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

Requests For Comment | RFC
82

At this point, it seems impossible to convince those against even with multiple different angles and perspectives. You are entitled to your own opinions, but I hope that in the future, we are all a bit more open-minded to opposing view rather than striking them down without considering it fully and without devaluing their merit with statements that do not contribute to productive discourse.

On that note, I’ve pulled, cleansed, and analyzed quantitative data from etherscan in an excel doc. I hope you see the data and take it at face value rather than with the bias against this RFC. We can all use the data for our own insights and analysis, and I don’t expect it to change anybody’s minds.

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Tx of > 19btc on RenVM
Sum: 74,684 btc
Count: 1053 tx

All TX on RenVM
Sum: 97,454 btc
Count: 27,620 tx

Translates to:
76.6% of all value is derived from 3.8% of all transactions

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Taking a larger threshold:

Tx of > 99btc on RenVM
Sum: 41,373 btc
Count: 185 tx

All TX on RenVM
Sum: 97,454 btc
Count: 27,620 tx

Translates to:
42.5% of all value is derived from 0.67% of all transactions

I hope we use this data and gather our own thoughts. Perhaps, it could plant the seeds for more objective, innovative, and forward-thinking ideas by the community.

Personally, my interpretation is that if we assume arbers are using < 20 renBTC, they represent < 25% of our volume and subsequently our revenue. I believe we should be focusing more on the big fish rather than arbers, and I’m concerned that there could potentially be a conflict of interest for those that engage in both operating a node and conducting high volume of arbitrage trades. Unfortunately, this is unproveable and potentially harmful to discussion, so I just ask that those that were against this RFC solely because of others’ arguments about arbitrage and do not conduct arbitrage yourself: ask yourself, “should I be making the money on market inefficiencies, or should arbitrageurs?”

3 Likes
83

The data you used was during DeFi yield craze which has close to zero value for real market behavior estimates. DeFi in October 2020 is nowhere close to DeFi of Septemeber 2020. Comparing the two is a direct path to making biased conclusions.

And you’re not accounting that if we keep RenVM usage profitable for arbitrageurs than overtime their $ share of overall volume might substantially increase.

Securing adoption and increasing transaction numbers is more beneficial long term, than catering to 1, 2, 3 whales and hoping that this will get us through the years.

Also catering to whales will never let you win the crowd! And it’s more important than ever with DAO’s popping all over the place.

And finally the most important one. Reducing TVL (by incentivizing burns) and increasing velocity is healthier for our current economic and security model, than pumping up DN’s profit with people who’s use case is to store BTC and get their yield. Which means that our TVL is going to behave just like it behaves now even longer! It goes completely against RenVM’s idea which values Volume + Velocity > TVL

Basically, imo, we need to stimulate more arb’s and other high freq trades, instead of cutting them off.

3 Likes
84

While the data is appreciated, this data leaves out an important element - how much profit did each transaction make. We don’t know this, so we don’t know if doubling burn fee would have made a difference or not.
I am curious why some of the strongest supporters of raising the burn fee also being into question the motives, integrity, or critical thinking ability of those against it.
There are just too many unknowns at this stage to make a clear judgement decision on data alone. And there are substantial changes coming that will change the landscape enough to in my opinion leave things be for another epoch at the least.

85

Exactly. I couldn’t have said it better myself.

87

Please refrain from personal attacks. I find this comment highly toxic for the debate. Let’s keep it subject based.

89

You’re attacking him personally. He was making a general statement.

Can we please go back to the subject? This is an open forum, where potential investors can judge our community.

90

Where did I invalidate opposing arguments or discount the opinions of those against? I literally pulled that data and ran the analysis after chatting with @Alexander 1:1 because I thought the curve argument AGAINST this RFC was interesting and helpful. Those conversations where we learn from each other and collaborate even if we disagree are contributing to the betterment of all of our understanding.

I’m pointing out that some of us have just copied and pasted or @-ed others’ opinions which is fine, but to do that and then attack the opposing party’s opinions without supporting evidence or just plain attacking the opposing party personally… that isn’t being helpful to any of us - this goes for both sides.

Ultimately, we’re all on the same side as Ren; we just have different ideas of how to move forward… And, I’m not sure why you took my comment so personally. It wasn’t directed at you or a specific party, it was generalized to both parties… to all involved.

I understand running a node is quite an investment for all of us, and I’m sure many of us feel passionately about how we move forward. This is why I shifted to trying to look at the data.

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For example, I find this helpful:

Because of @shiny’s question, I plan to dig deeper into the data and do specific analysis on wallets that have conducted >100 renBTC mints and burns to try to calculate their earnings on yield farming. This’ll be tough and involve some estimations and assumptions, but I’m sure I’ll be able to easily prove they made more than 0.1% on their farming

On the contrary, I find this less helpful since it’s been addressed multiple times above:

I will reiterate and summarize the points @preston and I were making:

  1. we are unable to verify those in this forum of their stake in Ren (node operator or random joiner or competitor) again, @alexander (someone against my RFC that I’ve successfully collaborated with) and I have both expressed concerns that the polls and sentiment tracking are virtually moot without verification
  2. there could potentially be a conflict of interest for those that operate a dark node AND run an arbitrage bot or participate in arbitrage frequently

@toucansam, if you felt personally attacked, I apologize. I hope this helps clarify my perspective here.

91

I agree that any change to the burn fee should come with some amount of lead time, and perhaps even a commitment to the range of burn fees that will be possible in a given time frame (e.g. give everyone 2 weeks notice, and commit to not increasing the burn fee beyond X% for at least Y weeks).

4 Likes
92

Independent view: I don’t work in crypto, nor am I a member of the protocol or run a darknode. I work in finance on Wall Street, and I own REN.

Some comments:

  1. Why are conversations about fees being discussed in an open forum at all? This should be done by the REN Senior Management Team, Founders and Investors internally. It should not have any input from anyone else, nor be on an open forum to be bantered about. There must be decisiveness on fees, not endless banter from an open forum. And, I realize that REN is an open protocol, but, the endless discussions on this topic will just delay decisive action. You have darknode operators and potential darknode operators reading this forum, waiting for answers. You have potential competitors reading this forum, looking for details. This topic should not be public. This topic, if handled incorrectly, could kill the network from ever getting materially off the ground. And, at $1.3 Billion of transaction volume, you’re barely off the ground.

  2. You’re all viewing this as a classic chicken vs. egg problem. This is the gist of what I’m reading: “If we charge high fees, then no volume will come onto the network, but we’ll attract darknode operators; if we charge low fees, we’ll drive volume, but we’ll have trouble bringing in darknode operators.” This is NOT an either or decision…you have no choice. It’s a process decision, and, the answer is absolute and simple. The fees were set incorrectly initially, and now must be reset to more appropriate levels. The fees should have been set high as the network needs to be developed to handle long-term volume (like trillions of dollars worth of volume) and the only way that happens is if you have incentivized enough darknode operators to sign up to network so you can create 100% decentralization. Without enough darknode operators, there’s no decentralization and really no point to your entire REN protocol network.

  3. You’re selling the key features of the REN protocol network to these uses: security, speed and ease of use, decentralization, etc. Users understand this, users want this, and users will pay the high initial fees for these beneficial features, especially, if you’re telling users that the fees will decline over time as volume increases and 100% decentralization arrives. Frankly speaking, these minting, burning fees will be rather inconsequential to the overall ROI (return on investment) on the large DeFi applications and activities that are and will be available to institutional participants over time.

  4. So, the fees are currently WAY too low, and should be reset much higher right now, and, then, decrease over time as you sign-up darknode operators, at specific levels. As I said, the fees were set up wrong to begin with, as you guys have a Mercedes here, not a Datsun. In any event, you have 1,380 darknodes right now, who are earning very little as network volume is $1.3 Billion. If it were $1.3 Trillion, they’d be happy campers. Now, I don’t know what the target number of darknodes is for 100% decentralization, but I know the maximum number of darknodes is 10,000 given the 1 Billion REN on a fully-diluted basis (at 100,000 REN per darknode). But, let’s say your target is 7,000 darknodes for 100% decentralization. Then, for example (and this is just an example), you should raise the fees to 0.5% minting fee and 0.5% burning fee (right now) to drive the next 1,620 darknode operators, bringing you to 3,000 darknodes; and, then, for every 500 additional darknodes added, you would drop the fees by 0.05% each, until you reached your 7,000 target where you’d wind up back down at 0.1% minting and 0.1% burning fees for long-term use in a 100% decentralized system. By raising the fees now, you’ll generate substantially higher darknode interest, and the demand for REN, and it’s price, will go up, and, as that happens, the REN marketing team can market the % decentralization to users at each darknode milestone. “We’re 25% decentralized, we’re 50% decentralized, we’re 75% decentralized, etc.” And, that marketing will increase the network volume, and with less darknodes remaining available, the price of REN will continue to increase.

  5. As a sidenote, there should be a simple darknode yield calculator on the mainnet.renproject.io that allows those interested in becoming darknode operators (and investors in REN like me) to easily calculate and understand their potential fees give certain inputs like a) network volume, b) current fees, etc.

In summary, I hope you’ll take what I’ve said above into account. Best of luck on taking decisive action and GO REN!

4 Likes
93

+1

I totally agree, @zbone1. I’ve been out here trying to get the community to see the light from every angle I could come up with. Appreciate your insight, every day that goes by right now more renBTC is being BURNed, and we are missing the easiest fees to capture.

In addition, posted an RFC two days ago in regards to your first point. It needs to be addressed asap. We will see if team posts it for community discussion.

1 Like
95

Thanks for the input, the perspective is very much appreciated, and a great example of exactly why this forum is public.

The Ren team currently has the final say in all matters of governance, but having these discussions helps us see everyone’s perspective and helps us generate new ideas. Decisive action is key, but it must be calculated and informed. Getting input from people and taking ideas for their merit, (not the number of people that support the idea, or even who proposed the idea) is critical to our decision making process.

See here for a bit more:

1 Like
96

Screen Shot 2020-10-30 at 8.42.16 AM
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More outflow. 48hrs and an additional 280M of TVL have exited the larger DEFI space. The trend is larger than the fees.

$16.2M of renBTC burned, helping our TVL congestion, but not b/c we set the fees lower, the fees were set at a base level from the beginning for us to have a conversation.

97

Thanks for clarifying your position. I will remove my post, as it is a bit out of line given this new context.

98

Experiments guide theory,rather than theory guide experiments.So I totally agree to increase the burnning fee to 0.2%. If it were not going well as we expected,we also can change the burning fee bake to 0.1%,then the users would come back.Nothing big deal.

2 Likes
99

Hey @davoice321, I’d love to get your thoughts on building a draft algorithm together. See my thread here Discussions for dynamic fee algorithm

100

TL;DR: I am not in favour of this RFC as written because minting fees are being adjusted presently in accordance with RIP-000-001 and this would interface with that. We should re-assess this RFC (or some variant) later, after experimentation with minting fees have concluded.

Wow, it is great to see so much discussion on this thread. It is clear everyone is passionate about making RenVM the best it can be — and although we all seem to have different ideas about how to do this —it is great to see.

I have refrained from posting my opinion on this topic until now, because it is good to get some unbiased perspective from others first. But, with November 16th approaching, it is important that a decision is made about this RFC.

Before diving in though, I would like to thank @DeFiFrog for putting so much effort into this. Regardless of how people might feel about this specific RFC, it is clear that you are putting in a lot of thought and time into helping improve RenVM. For the most part, everyone has been pretty polite, but a gentle reminder that we all have the same end goal, and civility goes a long way to making sure arguments are well-grounded and well-considered.

With that said, I am inclined to disagree with this RFC as it is currently stated

It is clear that burning fees influence minting volume. You can convince yourself this is true with a simple (albeit contrived) thought experiment: would you mint renBTC if the burning fee was 100%? Probably not. RIP-000-001 has already been accepted, and has a clear plan for the next epoch at least, with the goal to gather data about the effect of the minting fee on volumes. Adjusting the burning fee will interfere with that goal. (Thank you @Alexander for your more in-depth, and much less contrived, example of how burning fees impact minting volumes. See this comment.)

This does not mean that I am against the principle of this RFC. I believe that, just as with the minting fee, it is important to experiment with adjusting the burning fee (both up and down) to get a better understanding of its impact. But, to do this properly, it cannot be happening in tandem with adjustments to the minting fee.

I believe that the best course of action is to leave the burning fees as they are for now, and come back to this RFC in the future once the adjusting of minting fees is no longer happening (which should be done by the end of next epoch, or the one after, depending on the impact). A good approach to this would be:

  1. Finish adjustment minting fees in the next epoch or two and analyse the data.
  2. Begin adjusting burning fees in the same way and then analyse the data.
  3. Build an algorithmic model that captures sound reasoning and the data observed.
  4. Monitor and update the algorithm as needed.
  5. Enable Darknodes to adjust the precise parameters of the algorithm, within certain bounds, to allow them to respond to market conditions (like a sudden influx of volume).

RenVM is not going anywhere, and continues to grow in chains supported, apps integrated, and number of Darknodes. We are in the early days, and experimentation is important, but we are not presently dormant on that point. Experimentation is presently being done, and we should err on the side of as much isolation as possible (the market is already so independent and dynamic that it is difficult enough to deduce causation).

9 Likes
101

Maybe a bit late but in short, I feel this proposal is a bit premature for one simple reason, right now critical issue is TVB/TVL balance to ensure security and easy path forward towards decentralization. Very interesting discussions from both sides though :slight_smile:

To summarize, I am strongly against this at the moment, definitely worth revisiting at a later stage though.

102

I think this is a point worth discussing in general. We have two use cases:

  1. Mint for yield farming. Here our (minting) fees depend on how fertile the farms are. As such they can be quite high, because yields have been high. And they need to be high, because volume through RenVM flows only once and then sits idle in the farm.

  2. In-and-out. Here our fees need to be low in order to make the whole transaction feasible. Then volume is potentially very high, so low fees are no problem.

Obviously 1) and 2) collide when we are setting fees. Also 1) is the present while 2) is probably the future. We cannot test now for the future but we can also not keep fees super low waiting for 2) forever, which may take a while still. At the same time, if we set fees to high, 2) may not get off the ground even when it would be ready.

Maybe there should be a decision on strategy first, before we venture into setting the fees. Which metrics have priority? Which are we prepared to sacrifice? Do we want to milk yield farming now as much as possible, or is it more important to be ready for in-and.out integrations no matter how long it takes to wait.

If there is consenus about the strategy, I think fee setting is the easy part…

3 Likes
103

For a beginner, this topic is difficult, but I’m trying to figure it out. Do I understand correctly that the more nodes there are, the more liquid Ren is quoted? Does wBTC equate to BTC 1:1?

1 Like