# Demand-based recurring fees in practice by timdaub | Devcon SEA

- Channel: [Devcon](https://streameth.org/devcon)
- Date: 2025-10-07
- Duration: 22:19
- Watch: https://streameth.org/watch/yt-pjcP-P7q5mU
- YouTube: https://www.youtube.com/watch?v=pjcP-P7q5mU

## Description

ALL 4 letter .COMs have been taken since 2013. Yet most only have a few natural buyers; hence, speculation doesn't make that market more efficient.

Yet, in crypto-economics, we can already transcend private property to deter the monopolization of digital assets like domains. 

This talk explores solutions from Weyl, Posner, and Henry George. We'll show how pricing and allocative efficiency can be improved through Georgist land value tax for assets like real estate, domain names, or ad space.

Speaker(s): timdaub
Skill level: Intermediate
Track: Cryptoeconomics
Keywords: Economics, Mechanism design, Quadratic Voting

Follow us: https://twitter.com/efdevcon, https://twitter.com/ethereum, https://warpcast.com/devcon
Learn more about devcon: https://www.devcon.org/
Learn more about ethereum: https://ethereum.org/ 

Visit the https://archive.devcon.org/ to gain access to the entire library of Devcon talks with the ease of filtering, playlists, personalized suggestions, decentralized access on Swarm, IPFS and more.

Devcon is the Ethereum conference for developers, researchers, thinkers, and makers. 
Devcon SEA was held in Bangkok, Thailand on Nov 12 - Nov 15, 2024.
Devcon is organized and presented by the Ethereum Foundation. To find out more, please visit https://ethereum.foundation/

## Transcript

[Music] watching on the live stream my name is Tim and I'm the founder of KB news and I will be talking today about demand-based reoccurring fees in practice so if you're a developer you might have seen this already or you might have come across this problem uh you know you you have a new site project or something and you found the name and you type it into a domain name search and then what you see is that uh yeah the domain name is just not there uh and then in my case for example I looked for KB news.com uh and there's actually a 500 error so a 500 uh status error so it's actually not even uh used and then I looked it up how much uh it would cost for me to transition the domain and it was actually 8,000 uh 800,000 uh dollars um oneoff fee and $21.99 a year to then rent the domain and this kind of annoying because I would love to use the domain um and fun fact all four letter.com domains have actually already been taken since 2013 and so in the talk today I want to give you this promise that we can basically already fix this we are just not doing it and uh you will learn how and so basically this is not only a problem in web 2 it's also a problem already in web 3 and vitalik said this in his um blog post in 2022 where he basically said that um all the 9 thou 9,000 most popular um e names that are in the Scrabble word list for the most popular words they could have been rented for 100 uh years for the equivalence of 12 l essentially and that is because a e name essentially costs $5 a year to rent and so it's actually just not that uh much to squat these domains uh but it it this the problem even transcends kind of the digital space and it's actually 100 years old and here you can see this behind me um on on this photo from 1914 where somebody bought a a vacant lot in a city I think this is in Illinois it's from a person called F Lewis and I'll read out loud the text on the poster and then we can talk why what is going on here so the poster basically says everybody works but the vacant lot I paid $3,600 for this lot and I will hold it till I get $6,000 the profit is unearned increment made possible by the presence of this community and Enterprise of its people I take the profit without earning it and for the remedy readed Henry George so this is very similar actually to the domain names that we just saw that that are always being squatted in that somebody just did it with uh with real estate right and uh if we look top down at inner city real estate property then what we can see is that the pricing kind of uh is related not necessarily to the improvements on top of the Lots but it is related to the neighboring properties so the A1 Property here is most likely going to be valued higher than the A2 property because the A2 prop property is essentially next to like this garbage processing facility and a a factory whereas the A1 Property is in close proximity to a university a cafe and so on and so this really brings us I think to one of the core ideas of our talk which is what is JW like what is georgism or georgism in general as a as an idea and georgism kind of how georgists themselves describe what they're doing is they say there is first of all land and all land and land is the source of all wealth in the economy and so on this land there are fruits that are growing but I think more generally speaking these are not only the literal fruits but also let's say like minerals in the Earth the soil even like the air part of the quote unquote land and then uh even the you know the property rights that you can get when you're have when you have land in a city um and georgists basically believe that the fruits can be harvested or extracted from the land by putting in labor and then the fruits are actually the desirable good within the economy and this is uh because for that reason they can be used to generate wealth and so georgism really considers labor as the wealth creating function in the economy and therefore Georges generally believe that taxing labor kind of discourages productive work because it's just in a way of like extracting more resources and quote unquote fruits from the land and so their idea is to tax the land ownership because that would tax the uh unearned profits of the land and it would encourage the productive work on top of the land um and so this is one way of solving the problem right like it this would solve the this like vacant lot problem but there are actually more problems with in the digital space because for example KV news has this unique property of being only a useful domain to a hand of people handful of people like me for example because I'm running such a project but to another person might not be the cas case um and so there's this idea of a natural buyo which is essentially this like one person whose company name is also that domain name or whose personal name is that that domain name so like we have for example vitalic in the uh Community he is kind of the best known person best known vitalic out of all of them and so he's the natur he's like a natural buyer of that vital. e domain name and the same is true for coinbase and uh what ralic said also in this ens post is that essentially if there is only one natural buyer for a Project's name then speculation on top of these domain names might actually not lead to the best possible price and it might not lead to an efficient market and we can look at this by uh analyzing kind of the relationship between seller and buyer and the seller uh so basically on the vertical axis you here you have the uh seller at which at the the price at which the seller is willing to sell the domain and on the horizontal axis you have the probability of the buyer willing to accept the offer and then you have this slope that basically describes the willingness of the buyer to buy the domain at a given price and the seller actually has this idea in the head about expecting uh about maximizing their expect expected Revenue right and so if we plug this if you plug my preferences into that chart you can see that um on the vertical axis on the top there this 7,999 price point which I'm kind of not willing to accept at a very high uh at a I'm willing to accept it at a very low probability but even at the $33,000 I would only be willing to accept it at a 50% probability and then the maximized expected uh price for the seller would be $1,500 what's interesting here is that even at the $3,000 price point I'm uh everybody will only get a used K news.com domain at 50% of the time right because there's another 50% where I'm accepting it and another 50% where I'm not accepting it and so really the core idea here is that of efficiently and inefficiently allocating property and if we have a property like on the left hand side the domain that is currently not being used and it costs a lot of money then we call that inefficiently allocated and then if I would be able to use the website uh if I would be able to use the domain for my project we would call it efficiently allocated so so how do we actually design for efficient allocation then so this was kind of the motivation for why we should even bother right and spoiler alert it is demand based reoccurring fees so we can basically start to model out a solution here by starting out with the existing state and then gradually like improving our solution so we have like these different pricing models and if you look uh to the chart on the left you can see that on the vertical axis I have cost which is the uh red line and I have demand which is the blue doted line and you can see you can see in the first chart that essentially the cost spikes up initially and then drops to like this 21.99 a year and note how the cost and the demand are not mapped to each other so if we have a higher demand we don't have a higher cost and this is a problem because it essentially uh encourages squatting and it also blocks productive use as I've uh just said like so then we could say Okay um if we don't want squatting and we want productive use we are just going to increase the fee like increase the reoccurring fee and that's essentially scenario two where you can see the demand curve has flattened a little bit right it's now a bit closer to the uh I think it Maps a bit closer to the to the cost curve however here the problem is is that we might not be able to anticipate all the valid uses and so the cost might be too high too low uh and still demand could rise throughout time right so really what we want is demand based reoccurring fees so a and that's the third chart where essentially demand and cost are mapping between between each other and so in that case we have an efficient market we have a fair price for the asset and most likely we'll have uh productive use so these are essentially demand-based reoccurring fees and essenti I mean really to put in a few words it means that with higher demand we have higher fees and with lower demand we have lower fees um many people in the space here probably know this as harburger taxes or land value tax but the idea really is that you will only buy this kind of domain if you're willing to like use the domain for some productive use because otherwise you're not going to most likely not going to afford the the fees essentially um we can compare the different pricing models so I'll start with land value TX and then we'll move into harburger tax just to understand basically what makes them different and basically land value tax is really an idea that that comes from pricing real estate and essentially it would work by assessing a property's value and then constantly like taxing based on the property's value like a continuous tax and the valuation of the property would be done somehow through a government Market or an index and what is kind of important to understand when comparing against Harbor attacks is that the owner still controls the sales timing so they can always decline the sale or just wait or whatever and however the problem with it is that in uh it is like subject to gaming so there can be corruption you could potentially corrupt the assessor and uh try to get like a much lower absolute taxation whereas the harburger tax kind of decentralizes the aspect of assessment by saying the owner always has to self assess the property but then the owner cannot control the sales timing anymore the property can always be bought from the owner at the current self assessed price and so that kind of removes this Vector of uh corruption where we can just bribe for example the the assessor of the property why does this work harburger taxes why do they work why do they create great prices it is because uh and here you can see on the vertical axis the cost and the risk of a forced sale and on the vertical axis you can see the self assessed price if you self assess your property Y at a very high price you will pay a lot of like a lot of taxes but you will have a low risk of a forc sale whereas if you price your property at a very low cost you will pay low and low amount of taxes but you will have a very high risk of forse sale so every owner in that system essentially has an incentive by themselves to find an optimal balance of where they want to put the risk of a forse sale and a and the tech cost that they're paying and this is why har haror texes work how can we actually build this in smart contract so I called this presentation demand-based reoccurring fees in practice so here's the practice essentially uh it's a model called deprecating licenses where some collateral is being sent into a smart contract so this could be if and we call this collateral here uh that's the letter c essentially and there's a price function PT where uh T is the time that passes and essentially the collateral decays over time throughout a period that we denote with Big T and so in the charts on the right you can see this T being 30 days so like a month and um on on the top chart you can essentially see that at P0 the the the price of the license is essentially all the collateral and then at p15 it has essentially decayed by half because uh 15 days is the half of um the the entire period which is 30 days and so the demand-based reoccurring fee aspect here comes from the fact that people have to rebid with their collateral so um these spikes that you're seeing where there's the where there's this error saying bit was made where it just like vert vertically jumps up this is when a new person inserts their collateral and then the Decay starts again at the the collateral value that they've put in and at a at t equal equaling zero basically um what what's also important to mention is essentially that the higher you set the collateral the more collateral you absolutely pay over a time period and this can be seen in the lower right chart where there was one owner that set a very high amount of collateral and so the steepness of the depreciation is actually much higher than the second person that then bid it and set kind of a lower um amount of collateral and as you can see these periods on the lower chart they're essentially the same length but the first person is uh paying a significant a higher amount of collateral per time essentially we can also see this when we look at Desmos and we essentially just draged the collateral slider you can see that essentially with more collateral the steepness of the depreciation essentially um increases that's it that's uh demand-based reoccurring fees in practice I wanted to keep this very educational so and I hope you learned something today thank [Applause] you wow uh really nice talk and actually something that I as I mentioned before I'm extremely interested in uh so I I put a few questions in here but the first one isn't from me uh so uh again let's read it out for the for the audience let's say you buy a domain for your startup and set the price for 10K uh does it mean that if competitor with de Pockets wants to buy your domain you'd be forced to sell it for 10K in in the harburger Tex model yes you would be forced to sell the domain at 10K however uh your deep pocketed competitor would have to continuously pay a tax every month set at the 10K price which would make it very costly for them to keep up paying that price so um your competitor may also you know your competitor may also buy like a a domain in a tradition in the traditional pricing model and then they would have to just pay like 21.99 a year so I think it's still an improvement so how should we think about harbater when some players have a high risk or fear to force selling versus those with lower risk or lower fear fear of selling like uh homeowners versus investment companies yeah yeah so it's not always ideal to use harbor taxes in all types of property classes so I think real estate you want to have a higher stability um in in real estate specifically but for example you could also um price online ads with Harbor attex and then the trans like the ownership transition between online ads there's actually no harm done in the ownership changing like we would I think as users we probably even like ads to change on a website and then for I think domain names it's also a Nuance discussion I think if you have a I don't know you if you would price Unis swap.com with harborer texes and they could be like forced sales that are instant I think this would most likely lead to security attacks and so on so you would have to have some kind of um you know uh time delay function let's say where you can announce um a a change or whatever but so it really depends I think um it depends on the property and there are better cases and worse cases to apply it got it yeah that that that makes a lot of sense okay so this one was for me and maybe maybe I'm not sure if this is relevant to the research you've been doing but there's a lot of lot of talk these days about uh allocative efficiency for choosing proposers we're talking about maybe a tester proposer separation uh so could we use harbage or tax for choosing proposes on ethereum and are there any risks to doing something like this yeah uh I I'm not super deep into like the The Proposal I I don't know much about it but I would say that if you're auctioning off block space I I'm pretty sure this could work where you have to pay a where you have to pay a continuous tax for you to be to have the to gr be granted the license to create the next block um and yeah I would imagine that this would be pretty interesting I I I can't think off the top of my head what this would do but I I always tend to think that harburger taxes and land value tax actually contrarily to what people think they actually lower um the lower prices because as if if you're a holder that has a monopoly on a non-fungible good like real estate for example you you really don't you're really not in a rush to sell this property you can as as we saw in my first slide with the vacant lot I I might wait 10 years for the price to go up from you know $3,600 to $6,000 so actually if we could apply Harbor taxes or land value tax without this these problematic uh issues of you know a forced sale happening immediately I think we would actually see real estate prices and rent prices probably drop because there would be a higher rate of utilization in cities and uh and people would generally just use or or rent properties when when when they need them right and at the moment I think there's just no cost for uh leaving them vacant I don't know maybe that makes sense for you on a proposal level uh definitely definitely no that does I think we should have this conversation later uh and then maybe last question uh so again maybe related to a previous question uh how do average user think about harbage taxs yeah uh I think we have to do a lot of work in terms of ux just like maybe not even specifically explaining or telling people that this is haror more like work with the the words of that defi uses like collateral or fees I think TX is kind of a tricky word with crypto people I think so um yeah I I don't know I think there