RFC-000-007: Increase burning fee to 0.2% on November 16th (start of Epoch 6)

[preston]

I am in favor of raising the burn fee to 0.2% at the beginning of the next Epoch, and further if volume and income continue to rise, which I believe it will…and continue raising it to 0.3% and beyond until it doesn’t.

I am very impressed with the conversation and the points raised for and against. I think that in the future when we reach Main Net One, these concerns will be magnified and the directions we take will have much more weight than they do today, at most, we are talking about increasing revenues from an average of $200-300/epoch to $400-$500/epoch per dark node, not a lot of money either direction, which emphasizes further why we should proceed with the raise and experiment learn and adjust.

I would encourage anyone who is reading this comment to take a step back and remember how early we are in this project, and understand that collecting data through trial and error while under the protection of the Greycore is an important experimentation period that we cannot afford to squander.

Further, since fee management is under the RenVM community’s control, we have the ability to change it back if it does yield the results we are looking for. So, the cost is minimal if any while we are experimenting. If we ever want to have an automated solution we must experiment and collect data and watch to see how the market reacts.

@MaxRoszko

The mint and burn fee already adds up to 0.3%, and could increase even further pending follow-ups on the increasing minting fee RIP. Such a high total fee already disincentivizes strongly against high-volume in and out trading, which would only get worse if the burn fee also increases. The preferred usage of RenVM is quick in and out mints and burns, to keep the TVL low but volume high.

At this moment, I do not believe we are seeing any meaningful slowdowns as a result of our experiment, the total volume is still growing and the number of use cases and integrations are still rising, therefore I believe it is too early to conclude that our prices are high or too high, when we reach that point, I believe it will be clear to everyone as the volume will dry up.

[quote=“MaxRoszko, post:13, topic:250, full:true”]

@DeFiFrog

@DeFiFrog

Other protocols have changed fees in the past; in addition, many protocols have much higher fees than Ren does. (Uniswap at 0.3%, Coinlist wBTC at 0.25%, Curve at 0.04%).
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It appears the market is fine with this level of friction at other protocols. Curve is the only one with lower fees, but their mechanism is a less value add of a step (swapping between like-assets on the same chain), and their swaps occur more frequently. For every 1 mint and 1 burn of renBTC at RenVM, I estimate that there will be up to 10 Curve swaps of that renBTC.

RenVM’s fee is additional to what users are already paying on for instance Uniswap. They might be fine with 0.3%, but 0.5% is really pushing it for any kind of high-volume trading. We can’t make a simple comparison of our fees with Uniswap because no one is minting/burning renBTC just because, they are doing it in conjunction with other Ethereum operations.

If this is “pushing it” is to be determined, we will not know this until we try it, there is no better time to try this than now. The longer we wait the more cost/income consequences it could have. I would rather let the market guide us in this decision and experiment than speculate. Data is the ultimate decision market

@Maggie

I also believe we cannot pretend fixing the TVL/TVB issue through fees only. This would be equivalent to a government trying to fix all issues of a country through tax. We need more integrations and use cases for RenVM or ren assets capable to increase volume through RenVM. Once people can see more partners using RenVM and a constant volume flowing, this will be give more confident to doubtful investors.

I agree with you that additional integrations and volume will help address the TVL/TVB issue, however, if we do not manage our fees correctly we are doing our network a disservice, as we would be establishing ourselves not as a premium product. The world of opportunity is ahead of us, and I think we must discover the price of our services, such that arbitragers are not taking advantage of our low rates, and profiting off our discounted fees.

@Alexander

@DeFiFrog

• Other protocols have changed fees in the past; in addition, many protocols have much higher fees than Ren does. (Uniswap at 0.3%, Coinlist wBTC at 0.25%, Curve at 0.04%). 0.1% is significantly below industry standard for our service and is insignificant/negligible compared to gains earned by RenVM users

RenVM is infrastructure, not a project that needs to get enough funds to pay investors.
All of the mentioned projects except from Coinlist have a real cost associated with them. Uniswap have impermanent loss, Curve has depeg risk. Especially with DAI pools, where you can pay around 0,2% entrance fee. That fee has to be paid by traders.

Coinlist is difference as it is a centralised project. And they generally charge around 0,3% to 0,2%, which Coinlist is right in the middle of.

I agree we are positioning the network to be infrastructure, but as the infrastructure, we have needs, even though our cost basis are covered by the current level of income, our security has not reached a point where it is safe for us to proceed with pure decentralization. We need to increase our fees and continue to improve on speed and integrations to deliver a quality service that is secure, if we do not have proper security we do not have a viable product.

@fuzzylogic

Furthermore, as the Harvest exploit last night showed in an impressive manner: We’re still the cheapest player around in the DeFi space.

We are either the cheapest or were the only way to convert the renBTC taken back to regular BTC. Either way, I think that raising our Burn fees should be explored to see how and if it has an impact on the market.

@MaxRoszko

In general I think we should have low fees to incentivize growth at this stage, and later have application-specific fees, where high fees would be appropriate for yield-farming cases. Increasing the minting fee now though does help chill the ever expanding TVL a little which is good, because we don’t have to collateral to back it up if we want to go decentralized. More in favor of increasing the minting fee than the burning fee.

Growth will occur from adding additional integrators, to claim that customers are motivated by 0.1% when they make that in one day in DEFI, I think is a difficult argument to defend. Our customers come to us as they are supporting decentralization, speed, and ease of transaction. Our fee has seemingly not been a party to the conversation based on the data collected so far, when it does I think we will all know and can then make these types of claims.

@Steve

I’m relatively new to all this, and I’m sure I’m guilty of of some super-basic, level-one thinking, so a clarification would be appreciated. It seems a lot comes down to: ‘can’t be proven until tried.’ For me, the one thing that can at least be assumed is a propensity towards risk aversion for the user. This would imply an inclination to return renBTC to BTC whenever possible. Isn’t further incentivizing this the best approach to solve the TVL imbalance and raise volume? If .3% total for mint and burn appears like it would be acceptable, especially as this cost directly secures the service, isn’t maybe a .3% mint and a 0% or a 0.05% burn fee a common sense direction to test next?

Welcome to the conversation! I believe if we want to get to a place where we are able to utilize a continuous fee, we should actually have a higher Burn fee and a lower Mint fee. Thus inviting customers into DEFI with a low rate, and charging them more to leave. As in the future, I believe many BTC holders will never leave, and will instead hop from DEFI opportunity to DEFI opportunity chasing yield.

That said, where these levels are set is to be determined, maybe it’s 0.2% mint, 0.4% burn, but at this early stage, I agree we must experiment and discover where the price is too high and customers are no longer participating. Since there are other ways to acquire renBTC through the exchange instead of minting through our network I think the balanced approach is to have a fee on both ends.

In Conclusion, let’s move fast, let’s experiment, let’s push things to the limits, it is all part of experimenting, and most importantly these healthy conversations emphasis the need for more control of our fees.

I would encourage community members to weigh into and support RFC-000-002. From this conversation, it inspired an additional point that I will add to RFC-000-002 Multivariable Fee Control, that being various integrations could have their own fees if certain integrators are consistently delivering us volume, as a way of appreciating them we can lock in rates, set up terms that if they don’t meet a certain level of volume the fees reset to “standard” this type of control should be explored and embraced. The more flexibility we have in fee control the better, as a network we will be able to compete, differentiate, and secure our network! We cannot afford to wait until after we are fully decentralized to establish fee multivariable fee control systems.