LIP- 23 Turn on Protocol Fees For Free Collects

[levychain]

Abstract

This proposal explores the potential benefits and considerations for Lens Protocol in adopting a fee structure for minting activities on its platform, akin to the model used by other protocols and platforms like Zora, Mirror, Manifold, Sound, and many others.

This approach involves a minimal network fee for each NFT minted, part of which is shared with the creator deploying the contract.

By analyzing the impact of integrating a similar fee structure within Lens Protocol, this proposal highlights how such a model could generate significant revenue streams for the protocol and its creators, thereby enhancing the ecosystem's value and sustainability.

Motivation

The exponential growth of the NFT market has underscored the need for sustainable economic models that benefit creators, curators, and builders.

While Lens Protocol has successfully established a decentralized platform for creators to share their work, the absence of a minting fee structure represents a missed opportunity for revenue generation and creator incentivization.

By examining networks like Zora's implementation of protocol rewards, this proposal advocates for a strategic evaluation of how a similar model could be adapted to fit Lens Protocol's unique ecosystem, ensuring its long-term growth and the prosperity of its creators.

Pros and Cons

Pros

1. New Revenue Streams: Implementing minting fees could unlock new revenue channels for Lens Protocol, ensuring a more sustainable economic model less reliant on external funding or speculative asset prices.
2. Creator Incentivization: By sharing some of the minting fees with creators, the protocol incentivizes high-quality content creation, attracting more users and enhancing the network's vibrancy.
3. Market Alignment: Adopting a fee structure aligns Lens Protocol with prevailing market practices, making it competitive while normalizing the costs associated with onchain transactions.
4. Platform Security and Quality: Fees can deter spam and low-quality content, as creators will be more deliberate about what they mint, thus maintaining high standards across the platform.

Cons

1. User Adoption Barrier: Introducing fees could potentially deter new users and creators from joining the platform, especially those unfamiliar with the value proposition of blockchain-based monetization.
2. Implementation Complexity: Adjusting the protocol to accommodate a new fee structure may require significant technical resources and adjustments to existing contracts and user interfaces.
3. Market Volatility: The reliance on crypto for fees introduces exposure to market volatility, potentially affecting the predictability of revenue and incentives.
4. Decrease in Free Mint Volume: Introducing a transaction fee may reduce the volume of free mints, as creators and users face additional costs, potentially impacting the platform's overall engagement and growth.

Rationale

Proposing a fee-based minting model for Lens Protocol aims to create a self-sustaining ecosystem that rewards creativity and contributes to the protocol's long-term viability.

Drawing from other protocol success, such a model promotes a healthy economic environment and aligns the interests of creators and the platform.

By carefully balancing the fee structure to ensure affordability while providing tangible benefits to creators, Lens Protocol can enhance its value proposition, driving further adoption and innovation within the web3 space.

Case Study Analysis

From May 2022 to November 2023, Lens Protocol witnessed significant engagement, with nearly 4.4M posts collected. Dune source.

By applying a hypothetical scenario where Lens Protocol had implemented a minting fee of 0.0007 ETH per post throughout this timeframe, we uncover substantial economic benefits for both the protocol and its creators.

Given the total posts collected, implementing this fee structure would have collected approximately 3k ETH in protocol fees. Spreadsheet source

This figure is based on directly applying the .0007 ETH fee to the total posts collected.

With Ethereum's price at $4,000, these protocol fees translate to approximately $12.3M.

If we consider a model where creators receive half of these fees as part of their incentive and reward for content creation, this arrangement would yield creator earnings of around $6M.

Applying a similar split to Zora:

• Creator: 50%
• Lens Protocol: 20%
• Creator Frontend Fee (App): 15%
• Executor Frontend Fee (App): 15%

This analysis showcases the potential for significant financial benefits and highlights the model's effectiveness in distributing wealth more equitably within the ecosystem.

Such financial outcomes underline the broader implications of integrating a minting fee structure within Lens Protocol.

Beyond the immediate revenue generation, this approach encourages a more sustainable economic model that values creator contributions, fostering a richer, more vibrant platform ecosystem that motivates creators to produce engaging and valuable content.

Conclusion

Integrating a minting fee structure within Lens Protocol presents a compelling opportunity to enhance the platform's economic sustainability while empowering its creators.

Drawing inspiration from other successful models, this proposal advocates for a balanced approach that considers the interests of all stakeholders.

Implementing a fee mechanism that incentivizes quality content creation ensures a steady revenue stream.

It marks a significant step forward in the evolution of Lens Protocol, setting a new standard for value exchange and creator compensation.

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[0xchristinab]

I support this LIP.

While fees may get driven down to zero longer term, its a great opportunity for the protocol to experiment with the current standard of applying a fee to free collects and going from there adjusting wherever market standard goes.

Ultimately end goal is a healthy ecosystem of sustainable monetization for all. Protocol fees allow for this.

[jacvaca]

this, imho, is building for the future.

as a creative who has benefitted from this structure in other platforms like zora & mirror, I support this proposal as part of a sustainable revenue generation model on lens.

web3 consumers are accustomed to a small fee, and it furthermore signals appreciation for the value generated on the platform by the creator.

on the other side, where the fees may be seen as a deterrent is worth considering, though with transparency, agency, & education should be emphasized in communications.

[EthWarrior]

Supportive of the proposal as well. Seems like a no brainer at this point given how much similar models with small fixed minting fees are yielding fees to all stakeholders.

[sealaunchxyz]

In favour of a small fixed fee for free mints.

This is an effective way for:

1. increase protocol financial sustainability;
2. align incentives for users that create mass distributed mints at a low price,
3. provide an additional revenue stream for Apps and other market participants.

Some additional thoughts:

• Fee value: When Zora and Sound.xyz introduced Protocol Rewards, minting fee was equivalent to $1,5 per mint. With the increase in ETH price, now it's closer to the double of this amount. The fee should be upgraded periodically to avoid a very high fee relative cost.

• Having a fixed fee for free collects and a % fee paid mints creates an unbalanced fee structure where the following may happen:

  • Creator sets the price to zero, the collect costs $2 (collect fee) per mint. Creator receives $1.
  • Creator sets the fee to paid with a price of $2 per mint. Creator receives $1,9.

• If the % fee is paid in any token, how is it for the fixed fee?

Considering the above, in our view the best option would be to have also a fixed fee for paid collects (in a smaller amount), similar to Zora and Sound (see below) and consider an option to pay in alternative tokens.

Sound

Free Mints
Artist: 0.000555 ETH
Platform: 0.000222 ETH

Paid Mints
Artist: 0.000222 ETH + 100% of sales proceeds
Platform: 0.000555 ETH

Zora

Protocol Rewards split on mints with no list price:
TOTAL MINT FEE: 0.000777 ETH
Creator Reward: 0.000333
Create Referral Reward: 0.000111
Mint Referral Reward: 0.000111
Zora Fee: 0.000111
First Minter Reward: 0.000111

Protocol Rewards split on NFTs priced in ETH
TOTAL MINT FEE: 0.000777 ETH
The creator keeps 100% of earnings from sales
Create Referral Reward: 0.000222
Mint Referral Reward: 0.000222
Zora Fee: 0.000222
First Minter Reward: 0.000111

Protocol Rewards Split on NFTs priced in alternative tokens
The creator keeps 95% of earnings from sales
TOTAL MINT FEE: 5% of the listed purchase price
Create Referral Reward: 28.57% of the Mint Fee
Mint Referral Reward: 28.57% of the Mint Fee
Zora Fee: 28.63% of the Mint Fee
First Minter Reward: 14.23% of the Mint Fee

[bigint]

I fully support this Lens Improvement Proposal as it stands. The outlined fee structure and distribution model are well-thought-out and promise a balanced approach to revenue generation, creator incentivization, and platform sustainability. It's a solid step forward for the Lens Protocol ecosystem.

Hope this will get enough votes and executed faster 🤞🏼

[sasicodes]

Thanks @levychain for the proposal. I'm all for this proposal, I believe this minting fee structure could be a game-changer for the Lens ecosystem. I'm excited to see where this goes and I hope the community rallies behind it. Let's make it happen!

[harshvardhan-shah]

I'm in favor of this proposal.

Revenue share brings sustainability to the project and protocol. It won't deter users from collecting posts, as it is a common practice on projects like Zora.
Revenue generated will further improve the on-chain infrastructure and seamless experience on the frond-end and back-end.

[vicnaum]

Here are my thoughts about given Pros and Cons

Pros

1. New Revenue Streams: Implementing minting fees could unlock new revenue channels for Lens Protocol, ensuring a more sustainable economic model less reliant on external funding or speculative asset prices.

Agree, if it works.

2. Creator Incentivization: By sharing some of the minting fees with creators, the protocol incentivizes high-quality content creation, attracting more users and enhancing the network's vibrancy.

I would put it as attracting more creators, because they will be the primary beneficiaries of Mint Fees. Users, on the contrary - will suffer from it, because they will have to pay, and hold money on their balance to collect, but more about that below (see gasless)

3. Market Alignment: Adopting a fee structure aligns Lens Protocol with prevailing market practices, making it competitive while normalizing the costs associated with onchain transactions.

Need more confirmation that this is the prevailing market practices, and Zora/Sound being the same market as Lens Protocol.

4. Platform Security and Quality: Fees can deter spam and low-quality content, as creators will be more deliberate about what they mint, thus maintaining high standards across the platform.

Here I don't understand: "as creators will be more deliberate about what they mint" - are the fees taken from creators, or from collectors? Cause I assumed the fees are taken on minting of NFTs by a consumer, and that doesn't relate to the amount of spam & quality of the content. Might even have adverse affects actually (cause creators are incentivised to make every post collectible, as even free collects will give them revenue)

Cons

1. User Adoption Barrier: Introducing fees could potentially deter new users and creators from joining the platform, especially those unfamiliar with the value proposition of blockchain-based monetization.

We were fighting so hard to make the whole experience frictionless and gasless, so users can use the protocol without having to hold any ETH or ERC20 tokens in their wallet. Introduction of Mint Fees for Free mints means we entirely sacrifice gasless collects and create a barrier here.

2. Implementation Complexity: Adjusting the protocol to accommodate a new fee structure may require significant technical resources and adjustments to existing contracts and user interfaces.

Agree. This is, most of all, a strategic decision, where we first need to decide on several things, most important of which is:

• Does this have to be a Lens Protocol feature (aka you cannot cheat the system because it's part of the protocol), or just a collect module feature (which can be by-passed)?

If this needs to be the Lens Protocol feature - then it might be extremely hard to implement (talking about whole new protocol payments architecture, months of work), and a rabbit-hole of new questions opens. Also this would make the protocol more opinionated, which is a direction I personally disagree with.

Making it a collect module feature might work, but then it will be by-passable (because the protocol is open now, and anyone can create another collect module without these fees), which might now be actually a bad thing, giving users some optionality.

3. Market Volatility: The reliance on crypto for fees introduces exposure to market volatility, potentially affecting the predictability of revenue and incentives.

Can use USDC or native (MATIC) currency for the fees - they're not so volatile.

4. Decrease in Free Mint Volume: Introducing a transaction fee may reduce the volume of free mints, as creators and users face additional costs, potentially impacting the platform's overall engagement and growth.

This! That is my main concern. I haven't yet found any research that shows how introduction of Mint Fees affected the amount of Free Mints. And I feel that it might be a drastic decrease.

Is there any charts from Zora/Sound/etc which compare the amount of Free Mints before and after they've introduced the fees? We need to research this before making any important decisions.

5. This is an additional "con" from me: I dislike the dissonance between "Free Mint" charging a "Mint Fee". I know Zora and Sound do that, and justify this with paying for network fees, and rewarding authors, etc. But for me this just sounds like an oxymoron, and feels like some sneaky fine-print.

Case Study Analysis

...
Given the total posts collected, implementing this fee structure would have collected approximately 3k ETH in protocol fees. Spreadsheet source
...

Without any figures that analyse how the transition from completely free mint to a not-so-free mint affected the number of mints on Zora, Sound or other platforms (or any similar analysis of such effects) - the whole assumptions mentioned in Case Study don't have a solid ground underneath.

[iPaulPro]

Going on record as NOT supporting fees on FREE collects. If you don't want to sponsor those transactions, just allow the user to pay the gas. Adding a fee to a free collectible is confusing and seems antithetical to the value proposition of Lens.

[metatxn]

If you add a fee to a free collect call, it essentially becomes a paid call. Completely agree with @iPaulPro - it's better to let the user pay the gas fee directly rather than sponsoring the transaction.

To test this theory, we could stop sponsoring free collect transactions and observe if users are willing to pay the gas fee. IMO, this would likely lead to a decrease in the number of free collect calls.