A week ago, Arca (a digital asset investment firm) submitted a proposal to turn on the fee switch for Blur via Blur governance. Let me summarise what’s happening and share my thoughts.

Essentially, they propose that Blur:

• Implement a 1% base fee on all trades

• Use the fees to buy back BLUR and burn it

• Implement a fee discount based on the amount of BLUR held

The impetus for this is that BLUR token today is essentially useless (no value accrual mechanism) and this has led to a relentless bleed in token price. When S2 ends in exactly 1 month (20 Nov), there will be another 300M tokens unlocked. If nothing is done to create value for the token soon, the fear is another drop in token price will chase farmers away from the platform, leading to a downward spiral in liquidity and users.

I was concerned about this, so I responded on the forum, highlighting how I think flipping the fee switch could provide short-term support to BLUR token price ($600K – $1M monthly buy pressure) but it would be at the expense of Blur’s competitiveness. And that if we take a long-term view to Blur as a business, it would be a poor time to turn on fees because users are very sensitive to fees in this bear market.

It’s been a week since the fee switch change was proposed, and there were just 11 responses and 12 upvotes on the governance forum. I actually expected a bigger debate, and this suggests to me that there is very little momentum or interest to do so among the community.

Why so?

It highlights the tension between tokens & equity when both co-exist. Tokens have a much broader holder base whereas equity is concentrated in the hands of a few people/entitites. Where does cash flow and profits value accrue to — token or equity? It gets confusing when there is no clear lineation and at some point this needs to be resolved.

In the Blur case, equity holders have little vested interest to participate in this discussion and are comfortable letting things be status quo. After all, they are in it for the long term and flipping on the fee switch at this time is positive for the token but negative for the business — since Blur is well capitalised and doesn’t need the cashflow now.

Side note on token utility: IMO there are several ways to create utility e.g. fee rebates, curation fee (where NFT teams can stake tokens to boost their visibility on the marketplace). but here they are minor relative to the demand generated by the fee switch + buyback.

There are also ways to reduce immediate sell pressure e.g. staking + locking to get access to rewards/rev share/voting power that could be considered.