About Revnets

Let's say you want to build an open-source alternative to Google Maps. Unless you want to build it by yourself, you'll need some type of organization.

• Something like an LLC or a C corporation could work, but you would have to deal with legal fees, paperwork, and management.¹ These structures make sense for working with investors, but investment can have its downsides: after months of outreach and negotiation, you may be left with unfavorable terms or lose control of the project down the line. Investors might push you towards risky growth strategies, short-term goals, or selling the company.
• You could set up something more experimental like a DAO, but this comes with its own challenges – you have to figure out governance and onchain logistics before you even get started, and DAOs come with risks like governance takeovers that you don't want to worry about.
• You can try to make things work without a formal organization, but a lack of pre-determined rules and boundaries can lead to disputes later on. The risk of this happening makes people less likely to buy in.

Even if one of these options did work, how would you attract and grow a network of users to write reviews and label addresses?

We ran into this exact problem when building our own software projects: why wasn't there a simple way to set up rules in advance, and automatically share money with a network of supporters as it comes in?

Our Solution

To solve this, we're building "Revenue Networks" or Revnets, which are a new way to get your project started and fairly share money with your entire network of investors, workers, and customers. Revnets are designed with a few key principles:

1. Anyone who supports a Revnet should get some of its revenue, whether they're a worker, an investor, or a customer.
2. Revnets are owned by everyone in the network. Everyone interacts with a Revnet according to the same rules.
3. Those rules should be set in place when the Revnet is created, and impossible to change afterwards. Money can only come into or leave the Revnet as those rules allow, making scams and rug pulls impossible.
4. Anyone can make a Revnet and use it for whatever they want. Revnets shouldn't depend on us or third parties to work.

To accomplish this, we built Revnets using smart contracts on Ethereum (a smart contract is a computer programs uploaded to the blockchain). Our smart contracts don't have an owner and will keep working as long as the Ethereum blockchain is active.^{2 3} This means Revnets will keep working, even if we stop supporting them. Also, Revnets don't depend on legal enforcement – unless the contracts get hacked, it's impossible for anyone to break a Revnet's rules.

How Revnets Actually Work

When you make a Revnet, you pick which currency you want it to accept. Since Revnets are built on Ethereum, ETH is the simplest option.⁴

To represent a Revnet's ownership (and a claim on some of its revenue), Revnets use tokens. Tokens are really just numbers stored on a smart contract – you can just as well think of these as "points", "credits", or "options".

Let's return to our Google Maps alternative. We'll make a Revnet named MapNet which accepts ETH and uses MPN tokens to represent MapNet ownership.

Anyone can pay MapNet with ETH to make new MPN. The price to make new MPN is also called the price ceiling. At first, it costs 1 ETH to create 1 MPN, but MPN will get more expensive over time, depending on the price ceiling's increase frequency (how often the price increases) and its increase amount (how much the price increases).

Anyone can destroy their MPN to get back some ETH from MapNet. The amount of ETH you can get back is also called the price floor. In the most basic scenario, if you have 1% of the total number of MPN tokens and destroy them, you get back 1% of MapNet's ETH.

MapNet can also have a price floor tax, which means you would get back less than 1% of MapNet's ETH. That ETH you didn't get would stay in MapNet, raising the price floor for everyone else. The price floor also increases as it gets more expensive to make new MPN (as long as people keep making it). This is why Revnets are 'up-only' – as long as network activity continues, the price floor should continue to rise, backing the value of everyone's MPN.

The most you can lose is the gap between the price you bought MPN at and the price floor. Over time, that gap should shrink, and eventually become profit.

MapNet will make MPN at the price ceiling until a Uniswap pool (trading market) forms between MPN and ETH. From that point onwards, while MPN's pool price is between the price ceiling and price floor, MPN will be purchased and sold in that pool. If MPN's pool price reaches the price ceiling or price floor, the MPN supply will grow or shrink to meet that demand, keeping the pool price between the ceiling and floor. This keeps MPN prices stable and predictable, making people more confident in the token.

To boost early growth, MapNet can set up a boost. A boost sends some MPN to a wallet address called the boost operator for some time after MapNet is created. For example: "for the first 100 days, when people buy MPN, send 10% of it to our developer team's wallet".

MapNet can also pre-mint some MPN to that address when MapNet is created. These tokens can be used as a budget to pay a for early development, but they can also be used for staking rewards, an airdrop stockpile, or something else.

Why it Works

• MapNet development needs some heavy lifting up front to get the basics working – the boost (and pre-mint) can be used to encourage early work from a team of developers.
• Because MPN gets more expensive over time, early MapNet supporters are rewarded for taking greater risk, and have more of an incentive to leave reviews, label addresses, and use the platform. If it grows, they win too.
• Holding MPN means you own part of MapNet – the more valuable MapNet becomes, the more valuable MPN becomes. This makes workers, investors, customers, and other MPN holders more likely to support MapNet's growth through referrals and word-of-mouth.
• Because of the price floor, the tokens can never lose all of their value. This makes Revnets safer to participate in.

But you need to be careful: the rules that control MapNet's price ceiling, price floor, and the boost are locked in place once MapNet is launched. If your boost or pre-mint is too large, it might feel unfair and make people less likely to support the Revnet. If the price increases too quickly, it might cause liquidity issues later on. To get a sense of how these options play out, experiment with the Revnet simulator.

Software companies sometimes use investor funding to make their product free, or cheaper than its alternatives. Once their product has enough users, the company will raise prices, often leaving users worse off than they were before.

Revnets take a different approach: nothing is free, but customers know exactly what they're getting into. If the project grows, the network of people that made that happen is rewarded for it. And if the project fails, losses are limited – even in a worst-case scenario, people can always get some ETH back by destroying their MPN.

We think that Revnets will work best for open-source software, decentralized protocols, social networks, and platforms which rely on user-generated content: a platform which fairly rewards its users can attract and retain people better than one which doesn't.

If you want to talk through an idea, message us on Discord or Telegram.

Further Reading

If you'd like to learn more:

1. Message us on Discord or Telegram. We'd love your input.
2. See our yellow paper for an in-depth explanation of the Revnet's mechanisms.
3. The Revnet smart contracts are available on GitHub.
4. More Revnet writing is available on revnet.eth.limo.

Using a revnet could carry significant legal and regulatory risk. Be sure to consult an experienced legal counsel in your jurisdiction prior to usage.

¹ Depending on the nature of your project, your Revnet may require a legal entity. Talk to a legal expert about the relevant regulations in your jurisdiction before using them.

² Operating on Ethereum means users must pay gas fees to interact with Revnets. This can be expensive on Etheruem mainnet, but we're planning to deploy Revnets on Layer 2 Networks where gas fees will be negligible.

³ There could be smart contract exploits, or exploits in the Ethereum blockchain itself. Always do your research, and exercise appropriate caution.

⁴ Revnets can accept and denominate prices in other currencies.

Thanks to Jango, Mieos, KMac, Sage, Sofia, Hans, Grace, and Owen for reading drafts of this.