ERC-7641: Intrinsic RevShare Token

An ERC-20 extension that integrates a revenue-sharing mechanism, ensuring tokens intrinsically represent a share of a communal revenue pool

Abstract

This proposal outlines an extension of the prevailing ERC-20 token standard, introducing a seamlessly integrated revenue-sharing mechanism. It incorporates a suite of interfaces designed to foster fair distribution of revenue among token holders while preserving the essential attributes of ERC-20. Central to this design is the establishment of a communal revenue pool, aggregating revenues from diverse sources. The token, in essence, embodies shares, affording holders the ability to burn their tokens and redeem a proportionate share from the revenue pool. This innovative burning mechanism guarantees that, when the revenue pool is non-empty, the token’s value remains at least commensurate with the share of the revenue pool. Additionally, in periodic intervals, token holders can claim a portion of the reward, enriching their engagement and further enhancing the token’s utility.

Motivation

Revenue Sharing for Token Holders

This proposal standardized an Intrinsic RevShare (revenue-sharing) model, allowing users to claim rewards periodically to ensure the efficiency of liquidity. This standard can inherently offer a clear path to long-term benefits for holders with revenue sharing, achieving a more sustainable token model by rewarding holders.

With the inheritance of ERC-20 functionalities, token holders enjoy flexibility in trading tokens on secondary markets, and an optional burning mechanism empowers them to actively contribute to a deflationary economic model while obtaining a proportional share of the revenue pool.

This approach also encourages active participation in open-source initiatives with a sustainable and multifaceted revenue-sharing ecosystem for Intrinsic RevShare token holders.

Funding for Any Project

This standard enables the tokenizing of all kinds of projects with revenue. This EIP introduces a new model for incentivizing contributions to open-source projects. It proposes the distribution of Intrinsic RevShare tokens to active contributors, creating a tangible asset reflecting project involvement.

Notably, it introduces a use case known as Initial Model Offering (IMO). Many open-sourced AI models face a challenge in monetizing their contributions, leading to a lack of motivation for contributors and organizations alike. This proposal seeks to empower open-sourced AI models and organizations by introducing Intrinsic RevShare token. In leveraging the token for IMO, open-sourced AI organizations can conduct fundraisings for essential funds to incentivize the ongoing development of AI models. Moreover, any project utilizing these open-source models contributes to the sustainability of the ecosystem by paying a designated fee to the revenue pool. This fee forms the basis of a revenue-sharing mechanism, allowing Intrinsic RevShare token holders to claim a proportionate share, thereby establishing a systematic and fair distribution mechanism. Importantly, this revenue-sharing feature serves as a guarantee for token holders, fostering long-term revenue benefits and encouraging sustained engagement in the open-source AI community.

Specification

The key words “MUST”, “MUST NOT”, “REQUIRED”, “SHALL”, “SHALL NOT”, “SHOULD”, “SHOULD NOT”, “RECOMMENDED”, “NOT RECOMMENDED”, “MAY”, and “OPTIONAL” in this document are to be interpreted as described in RFC 2119 and RFC 8174.

Every compliant contract must implement the IERC7641, and ERC-20 interfaces.

The Intrinsic RevShare Token standard includes the following interfaces:

IERC7641:

• Defines a claimableRevenue view function to calculate the amount of ETH claimable by a token holder at a certain snapshot.
• Defines a claim function for token holder to claim ETH based on the token balance at certain snapshot.
• Defines a snapshot function to snapshot the token balance and the claimable revenue token balance.
• Defines a redeemableOnBurn view function to calculate the amount of ETH redeemable by a token holder upon burn.
• Defines a burn function for token holder to burn tokens and redeem the corresponding amount of revenue token.

pragma solidity ^0.8.24;

/**
 * @dev An interface for ERC-7641, an ERC-20 extension that integrates a revenue-sharing mechanism, ensuring tokens intrinsically represent a share of a communal revenue pool
 */
interface IERC7641 is IERC20 {
    /**
     * @dev A function to calculate the amount of ETH claimable by a token holder at certain snapshot.
     * @param account The address of the token holder
     * @param snapshotId The snapshot id
     * @return The amount of revenue token claimable
     */
    function claimableRevenue(address account, uint256 snapshotId) external view returns (uint256);

    /**
     * @dev A function for token holder to claim ETH based on the token balance at certain snapshot.
     * @param snapshotId The snapshot id
     */
    function claim(uint256 snapshotId) external;

    /**
     * @dev A function to snapshot the token balance and the claimable revenue token balance
     * @return The snapshot id
     * @notice Should have `require` to avoid ddos attack
     */
    function snapshot() external returns (uint256);

    /**
     * @dev A function to calculate the amount of ETH redeemable by a token holder upon burn
     * @param amount The amount of token to burn
     * @return The amount of revenue ETH redeemable
     */
    function redeemableOnBurn(uint256 amount) external view returns (uint256);

    /**
     * @dev A function to burn tokens and redeem the corresponding amount of revenue token
     * @param amount The amount of token to burn
     */
    function burn(uint256 amount) external;
}

Optional Extension: AltRevToken

The AltRevToken extension is OPTIONAL for this standard. This allows the contract to accept other ERC-20 revenue tokens (more than ETH) into the revenue sharing pool.

The AltRevToken extension

• Defines a claimableERC20 function to calculate the amount of ERC-20 claimable by a token holder at certain snapshot.
• Defines a redeemableERC20OnBurn function to calculate the amount of ERC-20 redeemable by a token holder upon burn.

pragma solidity ^0.8.24;

/**
 * @dev An optional extension of the ERC-7641 standard that accepts other ERC-20 revenue tokens into the contract with corresponding claim function
 */
interface IERC7641AltRevToken is IERC7641 {
    /**
     * @dev A function to calculate the amount of ERC-20 claimable by a token holder at certain snapshot.
     * @param account The address of the token holder
     * @param snapshotId The snapshot id
     * @param token The address of the revenue token
     * @return The amount of revenue token claimable
     */
    function claimableERC20(address account, uint256 snapshotId, address token) external view returns (uint256);

    /**
     * @dev A function to calculate the amount of ERC-20 redeemable by a token holder upon burn
     * @param amount The amount of token to burn
     * @param token The address of the revenue token
     * @return The amount of revenue token redeemable
     */
    function redeemableERC20OnBurn(uint256 amount, address token) external view returns (uint256);
}

Rationale

Revenue Sharing Mechanism

We implement a revenue sharing mechanism wherein any token holder can claim a proportional share from the revenue pool. To ensure regular and transparent revenue distribution, we have incorporated the snapshot method, capturing both the token balance and the associated claimable revenue token balance. Periodic invocation of the snapshot method, corresponding to distinct revenue-sharing processes, is required. During each snapshot, token holders are empowered to claim a proportionate share from the revenue pool, creating a systematic and equitable distribution mechanism for participants.

snapshot interface

We specify a snapshot interface to snapshot the token balance and the claimable revenue token balance. This functionality ensures correctness in tracking token holdings, facilitating a transparent record of each token portfolio. Regular invocation of the snapshot function is essential to maintain up-to-date records. The snapshot interface returns a unique snapshotId, allowing access to the corresponding token balance and claimable revenue token balance associated with that specific snapshot. This systematic approach enhances the correctness and reliability of historical data retrieval, providing users with comprehensive insights into their token and revenue token balances at different points in time.

claimableRevenue interface

We specify a claimableRevenue interface to calculate the amount of ETH claimable by a token holder at a certain snapshot. We will share the revenue between two consecutive snapshots. As an example in our reference implementation, assuming that the revenue between two snapshots is R, we specify a revenue sharing ratio p, ranging from 0%-100%, and we share the revenue of pR to different token holders according to the token ratio. In this example, the amount of ETH claimable by a token holder with amount tokens at a certain snapshot is pR * amount / totalAmount , where totalAmount denotes the total amount of ERC-7641 token. Noted that the remaining revenue of (1-p)R will be retained in the revenue pool, and we can take out this part of revenue through burning.

claim interface

We specify a claim interface for token holder to claim ETH based on the token balance at certain snapshot. Each token holder can only claim revenue at a certain snapshot once, ensuring a fair and transparent distribution mechanism.

Burning Mechanism

We implement a burning mechanism wherein any token holder can burn their tokens to redeem a proportional share from the revenue pool. This mechanism serves as a guarantee, ensuring that the value of the token is consistently greater than or equal to the share of the revenue pool, promoting a fair and balanced system.

redeemableOnBurn interface

We specify redeemableOnBurn interface to calculate the amount of ETH redeemable by a token holder upon burn. It is defined as a view function to reduce gas cost. As an example in our reference implementation, the amount of ETH redeemable, i.e., redeemableETH by a token holder with amount of token to burn is

redeemableETH = amount / totalSupply * totalRedeemableETH

where totalSupply denotes the total supply of ERC-7641 token, and totalRedeemableETH denotes the total amount of ETH in the burning pool.

burn interface:

We specify burn interface for token holder to burn tokens and redeem the corresponding amount of revenue token. A token holder can burn at most all tokens it holds. This burning process leads to a reduction in the total token supply, establishing a deflationary economic model. Furthermore, it is important to note that tokens once burned are excluded from participating in any subsequent revenue sharing.

Backwards Compatibility

This standard is backward compatible with the ERC-20 as it extends the existing functionality with new interfaces.

Test Cases

The reference implementation includes sample implementations of the interfaces in this standard under contracts/ and corresponding unit tests under test/.

Reference Implementation

• ERC-7641

Security Considerations

Deflationary Economic Model

The introduction of the burning mechanism in this standard signifies a shift towards a deflationary economic model, which introduces unique considerations regarding security. One prominent concern involves the potential impact on token liquidity and market dynamics. The continuous reduction in token supply through burning has the potential to affect liquidity levels, potentially leading to increased volatility and susceptibility to price manipulation. It is essential to conduct thorough stress testing and market simulations to assess the resilience of the system under various scenarios.

Spam Revenue Tokens

The extension of AltRevToken with the ability to set up different revenue tokens introduces specific security considerations, primarily centered around the prevention of adding numerous, potentially worthless tokens. The addition of too many spam (worthless) tokens may lead to an increase in gas fees associated with burning and claiming processes. This can result in inefficiencies and higher transaction costs for users, potentially discouraging participation in revenue-sharing activities.

A robust governance model is crucial for the approval and addition of new revenue tokens. Implementing a transparent and community-driven decision-making process ensures that only reputable and valuable tokens are introduced, preventing the inclusion of tokens with little to no utility. This governance process should involve community voting, security audits, and careful consideration of the potential impact on gas fees.

Copyright

Copyright and related rights waived via CC0.

Citation

Please cite this document as:

Conway (@0x1cc), Cathie So (@socathie), Xiaohang Yu (@xhyumiracle), Suning Yao (@fewwwww), Kartin <kartin@hyperoracle.io>, "ERC-7641: Intrinsic RevShare Token [DRAFT]," Ethereum Improvement Proposals, no. 7641, February 2024. [Online serial]. Available: https://eips.ethereum.org/EIPS/eip-7641.