Name: Decreasing minting fee to 0.15%
Scope: Decrease minting fees to 0.15% and evaluate the elasticity of demand and the interaction between TVL, TVB, Price, Nodes operational.
This RFC proposes decrease the minting fee for RenBTC to 0.15% at the end of the current epoch (7 days from now).
The new RIP may propose keeping the 0.15% and monitoring if it´s appropiate to continue to go back to 0.10%, the fundational percentage wich I believe is the most convenient for the network. I´m trying to demonstrate than Value Locked ( agreed not to been the main metric) involves interactions with revenues, Price, Ren market cap and safetiness of the network.
Plus, monitor how the increasing of fees affect new integrations with extra fees aggregated (e.g.MEW) and could damage what can give more velocity of transactions (0Conf).
Since 19-10, “the total BTC locked has gone down as desired, and the revenue of RenVM increased slightly (despite the decline of DeFi yields).” The affirmation is true, but the increase in the revenue was due to the increasing burn revenues balanced with the marked decline of mints.
It was planned by the team to see the consequences, and clearly demonstrated than the elasticity of demand was high. Despite the noise of changing yield farming scenarios, it´s due to say: the demand reacted inversely correlated with the higher fees while Total wrapped BTC on ethereum belonged growing stronger after 19-10.
Data source: Defi Pulse/ BTC at work
Since 19-10-2020 RenBTC has lost 13.610 BTC locked, 50% of it´s previous market share and a 9.01% of the market while all others growing.
From REN network data, balance between mints and burns was:
-128.000.000 last month
-33.000.000 last week
If it was intended to generate an approach to the network security, I firmly believe than only when TVL is in billions will be generated the possibility to reach that goal. That is based on a model made where the ratio TBV*3/TVL is approximating and exceeding 1 only with bigger numbers in TVL (with mints) that generates a possitive feedback to Market Cap., Price, Darknodes added, Income, enhanced by the integrations that can provide more velocity of transactions (helped with the reduction of fees).
The following Excel chart shows a model with a fixed relatively high APY in terms to evaluate the other conditions.
-As experienced with many platforms the market cap tends to follow the Value Locked or Network effect, or at least should be a media of a function between both. TVL stronger than maket cap. (as usual) implies more volumen is needed to reach safetiness.
It begins for actual Price, nodes operational and TVL. Followed by the TVL increasing each 250 MM and the possitive feedback to Price, darknodes added, revenues, TVB. The more TVL, the more Price, Nodes, TVB.
Integrating applications that can give volumen (with lower fees) and velocity, makes much more easier to reach the 1 ratio to make secure the network.
Otherwise we run the risk of stayin in a plateau with this general numbers and not to grow from here. That implies never reach the standard for network security.
About the promissing new integrations that add extra fees, numbers as well at least show the need to test lower cost for the transactions. Have a look at My Ether Wallet 24hs.and total volume.
-At actual velocity of transactions, with the model exposed renVM begins to be safe somewhere around 2.5 B TVL.
-Based on experience in other platforms (crypto or not), altough could be relationed with fees, the market cap will unlikely be higher than Value Locked for a long time. That implies if you have a TVL of 400 MM we shoud never expect a MC higher than that. And probably wont reach the safety standar .
-TVL is not the main metric at all, but necesary to favour the factors that determinate security and profitability of the sistem. At actual velocity of transactions, with the model exposed, renVM begins to be safe somewhere around 2.5 B TVL.
-We are mostly burning the mintings before 19-10.: If btc goes down the rewards in usd will be much lower than today.
All burneable RenBTC must have been minted.
Allow new integrations develop your potential,.and contribute to the higher velocity of transactions.
Grow to stronger numbers by generating possitive feedback between TVL, TVB, Market Cap, Nodes operationals, in order to ensure the network security and higher revenues.
Enhance the visibility of the platform, network effect, market share.
Enable short term profit lab (like arbitrage bots), contributing to de velocity in the platform as well.
To grant low fees (0.15, or 0.10% later) in order to give certainty to take planned decissions.
Tecnology in general is developed to make everything easier, faster, more secure and cheaper.
In a context of lack of human intervention all tends to be lower in fees. I asume in the middle, long term, the fundational and economically elegant model of REN will be the rule.
Having tested the high elasticity and it´s effect to the network, I propose lowering the fees to 0.15% in a first step and monitor the consequenses.
Nothing is needed to implement this change. RenVM governance (currently controlled by the Ren team as per Phases · renproject/ren Wiki · GitHub ) can set the minting fee with a call to the renBTC (and other) smart contracts.