Name: Time based burn (and thus total) fee
Scope: Make the burn fee dependent on duration of time between mint and burn
The idea is to make the burn fee dependent on the time between mint and burn of the same address interacting with RenVM. Several time-windows could be established with different associated burn fees. The burn fee could even be allowed to be negative in case of very high velocity mints and burns. This proposal would allow to differentiate between interactions with RenVM that are assumed to be for different use-cases. On the one-hand, arbitrage like use-cases are encouraged via lower total fees. Use cases where RenBTC is locked in protocols (staking, LPing) for a long time could potentially be disincentivized this way.
An address does a mint of 100 RenBTC and pays the 0.25% fee. If the same address does a burn in size up to 100RenBTC within 1hour the burn fee is -0.1%. Hence the total fee paid is 0.15%. If the burn happens within 1 day the burn fee is 0% (total fee is 0.25%). And so forth, any number of differentiating time windows could be possible. The last threshold is fixed and therefore the maximum total fee is known to the user beforehand.
Necessary next steps:
- Determine suitable time-windows and associated burn fees
- Potentially adjust mint fee based on the above
- Investigate technical feasibility
- Potential to incentivize higher velocity mints and burns. Such transactions increase volume without increasing TVL
- Maximum total fee is known to the user beforehand
- Not artificially reducing demand by increasing the total fee
- More difficult to implement than current method because measurement of time between mint and burn is needed
- RenVM to potentially have negative burn fees might increase attack vectors