Name: Raise the Burn Fee to 0.2%
Scope: Increase the burn fee to 0.2% and monitor impact.
RenVM is starting 2021 off with a lot of activity, Ren has seen a new ATH price, the TVL has expanded greatly in RenVM due to the increase in value of BTC, the total BTC locked has gone down from the all time high but is rising again, and the revenue of RenVM is increasing from the rise in BTC price, and the past approved RIPs to increase the fees.
It was the 6th Epoch of 2020 when RFC-000-007: Increase burning fee to 0.2% on November 16th was first proposed. As more volume data has been collected what we see is that a lower BURN fee rate doesn’t seem to have a material impact on volume. There might be certain integration or arbitrage opportunities that at higher fee prices don’t pencil out, but largely the dominant amount of volume comes from Ren Bridge and Curve.
However, if we had raised the BURN Fees we likely would have seen a meaningful increase in Dark Node income equal to 29.73% of the total income earned and would have increased Dark Node Operating income by 0.032141 BTC. With more security comes additional network expenses, and to inspire additional network participation, we need motivating income for people to join the network and lock up their tokens.
If we had raised the BURN fee, we may have lost the arbitrage bot, but look at how much income we would have gained through our existing integrators and REN bridge. As opposed to the income from the singular arbitrage bot. Below you can see the total impact to our network from this arbitrage bot in income per node.
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.
The team is actively working to improve the security of the network specifically to address TVL / TVB, this effort will create a lot of value for RenVM, allowing us to focus on our market penetration and expanding TVL, and opening up additional income opportunities. So far, we have seen 11 Epochs of volume with 0.1% BURN fees, and so far we have seen volatile amounts of volume that seem to correlate the most with the overall Defi ecosystem.
Burning fees are low hanging fruit to meaningfully increase income for the RenVM network, as the number of nodes increases we are more secure as a network, which as we get closer to REN phase ZERO, we want to be as secure and motivated a network as we can be. If raising BURN fees does not see a desired outcome, we can always re-adjust to market conditions, and the lower the fees.
The expectation is that after two or three epochs we will be able to see the impact to the network, if it is as expected volume will continue to grow, and income will grow with it. At this point after the data is collected the community can come to an agreement about whether there has been a fruitful 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).
Nothing is needed to implement this change. RenVM governance (currently controlled by the Ren team as per Phases · renproject/ren Wiki · GitHub 1) can set the BURNing fee with a call to the renBTC (and other) smart contracts.