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Session: The road to monetisation and $OXEN value capture

Session: The road to monetisation and $OXEN value capture

28 February 2021Admin

Session is one of Oxen’s most prominent and most successful products. It’s taken more than 2 years of hard work to build a decentralised secure messaging app. Now that app has welcomed tens of thousands of new users over the last few weeks alone. With feedback and app reviews better than they’ve ever been, high retention rates, and strong active user growth, Session’s future is bright. In the coming months, Session’s user base may well grow to be counted not in the tens of thousands, but in the millions. 

This milestone will be an extraordinary achievement for a product born of a blockchain project. The only other application with comparable success is the Brave browser, whose BAT token has become one of the leading utility tokens in the entire blockchain space, propped up by tens of millions of Brave users.

Something that has been talked about at length both internally and within the Oxen community is monetisation. Having a massive user base for Session, or any of our products or technology stacks, is undoubtedly good for Oxen. But unless that user base translates into demand for the $OXEN token, how can infrastructure operators realise the value of the services that they provide to the network? How do we account for increased operation costs as the network scales? How can the Foundation and the development team sustain our work through the value of the token?

Today, we’re putting forward a bold plan to enable Session’s rapidly growing userbase to capture value for Oxen. This plan will not be implemented straight away — a lot of work has to be done to make any of this happen. That’s part of the reason that no concrete plans have been announced to date, with the exception of permanent username purchasing through the Oxen Name System (ONS). There are many ways for Session to capture value for the network, with varying levels of decentralisation, potential value capture, and development time requirements.

Given the exceptional difficulty and limited value-capture potential of implementing truly decentralised monetisation solutions, today we’re putting forward a simpler plan that will be far more attractive to users, capture more value from the app, and ultimately result more OXEN getting bought and burned in a way that still stays true to the core tenets of the focus that makes OXEN and Session attractive in the first place: privacy.

Burning

The core purpose of all efforts to monetise Session revolve around the idea of capturing value from the Session user base through OXEN being bought off open markets and being provably and irrecoverably burned.

Token burning schemes in this fashion have four fundamental effects:

  • A constant demand for Oxen is created in the markets 

  • The burning of Oxen reduces the circulating supply, offsetting service node reward emissions

  • A link is created between usage of the service node network and the cost to operate a service node, facilitating greater hardware scalability requirements across the network

  • The resulting increase in token value proportionally benefits all Oxen holders and stakers, irrespective of holding sizes

In concert, these effects can have extremely positive effects on the price of a cryptocurrency. It’s a very simple equation after all: all other things being equal, less coins in circulation, combined with higher demand for the coin, creates a recipe for an increased price.

The Infrastructure Fund

Central to the monetisation strategy being presented today is the creation of the Oxen Foundation Infrastructure Fund (OFIF). This will be a fund whose sole purpose is to use profits from monetisation of any and all products in the Oxen suite to fuel the purchasing and public burning of Oxen tokens. This method strikes a balance between completely decentralised monetisation, which is extremely difficult to meaningfully execute (especially within the constraints of mobile app stores), and more typical profit-driven centralised monetisation strategies. 

The basic idea is that while some features, such as ONS, can capture value directly on-chain, many problems with monetisation can be solved if the Foundation acts as an entity that collects funds on behalf of the network. By allowing a legal entity to be the (somewhat) trusted party responsible for monetising the network on behalf of the community — without compromising user privacy — the range of possible features that can be provided to paying users, and the likelihood of converting free users into paying users, increases dramatically. 

The OFIF will be completely transparent: all revenues from monetisation are reported, all expenses associated with providing the infrastructure to enable these monetised features are reported, and on-market token purchases are also periodically reported. The Oxen that is purchased and placed in the fund is periodically publicly burned. Reporting will occur on a bi-monthly basis, and the Oxen trading desk would conduct on-market purchases using the fiat and other crypto proceeds provided by paying users, with the objective of maximising the number of Oxen tokens purchased for burning within a given 2-month span.

This plan outlines which features will be provided to paying users, and how payment for those features will be processed.

Features and services to be monetised

Before we dive into the particulars of how purchasing features and services will work, let’s look at some of the features we actually want to monetise. It’s important to note that we strongly believe all of the app’s core functionality should remain free. Secure messaging is an incredibly difficult challenge to solve, and the monetisation features we add should improve the app’s user experience — not restrict it behind a paywall. 

All core decentralised components of Session should remain free. No user should ever have to trust the Foundation at any stage to exchange messages and participate in closed groups. This is a core requirement of this plan.

Some features, however, are classified as additional features and services that would consume Foundation resources to provide, or put additional strain on the Oxen network, necessitating some form of monetisation in order to ensure the sustainability of these features and services. 

“Session Pro” and standalone premium features

One of the key questions when selecting the set of features to monetise is to also consider specifically how they will be monetised. It would be easy to bundle all monetisation features into a single subscription package, potentially marketed as “Session Pro”, which unlocks a variety of features for power users. On the other hand, there are individual features which some users may want to pay for separately, or via a single lifetime fee.

All of the below listed features could be offered as standalone features, but firm decisions on what Session Pro will involve will be made as new features are released. We’ll also test different pricing models and packages, and assess the popularity of different features, to maximise the monetary benefit from these features while also maximising Session’s user experience — as any self-respecting app developers would.

Services 

The following services are part of our initial monetisation strategy. Because these services incur costs to provide, they will be monetised to ensure their sustainability.

Open group configuration and hosting services 

Right now, large many-to-many (or potential future one-to-many) communications channels require someone to host the open group server on which they will run, for scalability reasons. Running these servers is a difficult process for ordinary users, requiring knowledge of how to set up a VPS or similar, and some other basic system administration skills. We absolutely want people to be able to host their own open groups on their own servers to ensure no one has to trust the Foundation if they don’t want to. However, a key feature we can offer in our capacity as the Foundation is automatic creation of open group channels and hosting of the corresponding servers on behalf of users. This can be offered as a service, where open groups can be hosted for free by the Foundation until they reach a large number of members, and once this threshold is reached the creator will need to pay the Foundation to continue adding new members. In-app open group hosting is probably more viable as a standalone product rather than being exclusive to the Session Pro package. Open group configuration and hosting services will vary substantially in cost to the Foundation, but economies of scale allow us to host multiple open group servers on one machine or in clusters, making it relatively inexpensive to provide this service while also being able to save open group operators money by offering low-cost monthly fees or relatively inexpensive annual or lifetime fees, compared to users self-hosting their open groups. 

Increased attachment file size limits

A commonly requested feature is to increase the limit of file uploads within the app. Currently, all attachments are encrypted and then stored (blindly and anonymously) on a server operated by the Foundation. To date, the cost of operating this server has simply been accepted by the Foundation, but with the possibility of some of that cost being covered through monetisation, we can provide much larger maximum upload sizes. Once again, all profits would be fed into the infrastructure fund to be burned, helping to increase the value of $OXEN. This would most likely be a feature exclusive to Session Pro users.

Encrypted account backup storage

Although significant improvements have been made to the process of recovering Session accounts from saved recovery phrases, encrypted cloud backups would make the restore process entirely seamless. Only the owner of the private keys for a particular account would ever be able to see the contents of this backup, but the Foundation could provide full message and contact history backups in the cloud so entire client and account states could be seamlessly restored by the account owner at any time, from anywhere in the world. Once again, the monetisation would cover the hosting costs for this feature, but profits would go into the infrastructure fund. Based on user feedback so far, this would be a particularly attractive feature for Pro users.

Permanent Session username registrations

One of Session’s key avenues of monetisation has always been permanent username registration via ONS. However, one of the realistic challenges with this approach has been that if people have to manually acquire OXEN in order to buy these names, very few Session users would actually do this for Session usernames. Through providing a standardised interface for username registration, with strong guarantees around user privacy, the Foundation can accept fiat payments and register permanent Session usernames on behalf of users. Details regarding the anonymity protections around such fiat payments are provided later in this plan. In any case, the profits (very little cost associated here, so almost all revenue would be profit) would also be fed directly into the infrastructure fund for burning. As previously outlined here, Session username registrations cost 15 $OXEN.

Client-side Features

Another way to encourage users to contribute to the ecosystem is to provide a set of additional client-side features which can be enabled inside the application in exchange for one-time or ongoing payments. Providing some of these features would put increased load on the service node network, necessitating their monetisation for sustainability. Potential client-side monetised features include:

  • Custom emoji or sticker sets: Similar to how Discord and Telegram provide custom stickers and emojis, these features can be unlocked for Session Pro users or purchased on a one off basis. The creation of a sticker marketplace would also invigorate the Session community and provide an artistic outlet for users. 

  • Voice chat bitrate quality upgrades: One limitation on the quality of secure voice communications using the Oxen network is network bandwidth. Once voice calling is implemented, Pro users could be permissioned to enjoy higher throughput limits, and therefore experience higher quality calls, all while maintaining the highest standards of security and anonymity.

  • Multi account registration: A commonly requested feature is the ability to create multiple Session IDs within one Session client, and to be able to easily switch between them. We think that this is incredibly useful for power users, and so we plan to offer this as a part of the Pro package.

  • Increased closed group size beyond the normal maximum: Pro users will be able to create closed groups with higher caps, enabling larger secure closed chat environments that use the trustless infrastructure of the Oxen network.

  • Manual selection of the region for each node in the onion request path – Another commonly requested feature is the ability to manually reset or configure the exact service node path being used by the Session app. Pro users would gain the ability to have granular control over the path they use at any given time.

  • Animated badges and verified account status: Some of the concerns with open groups revolve around the quick and easy nature of creating Session IDs. This makes open groups susceptible to both spam and attempted impersonation. The latter issue can be addressed by adding a secondary authentication layer to a particular user, giving Pro users a ‘verified’ status that can be used to bypass future spam protection mechanisms and stand out from other Session users in open groups.

This is only an initial list of features to be implemented and monetised; more will be added as Session develops. In choosing these features, we have tried to strike a balance between providing a strong foundational user experience to those who use Session for free, while also providing the option to enhance Session in a sustainable way for those power users who want to invest in their experience using Session — and, of course, simultaneously increasing the value of $OXEN as users pay for these monetised features.

Payments

Although it would technically be possible to integrate an Oxen wallet within Session, and wallet integration is on the roadmap, it would not be possible to accept Oxen payments for features inside Session on iOS and Android without violating the Apple App Store and Google Play Store Terms of Service. For this reason, we must consider alternative methods of taking payments for monetised features, particularly on mobile.

In-app payments 

Session’s mobile clients can take advantage of the in-app payment systems provided by Google and Apple. The primary advantage of this route is that the process of purchasing upgrades/services and features using Apple’s or Google’s existing payment infrastructure is extremely easy — the user will typically already have linked some payment method (credit card, PayPal, bank account, etc.) which is much easier than onboarding Session users into using a cryptocurrency. The Foundation would never receive users’ personal information at any stage — that information stays with Google or Apple.

The primary disadvantages of this approach involve both the privacy implications and the 15-30% premium which Apple and Google take to process transactions. 

Regarding privacy: if you’ve already given Apple or Google your payment information, then no privacy is lost by processing a payment to the Oxen Foundation, and this can be done in such a way that neither Apple nor Google is aware of your Session ID or which feature you are paying to enable, and the Foundation never receives any personal information about the user at all. 

Web payments

For those users who prefer — or need — to avoid using Apple’s or Google’s payments infrastructure, we will provide alternative payment methods through a web interface that can take all fiat and crypto payments, but is also offered as a SNApp that accepts Oxen directly for maximum privacy. Combining an in-app payment option with a web portal providing direct $OXEN payments caters to users with a wide range of privacy requirements, all the way from mainstream users who want to pay using a credit card through Apple Pay, right through to the most hardcore of privacy enthusiasts who can shield their payments from all types of metadata analysis. We think that this mixed approach to payments will maximise the benefits for Oxen and Session users alike, and would be relatively straightforward to implement.

The Financial Backend 

On the backend, when a user makes a payment for a feature, the Oxen Foundation will take the proceeds of that payment. If the payment is for a service the Foundation must provide, then the Foundation will charge the cost for providing that service, plus a premium which is used to buy and burn Oxen. If the Foundation is processing payment for a feature that incurs little or no associated cost to provide, then the entire payment amount will be used to buy and burn Oxen.

The OFIF is not intended to be used to pay for development or marketing of the project — the Foundation has other means of generating revenue to achieve these effects. The OFIF is explicitly designed to drive demand for $OXEN, which in turn leads to better asset performance — something that is key to the success of the Foundation’s funding model. 

The Numbers

Session has seen massive growth over the past month, doubling the active user base, and we anticipate that this growth will only increase as Session continues to improve and moves from being a nascent platform to a widely-adopted messaging application. 

Monthly Active users Session

With app stability and user ratings at the best they’ve ever been, last week we ramped up our app store advertising campaigns — the effects of which we haven’t even yet begun to see in the data.

In the world of freemium applications, typically about 1-5% of users will pay for in-app features. If we assume a middle-of-the-road 3% monetisation rate, and a hypothetical subscription rate of $5 USD per month for a user base of 1,000,000, minus expected transaction and infrastructure expenses, we estimate that the infrastructure fund would be able to purchase and burn about $1.12m-$1.68m of $OXEN per year. Every additional million users on top of that would multiply the effect of that burn by that number. This would be in addition to all one-off and lifetime features, like open group hosting and ONS name purchases.

For context, WhatsApp has over 2 billion users, Telegram grew by 25 million users to 525 million active users in the last few weeks, and Signal has recently been growing by millions of downloads each week and is likely also going to hit the 100 Million user mark very soon. All this is to say that Session is positioned for massive growth over the next year. Holding, and providing infrastructure through, $OXEN will ensure that you can capture some of the value of this growth.

When is all of this going to happen?

Session is currently experiencing massive growth. The main requirement in order to make this monetisation strategy successful is to continue to heavily boost user numbers. As part of this, we’re rolling out multi-device, cleaning up the user interface, and introducing better error handling to continue maximising reliability. These steps will help to boost retention and user growth before we start rolling out some of the features discussed above. In particular, encrypted device backups, multi-account support, and enabling permanent usernames (ONS) through payment gateways are high on the priority list.

We’ll be balancing dev time with the expected effectiveness of each feature as we go, and rolling out features as they are completed throughout 2021, all while staying agile and focusing on the end goal: capturing as much value for $OXEN as possible to maximise the impact of our work. Users are the name of the game, and keeping Session’s core offering compelling is critical to the success of the project — including the monetisation plan.

Conclusion

Session is a powerful piece of the overall monetisation plan for Oxen’s privacy stack. Creating a monetary feedback loop where Oxen is bought from markets and irrecoverably burned provides an incentive for the biggest Oxen ecosystem players. Further monetisation of different layers of the Oxen stack, such as a potential Lokinet exit node marketplace, will open up similar opportunities for all of our technologies, ensuring that value is captured for Oxen holders.

The Session services and features that we’re proposing to implement and monetise will offer power users significant quality-of-life improvements while still catering to the core, free Session user experience. Even assuming highly conservative monetisation rates, Session will have a massive impact on both the demand for Oxen and its circulating supply.  

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