Enhancing the Awareness, Utility, and Anonymity Set of Oxen - Part 7 - Batched Swapping and Graduated Burning of Session Pro Income

[venezuela01]

Enhancing the Awareness, Utility, and Anonymity Set of Oxen - Part 7 - Batched Swapping and Graduated Burning of Session Pro Income

The ORC-8 discussion highlights a crucial challenge within the Oxen ecosystem: the coin's underutilization due to a limited number of daily transfers, which consequently diminishes Oxen's practical anonymity set. Prior proposals have addressed this issue from the AARRR framework perspective.

This proposal does not follow the AARRR approach. Instead, we suggest using OPTF as a temporary, centralized solution to manually boost transaction count initially, in the hopes of gradually shifting towards reliance on decentralized user activities in the future.

Fiat to Oxen Conversion: OPTF's Centralized Tradeoff

According to informal chat in the Oxen telegram channel, it is assumed that most paid users will likely purchase Session Pro using fiat or other cryptocurrencies rather than Oxen. Based on this assumption, OPTF plans to collect Session Pro mobile in-app payment income as a centralized organization, and purchase Oxen to burn.

A Naive Approach to Raising Transaction Count: Graduated (Unbatched) Collecting and Burning

Ideally, OPTF should deposit an equal amount of BTC or USDT into a CEX or DEX each time it collects fiat from users. OPTF should then purchase or swap an equal amount of Oxen from the exchange. If using a CEX, OPTF should immediately withdraw that amount of Oxen from the custodial wallet in the exchange to OPTF’s own non-custodial wallet. In the case of a DEX, the funds would directly go to OPTF’s non-custodial wallet. Following this, OPTF can send another transaction to burn the exact amount corresponding to the last user’s purchasing amount. This will significantly increase the number of transactions on the Oxen blockchain and improve the anonymity set.

Addressing the Cost Issue: Batched Purchasing and Burning

However, this approach might be expensive due to transaction fees and potential exchange rate losses. We propose batched purchasing to mitigate these costs. Instead of purchasing Oxen immediately for every Session Pro subscription, we can accumulate for 24 hours and purchase Oxen in batches.

Unfortunately, this method could potentially reduce the number of transactions and contribute less to the anonymity set if we transfer and burn Oxen only once a day.

Batching Without Compromising Anonymity Set: Oxen Asset Pool and Graduated Burning

A potential solution is to implement an Oxen asset pool as a buffer for batched purchasing and graduatedly burn from this asset pool.

For instance, assuming we start Session Pro monetization at 1,000,000 MAU and 1% of users subscribe monthly (accounting for 10,000 users). At a Session Pro cost of $6 USD per month, OPTF will collect around $2000 USD daily. One day before monetization, or on day 0, OPTF should prepare an Oxen asset pool worth $2000 USD, or approximately 40,000 Oxen, assuming $0.05 USD per Oxen. Starting from the 1st day, each time a new user purchases Session Pro with fiat, OPTF will move $6 worth of Oxen (or about 120 Oxen) from this asset pool to a temporary wallet and then burn that 120 Oxen from that disposable wallet. This disposable wallet is temporary, designed to be utilized for a 24-hour period before being rotated. Depending on the implementation details of 'burning' and our demand of financial transparency, it is also possible that one more disposable wallet is required to ensure privacy. After 24 hours, the Oxen asset pool is likely to be empty, at which point OPTF can refill the pool with another 40,000 Oxen by converting fiat income into Oxen in a batch, ready for the next day's transactions and burnings.

This approach allows us to minimize transaction fees and exchange rate losses through batched purchasing, while ensuring a sufficient supply of Oxen for gradually burning to maintain the anonymity set. The daily rotation of disposable wallets ensure that in the future if a regulatory department asks for past transactions, those records are already deleted.

Promoting Oxen Use: Offering Session Pro Discounts

When implementing Session Pro monetization, we could consider offering a discount to users who purchase directly using Oxen. This is advantageous for two reasons:

1. If users purchase using Oxen rather than in-app payment, we can reduce fees paid to Apple and Google without compromising income, creating a win-win situation.
2. If users choose to use Oxen, they contribute to Oxen's anonymity set and should be rewarded for their contribution.

The Potential of Raising Transaction Count and Anonymity Set

With an anticipated 1M MAU and 1% subscription rate, an initial 10k monthly subscription users for Session Pro could generate 333 transactions a day. Although lower than Monero's record of about 20k transactions a day, this is a strong start. Assuming a 2x user growth per year, there would be around 1332 transactions per day after 2 years. This growth will likely ensure almost every block contains at least one transaction, or 1.85 transactions per block on average, significantly reducing the risk of timing analysis for high threat users.

Long-term Outlook: Increasing Decentralized User Activities

Given enough time, we anticipate the number of crypto users will increase. According to Coinbase Revenue and Usage and Binance Revenue and Usage, in the past 3 to 5 years, leading exchanges have recorded compound annual user growth of between 30% to 50%, with estimated annual users over 100 million, and the trend is not stopping yet. According to the Age distribution of getsession.org visitors, the majority of Session’s users are relatively young. Combined with the amazing global growth trend of cryptocurrency and the demographics of Session users, it is very likely that in the future there will be more overlap between Session users and crypto users. See Conduct a survey among Session users on the usage rate of cryptocurrencies for a related topic. With the discount strategy introduced above and a Session integrated multi-crypto wallet, in the end we might be able to migrate more users to directly spend Oxen, further reducing the need for OPTF to manually boost the anonymity set. At that time, the responsibility of increasing the anonymity set by OPTF will be gradually transferred to more decentralized user activities.

[degenrocket]

Buying OXEN on the market with revenues from in-app purchases is a good solution that will allow to preserve privacy-by-default and at least some decentralization.

Added this issue to a compromised proposal: Session Pro + OXEN.