A 15% share of all trading fees generated by the platform will be issued to token holders as a reward. Initially these rewards will be distributed every three months in Ether, but the frequency of issuance will increase as the volume of the exchange grows. Eventually, the aim is to reach a point where pay-outs can be made on a daily basis.
Where will the reward be sent?
To ensure that token holders receive the rewards, the tokens need to be kept in a wallet where the holders control the private key (such as MyEtherWallet), or hold them in the Dimensions platform wallet. Transparency is a vital component to bring trust to a system and Dimensions Network plans to implement cryptographic proof of trading volumes as well as a visual representation of accumulated rewards and the estimated pay-out date.
Why a share of trading fees?
The method of rewarding DST holders from a share of the trading fees is both simple and fair. Rewards based on the company’s profit may appear more desirable, but profit is a complicated dance between revenue, operating costs and taxation, and can easily be manipulated by accounting professionals. Large corporations often use complex structures to give the appearance of little to no profit in one tax jurisdiction, only to shift the profit to a tax friendly jurisdiction. Smaller companies are equally incentivized to reduce their tax exposure, by decreasing their reported profit. This can be achieved in any number of ways, and the reported profit may not give a true indication of the strength of the underlying business.
15% of trading fees is a balance between rewarding token holders and ensuring the business remains profitable. It also keeps costs of operation competitive and is a realistic and sustainable rewards percentage.
Snapshot of trading volume on current market
Rewards will grow as the user base and trading volumes grow. The below table shows a snapshot of approximately 24 hours trading volume from the top 5 exchanges by volume (Data from coinmarketcap.com – May 2018).
A low‐end estimate of 0.1% has been made for the average trading fee paid by customers. The final column shows what the daily rewards would be if they were to distribute 15% of their trading fees to token holders. The appetite for regular cryptocurrency trading is known, and this is growing significantly as awareness grows in the general population, and amongst investment and trading professionals. The appetite for derivative and margin products is less clear, but will increase over time with investor sophistication.
Dimensions Network Growth Projection
As a conservative estimate, Dimensions Network predicts the following reward issuance to DST token holders, highlighted in blue:
The above analysis shows varying growth rates over the next four years and it assumes that certain conditions are met, including a fixed trading fee of 0.1% (This might start higher and decrease over the years as competition increases), 100M in daily trading volume after the 1st year of operation (that is on par with CoinEgg and bitFlyer at the time of writing), a 100% year on year growth in trading volumes, and equalisation of fees between the centralised and decentralised trading platforms.
In order to make these calculations simple, a reward calculator can be found on the Dimensions Network website. It demonstrates what DST holders could earn as reward, should the exchange reach specific volumes (use the volume slider to change the volume). The calculator is based on 5000 ETH collected during the crowd sale.
From the information above it is clear how effective and profitable the cryptocurrency exchange model could be and holding DST is one way to be part of this new, exciting and rewarding ecosystem.