Impose a 2.5% royalty on secondary market sales of names

I think this is a fantastic idea.

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Don’t think we can redistribute royalties to holders. It might violate our constitution and perhaps run into compliance issues since it would look like a dividend. Also don’t think it would be a good look, although I understand what you’re getting at in terms of rewarding community.

I’m fine with taking our time on this proposal.

This is not a new problem. In practice, it’s too inconvenient for the vast majority of sellers to try to circumvent the royalties — it’s too much of a pain and shrinks the buyer pool. Opensea still gets a ton of volume even thought they enforce royalties. Don’t think it’s a deal-breaker if a small % get around the royalty. It’s just supposed to be a general disincentive.

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I support the royalty but would like to see vote on % amount. 0%, 1%, 2%, 2.5%, 5%

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If taxes are any indication, people will find a way to not pay, such as the “free transfer” option which in my opinion is a must. I don’t think this should be baked into the protocol.

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just wanted to note here that my instinct is to oppose this, but that’s people’s comments in the replies might be changing my mind. I agree this shouldn’t be for revenue generation, we don’t need it. As to whether it’ll actually substantially discourage squatting, it don’t think it’ll have a big effect. I guess we could just think of it as a secondary market / squatting tax, just one additional tool among many to discourage squatting. I’m also okay not rushing these things, there’s no urgency to getting something like this passed early in the DAO history and we have several more urgent things to be considering and voting on.

In any event, I wanted people to know I’ve read this and am thinking about it. Will need to think about it more.

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I agree that it should be viewed as one tool of many to discourage squatting. It’s obviously not a panacea but its effect will be > 0. The important point is that the direction of the incentive is correct, even if the magnitude is not especially large. As the market matures in the coming years and as flippers operate on tighter margins, the effect may be more impactful down the road.

I am not in favor.

Primarily because the the 2.5% proposed is not substantive enough to discourage squatting, but also because this appears to track the NFT community’s pricing patterns for the sake of conformity.

I do not believe 2.5% will be effective because it’s applied on the backend of the ownership (at point of resale). In alignment with economic theory, the cost will only be passed on to the purchasers, therefore negating it’s intended purpose.

Further, if the price was greater than 2.5%, (substantive enough to be effective), and we maintain the assumption that the royalty burden will be passed on to the purchaser, it may decrease the amount of additional revenue generated by decreasing the volume of secondary market sales. Deadweight loss.

This needs to thought about more carefully… If a royalty is applied to disincentivize squatting, a calculated figure with market-based reasoning should be applied.

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While I feel it’s fair, especially given OpenSea is getting their cut, I just wonder if it’s possible to do this retroactively. Would there be negative PR and criticism given this was not communicated when people acquired their domains?

On the other hand, assuming the same communities received airdrops, and have assigned their delegates with the right to vote on their behalf, might be doable, if the DAO votes it.

Just a thought for discussion.

Is there any way we can combine some sort of time delay of .eth domain release directly proportional to the secondary market value of the .eth domain being transferred? You secure a faster release by paying the community tsy a sliding scale by time % of the secondary value.

We could start at 90% and the opening secondary transfer delay 10 years and I’ll posit that we’ll see the value of squatted domains plummet down to a cheaper floor.

This could overly penalize squatters which might lead to adandonment or OTC transfer markets, which is also not what we want.

I’ve thought about this since this popped up.

Basically against any sort of royalty idea since it’s easy to get around.

I think that to charge any sort of fees, it would basically have to apply to regular transfers also. Maybe an additional layer of fees before new reverse address can be set? Seems annoying, dunno.

Working around the royalty will be too much friction for 99%+ of the population. The fact that OpenSea volumes are so high is a testament to this. If a domain is selling for a really high price then perhaps a seller would solicit buyers via twitter/discord and execute the deal via nfttrader or a similar service, but even that is questionable. To provide an example, the BAYC floor is around 50 eth and 85% of transactions still run thru OpenSea even though you can save 5% (2.5% BAYC + 2.5% OpenSea) or over $11k by transacting outside of OpenSea. If the vast majority of sellers/buyers are not trying to skirt royalties on a 50+ eth NFT transaction then even less will bother with domain sales that are primarily less than a few eth.

I don’t think that royalties should be imposed on transfers; that is way too intrusive.

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This is pretty much how the current system works. When a name is released, registration carries a $2000 premium, which diminishes to 0 over the next 28 days.

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If this is your primary objective, what are your thoughts on raising the price for names of 5 characters and greater?

I don’t like the idea of raising the price for 5+ character domains because it will impact people who just want to buy a domain for themselves. A royalty only impacts resellers, which are the intended targets.

The effective price is already much higher than $5 due to gas fees. I don’t see any evidence that an increase would reduce squatting more than legitimate registrations.