep protocol technical knowledge resides mostly in 0x Labs, which makes it hard for us to lead or even scope protocol engineering work. That said, we are actively working to find ways to improve this situation so that we can expand the developer ecosystem and the number and types of projects building on 0x.
It’s too early yet to objectively assess what long-term results will be derived from the EVE, but all things considered, we’re pleased with where we are. We’ve put some repeatable processes in place, developed some good working relationships with ecosystem partners, awarded four grants to projects with potential, and have set in motion the two things that we were most confident would contribute to real value capture over time -- actionable branding improvements via the work we are doing with Other Internet; and sustainable tokenomics improvements via the data collected from the protocol fee experiment. In combination with the grants already awarded and the pipeline going forward -- in particular, the likely grant award to trader.xyz -- we're optimistic that EVE will prove to be a success and will enable further progress on the path to decentralization.
Core team: @nikita, @0xSHA Council: @JoaoCampos89, @gabririgo Advisor: @mintcloud Twitter: https://twitter.com/0xCommunityDAO Open Funding Opportunities: Open Grant RFPs Discord: https://discord.gg/d3FTX3M