Income factors for consideration

Listing the different income factors that will be considered for each income approach

The methodology used for this approach comparison is documented separately.

Short term income potential

• Description - A new Web3 ecosystem can benefit from generating income in the short term that can help with funding the development of infrastructure, protocols and applications. Funding for these types of initiatives should help with creating more reasons for people to start using the network.

• Maximum score - 5, Very important. If a network is unable to generate enough initial demand there is a risk that the fees generated from any network transactions will not be sufficient to pay for the operational costs of the nodes that maintain the network.

• Scoring questions - What immediate income could become available due to this income approach? How fast could that income become available?

• Scoring - High income potential is good (Score - 5). Low income potential is bad (Score - 1).

Long term income potential

• Description - A Web3 ecosystem that wants to become sustainable over the long term will want to think about how the network is going to be maintained and improved and how it will be able to respond to a changing environment.

• Maximum score - 5, Very important. Treasury income could play a vital role in determining whether a Web3 ecosystem is successful and sustainable over the long term. A Web3 ecosystem would likely benefit from a long term solution for generating income that can help with paying for any maintenance and improvement efforts.

• Scoring questions - What is the long term income potential of this approach? Is the income reliable? Does it scale as the network grows?

• Scoring - High income potential is good (Score - 5). Low income potential is bad (Score - 1).

Incentive complexities

• Description - How income is generated for the treasury could impact the overall complexity there is in generating income. The income approach could result in incentives that negatively impact what people contribute.

• Maximum score - 5, Very important. Web3 networks will need to be maintained and improved over the long term. The income approach could generate undesirable incentives that negatively impact the income potential for the ecosystem.

• Scoring questions - How complex is it for income to be generated for the treasury? Who is contributing towards the treasury and what incentives could these actors have? Are there any free-rider problems due to the approach being adopted?

• Scoring - Low complexity is good (Score - 5). High complexity is bad (Score - 1).

Malicious actor risks

• Description - How treasury income is generated could create opportunities for bad actors to take advantage of the adopted income approach.

• Maximum score - 5, Very important. Malicious actors could attempt to exploit the systems and processes available in an ecosystem for personal gain or alternatively could be trying to just harm the network. How a treasury generates income will be an important area of concern to consider how a malicious actor could exploit that income source.

• Scoring questions - How easy is it for a malicious actor to get a larger amount of influence in the ecosystem? How could these actors influence the treasury decisions and how income is used? How could these actors benefit from that influence on decisions to benefit themselves or to harm the network?

• Scoring - Low risk is good (Score - 5). High risk is bad (Score - 1).

Transaction deadweight loss

• Description - How income is generated for the treasury could cause transaction deadweight loss. This would mean reducing the amount of transactions that get created due to the income approach.

• Maximum score - 5, Very important. Causing transaction deadweight loss could be problematic for a network that is competing with multiple other networks. The ecosystem will need to make sure it is as attractive as possible to maintain a steady or growing amount of transaction volume.

• Scoring questions - How could the income approach cause transaction deadweight loss? What are the implications of that loss?

• Scoring - Low amount of transaction deadweight loss (Score - 5). High amount of transaction deadweight loss (Score - 1).