The CSRfi Meta

Introducing.. The CSRfi meta! The intersection of Contract Secured Revenue (CSR) and DeFi!

We believe CSR has huge implications for DeFi protocols, and has the ability to affect traditional product flywheels in a very interesting way.

Firstly, what do ‘traditional’ DeFi product flywheels look like? Users create value via usage, and this value is captured directly by the protocol with revenues, or indirectly via the governance power of its token, or even a mixture of both.

pre-CSR flywheels
pre-CSR flywheels

Revenue is sometimes shared with users or tokenholders to help spin the flywheel, and is sometimes retained by the team as profit or as money to pay operating expenses with.

This is fine, and better yet…it works! This is how all the most successful protocols operate (with various exceptions for non-revenue extracting public good). So how can CSR improve this?

New Flywheels

CSR creates more value for the stakeholders within a various product micro-ecosystem at the expense of everyone else involved in the wider ecosystem. This occurs via dilution because CSR essentially stops some of the burning that would otherwise take place. This retained value can be: captured in the token, given to users as rewards, retained as revenue to help pay operating costs (and therefore pass these lower costs to users), used to fund expansion and partnerships, etc. etc.

Basically its all the use cases of having an extra source of revenue: you can do whatever you want with it. The point here is that this extra revenue can be captured with minimal extra effort, and can be put to use in exciting ways.

Here is a high-level view of what CSRfi flywheels look like.

CSRfi flywheels
CSRfi flywheels

Chains that adopt CSR will likely see an explosion of interesting use cases. The design space for CSRfi is huge, and we have barely scratched the surface.

Freeloaders in disbelief

Ultimately, these mechanism create a sytem where value is recaptured and redirected to those that directly participate in the creation of this value. In traditional blockchain ecosystems, gas is either: burned, sent to validators, or sent to a sequencer. Therefore, genuine users spending this gas are losing out, while freeloaders who just hodl and otherwise provide no value within the ecosystem are gaining marginal advantages (especially if gas is burned).

With CSR, redirecting value to relevant parties directly rewards them for creating this value.

csrTokens are one of the first interesting economic experiments in CSR, and the first legitimate CSRfi application. We are excited to continue building and see what the near future brings for CSRfi. Onwards!

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