Canto: L1 With Fee Sharing for Smart Contracts

GM folks 👋🏻 - happy Wednesday. Hopefully, the day is not too humpy for you today 🐫. Prices dipped overnight with Bitcoin and Ethereum trading at $22,700 and $1,550 respectively, a level that needs to hold, if we want further continuation to the upside 📈

In Today's Email:

• What Matters: Coinbase's Chief Product Officer $105M payday 💵

• Case Study: Canto layer 1 fee sharing mechanics 👨‍🔧

• Features: Fantom vault ecosystem fund 🔐

WHAT MATTERS

Coinbase CPO Leaving With a $105M Payday

State of play: Surojit Chatterjee, the former Google Executive turned Coinbase's Chief Product Officer is reported to be leaving his job with a $105M paycheck on February 3. Chatterjee made his money from stock sales according to disclosures filed with the SEC. His reign at Coinbase started in February 2020, so it boils down to $35M per year not counting his close to $1M annual salary 🤯

• Crypto Twitter is unsurprisingly critical of the news. Chatterjee was responsible for Coinbase's NFT marketplace launch, as the company tried to compete with market leader OpenSea. The product flop. It registered 2,000 times less in trading volume compared to OpenSea.

Why it matters: What Chatterjee did is not inherently wrong, but it shows the mismatched dynamics between risk and reward in our corporate environment. Expensive compensation packages are given to individuals with proven track records and proximity (in Silicon Valley), even if their work might not always show for it.

• Chatterjee's total compensation package is $646M. It was supposed to be for a five-year contract but was cut short as he's leaving next month. Stop for a moment and think. Did Coinbase really have no other options to spend those $646M to build a successful NFT marketplace? You tell me 🤷

For reference, Ford's CEO's total compensation is $10.8M in 2021.

For builders: Be extremely careful about hiring. Even if you're not a multi-billion dollar publicly listed crypto giant, there are many cases in which middle-level managers or remote software developers that took on multiple jobs with short vesting schedules. These folks then dump their tokens within six months, leaving the projects' reputation tarnished and pocketing 6 figures in the process. Choose your teammates wisely ⚠️

For investors: Advising your portfolio companies' founders about talent recruitment and compensation is now more crucial than ever. In a bear market environment, it's the employers' market. Founders should no longer opt for paying 25-year-old Rust developers $400,000 per year. Such rates won't sustain your company.

CASE STUDY

Canto CSR Fee Sharing

State of play: Canto, a layer-1 blockchain focusing on DeFi, has implemented Contract Secured Revenue (CSR). CSR is a fee-splitting model whereby smart contract developers can earn a percentage of the transaction fees paid to the network when users interact with their smart contracts 💰

• Developers will receive NFTs that can be used to claim the smart contract fees via CSR. These NFTs are composable themselves, opening up new opportunities and avenues, such as using the NFTs as collateral for loans or combining it with other smart contracts.

• It also reduces regulatory risks because CSR enables the team behind the smart contracts to earn revenue from their work without extracting protocol fees or conducting any revenue-sharing mechanisms on the application layer.

In short, CSR enables a new way of thinking about tokenomics and how value flows through the base layer, application layer, and the team behind the protocol.

CSR is currently live on testnet. Canto plans to launch it on mainnet on January 26 if the governance proposals move forward without hiccups.

Our take: CSR is a refreshing implementation as layer 1 protocols try to differentiate themselves from one another. Increasing competition from the AppChain narrative also means that layer 1 protocols need to support dApps efficiently while not taking away the majority of the value generated by those dApps.

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FEATURES & GOVERNANCE UPDATE

Fantom Funding: Ecosystem Vault

Fantom has launched its ecosystem vault. In short, the vault is a community-driven and decentralized method to fund projects on the Fantom ecosystem. It's an on-chain fund financed by 10% of the transaction fees on Fantom. Builders can apply for funding by creating a forum post and a governance proposal with as much detail as possible, the KPIs, the amount being asked, and so on 🤝

• Fundings will be approved if the proposal receives at least 55% approval, with at least 55% of FTM stakers participating. Fantom is working with Llamapay to distribute the funding. For the initial launch, there will only be 5 projects receiving payments at any one time.

• Payouts will be received in streams, depending on the amount received. "For example, a governance proposal passes at 70% approval with more than 55% in attendance for Project X to receive 1,000,000 FTM from the Ecosystem Vault streamed over 4 months. The payments begin streaming at roughly 350 FTM per hour and end when the 4 months are over."

Why it matters: Adoption is the most foundational metric for an L1 ecosystem. By allocating a portion of transaction fees back to founders and developers, Fantom ensures that it will always invest in growing its ecosystem. It also further decentralizes the decision-making process from the original founders and core contributors.

Other notable feature updates:

• Masa Finance launches soulbound identity protocol.

• Pendle adopts revenue share tokenomics with vePENDLE.

• Canto introduces CSR fee sharing.

• Gemzy launches NFT vaults.

• Harpie launches on-chain 2FA.

QUICK BITES

• Genesis seeks creditors deal.

• MakerDAO backs plan to deposit $100M into Yearn Finance.

• BlockFi plans to sell Bitcoin mining machine-backed loans.

• FBI confirms North Korea hackers behind $100M Horizon Bridge hack.

• Gemini lays off more staff.

• Binance admits storing users funds with collateral.

• NYDFS reminds crypto custodian about commingling of funds.

• Wilshire taps FalconX for Digital Asset Indexes.

• France voted to ease crypto licensing regulation.

• EU Banks face stricter rules for crypto holdings.

MEME & NOTEWORTHY READS

• Pantera Capital's report on the year ahead 2023.

• a16z crypto's article on regulating web3 apps, not protocols part III.

• Kevin Sekniqi's article on building the next generation of exchanges.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.