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# System prepended metadata

title: '[PRD] Builder Protocol Rewards & Fees'

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# Builder Protocol Rewards & Fees (L2 DAOs only)

### Problem statement

At launch, BuilderDAO was seeded 1000 ETH via a Nouns proposal. With the DAO's burn significantly outpacing its auction revenue, it has become increasingly critical for the DAO to find a sustainable revenue model. Enter Builder Protocol Rewards in v2.

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### **Impact**

*Note: This rewards model is only applicable to L2 DAOs. It was clearly stated in the original Nouns Proposal #167 that v1 Nouns Builder and Protocol will be entirely free.*

Builder Protocol Rewards is a rendition of the Zora Protocol Rewards model. Auction revenues will be taxed a %percentage fee that is split three potential ways (see next section for more info).

Ultimately, this expansive fee model should give BuilderDAO a clear and sustainable path towards revenue generation. 

- Potential high revenue impact
- Interest alignment with DAOs
- DAO members and bidders do not have to pay extra as the fee is taxed to DAOs


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### **Functional requirements**

2.5% split three ways:
1. BuilderDAO Rewards
2. Third-party client rewards (if not set, this will go to BuilderDAO)
3. DAO founders' rewards (optionally set by DAOs, otherwise it goes to DAO treasury)



No major requirements from a UX standpoint because this does not affect the end user experience i.e. a %fee will be taken from DAO auction revenues with no impact to bidders and auction winners.


Logistics:
1. Controlled by BuilderDAO - can be switched on or off via a DAO proposal
2. The %fee is not applicable to auctions from v1 DAOs.
3. v1 DAOs can benefit from rewards by upgrading to v2 via a proposal
4. New DAOs created after v2 is deployed will by default opt-in to this rewards model

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### **Feasibility and estimates**

**Engineering**
- FeeManager.sol
A new contract that manages fees throughout the protocol.
Will enable fees as a % of auction bids or sales through the platform.

- Auction.placeBid
Handles sending a % fee to the address specified in the Fee Manager.

**Design**
- Add an explanation on protocol fees to the docs, create DAO page, Upgrade notes, and bid flow for upgraded/new DAOs. This must be **explicit** in the DAO creation flow.

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### **Risks and dependencies**

**Legal**
- Some (low) regulatory risk (where Builder is reliant on DAOs to determine fees, making the fee potentially look more like an investment)
- Takes funds from DAOs (reduces what does to Treasury)
- More complex accounting
- If DAO auction values are low, income could be negligible


**BuilderDAO members alignment**
- Soft consensus via Snapshot
    - Option #1: Auction rewards
    - Option #2: Develop an alternative revenue model
    - Option #3: Don't focus on revenue generation
