RFC-000-013: Raise Minting Fee to .3%

Name: Increase minting fee to 0.3%
Category: Protocol
Status: Proposed
Scope: Increase the minting fee to 0.3% and monitor impact.

Overview

Following up on RIP-000-003, this RFC proposes increasing the minting fee for all assets to 0.3% at the end of the current epoch (19 days from now). After a minimum of one week, and at maximum of four weeks, a new RIP will be proposed.

The new RIP may propose raising the minting fees to 0.3%, lowering the fee to 0.20%, or keeping the fee at 0.25%. Generally, this will be guided by the impact on revenue that is observed: no impact resulting in a raise or staying of the fee, and negative impact resulting in a lowering of the fee. The new RIP will be the point at which everyone can voice their opinion about the impact (whether it has been positive or negative for income). We have seen income from Mints steady or rising over the last epoch.

The reader should be familiar with RIP-000-001 and RIP-000-002 because this RIP is, in some sense, a continuation of them. Much of the discussion already had on these RIPs applies to this one too.

Details

After last month, the TVL within RenVM has held due to the increase in value of BTC, the total BTC locked has gone down as desired, and the revenue of RenVM increased slightly (despite the decline of DeFi yields). As required by RIP-000-001 it is time to propose the next change in the minting fee to continue trying to find the right fee based on demand, but also to continue demonstrating that we can lower the TVL without necessarily impacting revenue.

The long-term goal is still to implement algorithmic self-adjusting fees that do not require active governance by nodes/community members. But, before we can design such an algorithm with any kind of confidence, we need data about how volume reacts to different minting and burning fees. It is important to isolate impact as much as possible, so this RIP only proposes modifying minting fees, and strongly recommends that burning fees not be changed until experimentation is complete. See RFC-000-007 for many in-depth discussions about this particular point.

Minting fees should be adjusted to meet demand, however, we must also be mindful of changes in market conditions, and the fees of other projects that also offer BTC on Ethereum (given that this is dominantly our current major source of revenue).

The expectation is that after one week (and before four weeks) a new RIP will be opened that proposes a further increase or a decrease. This is an opportunity for the community to come to an agreement about whether there has been a material impact or not.

This RFC has no impact on future chains, which will begin with 0.1% minting and burning fees unless another RIP proposes otherwise (and is accepted).

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Summary

Raise the Fees to 0.3%

  • 2021 Jan, 7 - Mint Volume is 48% higher than the prior epoch, highest Mint Volume since Epoch 7 (pre-fee raising) with 3 additional days remaining in the epoch.

  • Raising the MINT fees to 0.3% will increase Mint income in future Epochs by at least 16% if it matches the same current volume. This translates to roughly 3.0-3.5BTC in income for Darknode Operators. If we raise the MINT rate to 0.35% we stand to earn 6-7BTC

  • Raising the fees from 0.1% to 0.25%, has increased Dark Node Operator income by ~19BTC since Epoch 8, while supporting 198 new nodes, a 15% increase in operators since Epoch 7.

  • If Mint Volume maintains velocity 264BTC/Day, renVM will see a 76% increase in MINT Volume from epoch 9 to epoch 10. Despite raising the fee 2.5X over the last two epochs.

  • Total Mint + Burn volume has risen 87% from epoch 9 to epoch 10 (current), this corresponds with increased yield opportunities in DEFI.

  • With the number of new Dark Nodes currently 127 being added to the network, this lowers current node operators expected income by 7.6% if no action to increase fees is taken while maintaining current MINT volume.

Don’t Raise the Fees to 0.3%

  • By not raising the fees, more users might use renVM.

  • By not raising the fees, the network is not focusing on increasing velocity and new high-velocity applications might not have enough profit margin to utilize renVM

  • By not raising the fees, the arb bot volume might increase.

  • By not raising the fees, Minting Volume might increase.

  • By not raising fees, New Integrator - MEW whose volume is still just starting, charges 1.0% + renVM fee 0.25% on top for a total of 1.25% This total fee discourages new MEW users out of the market, so renVM should not raise its fee, which might incentivize new users on MEW.

  • By not raising the fees, RenVM will be more competitive with centralized or decentralized exchange fees when exchanging BTC for renBTC.

Implementation

Nothing is needed to implement this change. RenVM governance (currently controlled by the Ren team as per https://github.com/renproject/ren/wiki/Phases ) can set the minting fee with a call to the renBTC (and other) smart contracts.

2 Likes

@preston thanks for opening this RFC. I am conditionally in favour, assuming that someone can present some data/arguments that demonstrates revenue has not been impacted by the recent increases from 0.1% to 0.25%.

For those interested, some work on this has already been done by various members of the community. For example: Motivations of raising burn fee over mint fee - #7 by preston

1 Like

I am against this. I don’t see why we are raising the mint fees? Isn’t the goal to get more users to use the product and for more adoption. It seems to me the minting has not increased in volume the only thing that has increased is the price of BTC therefor the overall income is more in USD.

As far as this epoch goes it seems to me that it will be very similar to the last epoch, therefor I suggest to keep it at 0.25% or maybe even test lowering it 0.2% to monitor it.

5 Likes

I am not in favor of this.

I feel focus should be on increasing velocity, not simply disincentivise mints in hopes of TVL decreasing. Maybe focus can be shifted to incentivizing burns instead of focusing on mints.

posting a pic here a community member shared in the telegram group.
this clearly shows revenue has decreased with each epoch since september. (we should not look at things in USD since rewards are paid in renBTC and BTC price is quite volatile at the moment which can skew stats seen in USD.)

Almost each epoch is giving less BTC and that could also lead to a vicious loop where price of REN falls as rewards are no longer enticing enough and it’s simply more beneficial to just hold BTC. (In this loop security goes down as well)

Even if we do achieve less mints and TVL goes down 50% (assuming extreme case), what did we achieve if velocity is not maintained? its the usage/volume that generates rewards that incentivizes bonding nodes and thus increasing security with the TVB going up.

This route of increasing mints seems like we are just decreasing revenue.

5 Likes

I would also like to add 2 more things. I remember seeing community member @FanaticalFishing raising an interest point regarding arbitrage bots being turned off due to the raise of mint fees.

I find this interesting cause arb bots serves the very purpose the network needs, volume/usage/velocity without the intention of holding renBTC. simply increasing mints and burns, and with that revenue.

And the second thing is continuous fees, I know it has been discussed in different threads but seems like not much weight is being put on that. at the end of the day it is the increase of burns that benefits the network the most (to reduce TVL), not reducing mints.

The downside of continous fees is that renVM can no longer claim the 1:1 peg which is a shame agree, but at the same time we are not really promoting anyone to hold on other chains. It is well known that the safest option is to hold coins/tokens on its native chain and renVM is an interoperability network that enables cross-chain activity, not cross-chain hodl :slight_smile:

Regarding the arb bots and continuos fees this can easily be tested/discovered by using one epoch as a “test case”, reduce mint/burn fees to the original level (10 bps for both mint/burn) and turn on continous fees.

2 Likes

A bit offtopic but I want to comment on the continous fees.
In my eyes renVM is only used to lock BTC and get renBTC on Ethereum to take part in DeFi.
Continous fees will direct users to other plattforms to get their BTC onto Ethereum.
As long as we don’t have any other use case I’m against continous fees.

2 Likes

I am extremely heavy against it. The minting volume is going down. Yes, we earn more per mint but the number of large mints is decreasing heavly. We have 13.000BTC in renVM, this amount dropping each month means a certain thing. Minting is not that attractive anymore. Yes we need velocity but what kind of velocity we goona have when the amount of btc in renVM is going to be half of what is now or less? Lets focus on bringing more adoption first for god sake. Check out what volume do MEW brings to renvm, almost zero! Because they have additional high fees than us added on. We had an integration that gave us many millions of volumebdaily. It fully stopped the second we increased the minting fee. Wake up.

7 Likes

Based on the data, we are projected to exceed the MINT volume from Epoch 9 and most likely Epoch 8 as well.

Burn volume is also higher this epoch, I believe this reflects the bullishness of BTC and the resuming bullishness in DEFI. As the REN team expands the usage and integrations for renBTC, I expect our volume to continue to rise over the course of Epoch 11-13.

As we can see by the DEFI metrics at the bottom of the chart, wBTC continues to grow at a faster pace than renVM while at a higher fee, I see no issue with matching their rates as it does not seem to stunt their growth in the slightest, nor has it over the course of the time we have been operating. The single largest contributor to growth by far is integrations and yield opportunities for wrapped BTC. Team is doing a great job pushing these objectives, so I think volume will continue to rise over time.

Dark node income does face a challenge as we continue to gain more node operators each epoch, as a network to keep incentivizing new operators to join we have to find value for them to get excited about, this could take place in the form of more MINT revenue, or potentially more BURN revenue.

The goal is to gain data and see if raising fees have an impact on volume, in the effort to automate the process one day. As a community, we have to balance, TVL and TVB, as we know in 2021 we are continuing towards taking the training wheels off without Team protection. Over time the best way for us to gain users has nothing to do with fees, as the data shows our competition with higher fees has outgrown us every epoch we have raised fees closer and closer to their level, it comes down to integrations and yield opportunities, which the team works on every day.

This is false, look at the chart Mint volume this epoch has already surpassed the last epoch, and we are on target to surpass the prior epoch as well.

In conclusion, the data provided support the prior RIP objectives of raising Mint fees, I am in support of this fee raise, and think it will help further incentivize node operators to join the network, help us collect data on the impact of fees, and further hopefully help us capture more value so that our TVB can catch up to the TVL which has increased substantially with the price of BTC.

3 Likes

First of all, you are saying that the mint is increasing. Is that really an increase? When you have some nice integrations it barely moved up while the burnt amount went extremely higher compared to the burning amounts. Maybe the minting volume increased a bit but the burn rates went much much higher. If we have 3 months like this you gonna have much less burns too when the 13k btc we have right now secured are all burnt back into native BTC. You need to have 1 to 1 ratio mints and burns and right now it clearly looks like the mints are too low compared to mints.

1 Like

I am against this proposal. This would raise the fees to the point RenVM is no longer competitive. It would discourage even more integrations. Below are exchange fees for 2020 for a comparison. Ren is in its growth phase. Lets not kill it please

RenVM       Mint Fee   Burn Fee

                    0.25%     0.1%    

Exchange    Maker      Taker
                    Fees        Fee
FTX             0.02%     0.07%
Binance       0.1%       0.1%
Bitfinex        0.1%       0.2%
BitFlyer        0.15%     0.15%
OKEx           0.1%       0.15%
Huobi           0.2%       0.2%
Kraken         0.16%     0.26%
KuCoin         0.1%       0.1%
Poloniex       0.09%     0.09%
Bittrex          0.2%        0.2%
Bitstamp      0.5%        0.5%
Coinbase     0.5%        0.5%
Gemini        0.25%       0.35%
Cex.io          0.16%       0.25%
TradeOgre   0.2%
STEX           0.2%        0.2%
qTrade         0%           0.5%

4 Likes

These CEXs also have withdrawal fees.

Shouldn’t we also consider that as well? Perhaps you can add that to your data table?

RenVM also requires eth gas fees so maybe it balances out? Not sure.

I will look at withdrawal fees. I remember some months ago when the gas was really high, Binance said that it was losing money on withdrawals. it was charging less than the current rate of gas fees.

I am in favor of fees being raised, now is the time. If we aren’t trying to raise after what is in on pace for being our top epoch yet, then when would raising ever happen? Bottom line . The huge mints( from whales ) many of them don’t want kyc. And they happily pay extra for that factor

1 Like

Totally Against. We need to increase velocity!!! It is obvious btc rewards have been trending down literally every epoch yet we’re trying to milk our existing users? C’mon. In early stages you need growth not profit maximization. The mint fee needs to be .2% max perhaps .15%. jumping up to .25% was ridiculous.

5 Likes

Trailing average of mint volume has been increasing even with the fee increases. Since our revenue has been positively impacted, we should continue increasing mint fees as to follow your framework that you set out for the community in RIP 000-001.

I am supportive of this motion to increase mint fees.

I also think it is very important to look at experimenting with increasing burn fees before we experiment with decreasing them.

See other reasons + my analysis for my support here. The findings are quite extraordinary:

2 Likes

Excellent post . Huge +1

1 Like

I am in favor of raising the fee. RenBTC > wBTC.

2 Likes

I am against raising minting fees due to the reason that people will just use sushiswap or uni instead.

4 Likes

Increasing mint fee to 0.3%.

Pros:

  1. May discourage minting which will bring down TVL.
  2. May be a non-issue and increase fee revenues
  3. May increase TVB as it attracts more investors if fee revenues continue to go up

Cons:

  1. May drive users to use other solutions
  2. May discourage minting which will bring down fee revenues

Between the pros and cons, I am in favor of increasing the mint fee because it’s still early, there are no true strong competitors and the effect of the CONS are correctible in a subsequent epoch. Basically, if it proves to be a bad decision, it’s reversible. Just like what Michael Jordan said, “You miss 100% of the shots you don’t take.”

3 Likes

I am in favor with the understanding that this is experimental for data collection purposes and can be rolled back in the event there is backlash from users or a significant decrease in volume.

Does this affect other host chains as well? i.e. Is it possible to keep the mint fee for renBTC on Ethereum .3% but mint fee on all other host chains .1% to start with? (BSC, Polkadot/substrate, etc…). Or am I misunderstanding that?

2 Likes