All On-board - The Daily Gwei #387
Make sure you don't miss the train to subsidization-ville.
We’re all well aware that the great migration to layer 2 Ethereum is currently happening with users leaving their layer 1 “homeworld” to find greener (and cheaper) pastures at layer 2. Though there’s one rather large kink with this - users still have to pay the exorbitant layer 1 gas fees to move their funds over to layer 2. Of course, there are various ways around this (centralized exchange bridging, direct fiat on-ramps, batched onboarding etc) but I am a big fan of dYdX’s new initiative of subsidizing gas costs for their users.
The reason this subsidization makes sense for dYdX is because it’s basically just a new user on-boarding cost that they’ll make back in some way on their platform whether that’s via trading fees or liquidation fees or something else. Though I don’t think this is in any way parasitic to the user - a new user gets on-boarded for free to try out a brand new product and they’re just paying the normal trading fees that any other user pays to use the exchange. This way, dYdX potentially gets a new long-term active user for free or at little cost while the user gets a seamless on-boarding experience.
It’s going to be interesting to see if any of the generalized layer 2 platforms (Arbitrum, Optimism and others) start subsidizing on-boarding costs or if they’ll just rely on centralized exchanges to save users from layer 1 gas fees. If I had to guess, I’d say that these platforms will go with the latter option but, funnily enough, they may inadvertently end up subsidizing the gas costs for people when they issue their tokens and do an airdrop. This is because people are on-boarding to these layer 2 platforms right now with the intent of making sure they are eligible for a future airdrop - any gas costs incurred by doing this is just the “cost of doing business” and will most likely be covered by the value of airdropped tokens.
There are other ways costs (gas or otherwise) have been subsidized for users over the last year or so from 0x offering gasless trades (making up the cost on the actual trade), Polygon airdropping a little MATIC to new users who bridge over from Ethereum (to pay for fees on the PoS network), 1inch offering gas kickbacks via gas tokens (this method is now dead though) and many others. I’m sure we haven’t seen the last of these subsidizations either because they are a very easy and quick way for products/services to on-board new users and grow their market-share - hell, liquidity mining itself is just this type of subsidization taken to the extreme!
Most of these subsidizations tactics are just taken from the web2 world and ported into web3 but the some that are unique to crypto (such as liquidity mining and gasless trading) always fascinate me. For better or worse, the crypto ecosystem seems like it will keep coming up with new ways to both subsidize on-boarding costs for users as well as creating incentivizes for them to not care about spending a little (or a lot) of money to play around with a product or service.
Have a great weekend everyone,
Anthony Sassano
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All information presented above is for educational purposes only and should not be taken as investment advice.