RFC-000-022: Introduce minimum fee cap for small RenVM TXs

[Sabobi]

@Arviee

Do we really not need any kind of defense system against bad actors spamming RenVM with TXs that cost a fraction of a cent and a 0.15% fee with no min. amount?

I think you are frontrunning the issue a bit, what is a spam txs to begin with? DNO’s get paid for every transaction so as long as hardware capacity doesn’t get strained then it should be fine. Arb bots can be perceived as spam but is it really spam? Either way this is not really an issue until host<>host between low fee chains is activated, for now anyone spamming would lose more than they gain being hit with renVM + respective chain fees. There are also many ways to fight spam, I don’t see a need to create a firewall just to avoid those.

@Arviee

Even if disregard this and go with your route with no min fee cap on RenVM, which makes sense in the future you envision. But what about now? Can you shrug off everything I said in this post?

I think you have seen in other posts in forum from me that I’m generally against tinkering for small amounts. (yup 125k is tiny ), I firmly believe focus should be outwards on onboarding more users and integrations, not strangling existing small userbase to gain more revenue. Take any big TradFi company as example, early stages they always sacrifice revenue over user growth.

There are many ways to increase revenue as well, the adjustment you suggest makes more sense to me when the project is well established with at least 100x more revenue, at that stage it will have much more input from developers and much more data to go on. At this stage I just see this as unnecessary tinkering so we feel good about slight increase of DN rewards, I can’t see the benefits over harm (technical cost) long term…

@Arviee

At the moment our two biggest earners are Curve and RenBridge, one of which is our product. Why not enable min cap fee on the RenBridge itself and leave the RenVM as it is?

Why not focus on onboarding more integrations like Curve and RenBridge instead? Those are win-win situations

@Arviee

I think that’s a solid option as well. We’re not limiting RenVM usecases, but profiting more from the bridge using an industry standard practice.

I wouldn’t use anything in DeFi as “industry standard” at the moment, we SET the standards and should not follow experiments unless they have strong validation of working well. No DeFi project out there have been resilient towards market downtrend, yet. Still very early

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Just to add a small note as well, since everything is in the open any decision governance takes can/will be used against RenVM if possible, there are plenty of Blec’s out there.

How do you think this proposal will be seen? (Think adversarial)

For fudsters this can be used as an argument for the “renVM fees can never secure the network” and say “you see! they are forced to squeeze every penny out of users just to pay themselves”.

I know it’s a bad argument, but bad arguments gain traction many times as we have seen. I rather have a bulletproof model and do changes like this when there is asymmetric benefits, right now there is no asymmetric benefit, just a few bucks more to an already low revenue.

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Final comment, maybe I am too idealistic but I am a strong proponent of financial inclusivity over capitalistic drainage. Crypto is setting new standards and the ethos is very different from TradFi. I rather see Ren as a “open to all” totally permissionless and trustless protocol that serves as infrastructure for everything within interop. The more restrictions you put the more incentive you give people to fork you and offer same service without those limitations, and we all know people loooove to fork haha

Example, bitcoin will eventually face difficulties as block rewards decrease, should they establish min fee cap as well? It would be quite an absurd suggestion right? Why, because it’s a protocol for all. That’s the vision I believe RenVM should hold on to, there is really no limit to how big RenVM can get if we approach it with right attitude and don’t cripple ourselves on the way.

Min fee cap is imo crippling since governance will HAVE TO intervene later to adjust those fees and thus invite/introduce drama, I simply cannot see a scenario where fudsters wont start nonsense arguments as soon as governance intervenes with dApp revenue on top of renVM.

[DeFi_Whiskey]

I’m a bit confused with this post. You are saying we should be sensitive to users who have smaller amounts and cannot afford high fees. E.g.,

@darknode_bot

[N]ot everyone is as fortunate as us and may be just starting on their crypto journey with some spare money from work. Let’s support those just getting started and combat the impulse to make crypto a game for whales only

That sounds very reasonable. But then you write:

@darknode_bot

This bot supports a $5 min or, the greater of $5 or X% of the transaction.

Ok, but that is going to make it more expensive for anyone transacting on RenVN with amounts less than .11 BTC, as noted by the OP. This proposal would actually raise prices on the people you want to help. Or am I misunderstanding this?

[MaxRoszko]

@Arviee

Do we really not need any kind of defense system against bad actors spamming RenVM with TXs that cost a fraction of a cent and a 0.15% fee with no min. amount?

There is no worry about this because they are paying the underlying chain fees as well. So any BTC mint for instance already costs significantly more than $5 by default for users since they are paying 2 bitcoin transaction fees already.

So adding another $5 extra would price out more transactions.

[DeFi_Whiskey]

Firstly, let me say this is a well thought out proposal, and I like that people are thinking of how to maximize revenue. In general, a min fee sounds reasonable. I agree it’s something we should consider, definitely.

My issue, however, is not with the proposal per se, but the lack of strategic clarity we have regarding revenue. Simply put, what are we trying to achieve each epoch? For example, are we ok with doubling or tripling our fees (revenue) if, by doing so, we further increase TVL / locked REN? At one time we had a goal of 2x locked REN to TVL to secure the network. Right now we have 8x TVL to locked REN. We would need the price of REN to be 5 USD to achieve our previous target, assuming TVL stayed constant (which it wouldn’t if the price was at 5 USD, but whatever, no need to go there).

But you might add, don’t worry! Technical improvements mean we don’t really need 2x locked REN to TVL, it’s now actually less! Ok, great, how much less? Nobody seems to know… But it’s less. So do we just not care about TVL now and maximize fees as much as possible, regardless of the TVL impact? Is 8x TVL to locked REN way too high, so we should be careful and try to reduce? Is 4x our goal? 1x? I have no idea. Anyone? How can we have a sales strategy when this is not crystal clear?

In any case, we prefer volume, not TVL, right? But it seems the use cases we have with Curve and Badger aren’t really about volume, more about TVL. Mint, lock your renBTC, collect fees. Arbitrage opportunities, of course, are still interesting, and tend to be high volume (in, out). Can we build on that in some way? Or again, perhaps we don’t need to as caring about high TVL is so 2020… I have no idea!

Whatever happened to time based pricing? Is that off the table? If we really want to increase volume, then shouldn’t we make it very cheap to get in and out of RenVM, but expensive to stick around? Isn’t that where we need to go to align pricing with our strategy, assuming the strategy is volume over TVL? But what use cases support that? Where are those partners? What are we doing to drive high volume growth (assuming that’s our strategy)?

When I run the numbers, one thing is clear: if we want to maximize Darknode revenue each epoch, we need to focus on renBTC. It’s 99% of our volume. But it’s hard to craft a strategy when I’m not even sure what we are trying to achieve now, what we want to maximize, minimize, etc.

Maybe it’s not even renBTC? Maybe is going to be renUSDC that takes us to the next level? Ok, if that’s the case, when will this go live? Who are the typical users, and how will our fee structure change? Will it differ from our renBTC structure? Have we thought this through? Or is this more a 2023 question, so we’re back to thinking of what we want to do with renBTC in the meantime?

In light of this strategic vacuum, I tend to prefer keeping things simple. Which is why I’m not too keen to tinker at the edges of pricing, when there is something fundamentally missing right now: an actual sales strategy. So I would be against this proposal until we have a strategic framework that helps us all align on what we want to do to increase revenue. Ideally linked to a product roadmap, and aligned with our major partners. Or at least some insight into who those partners should be. Until then, I like .15% everywhere.

[Arviee]

@MaxRoszko

There is no worry about this because they are paying the underlying chain fees as well. So any BTC mint for instance already costs significantly more than $5 by default for users since they are paying 2 bitcoin transaction fees already.

I wasn’t talking about BTC. What happens when users start going BSC <> Solana <> Polygon <> FTM <> AVAX and so on?

@Arviee

Do we really not need any kind of defense system against bad actors spamming RenVM with TXs that cost a fraction of a cent and a 0.15% fee with no min. amount?

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Anyway, I think I’m getting the sentiment here…

The negative, which wasn’t mentioned yet, is that losing (pricing out) some % of people doesn’t mean just losing people, it also means loosing satisfied and happy marketing buzz, that these people might generate (aka them spreading the word). In the looong term this, along with a possible negative PR spin by “blecs”, might have a negative effect even if we account for increased income from the group that remains…

[Woodgast]

I disagree with this proposal, although it is well written :).

We are in the bootstraping phase, I don’t only mean bootstraping renASSETS liquidity on different chains, I also mean bootstraping the user base.
I would prefer to achieve 10M$ daily volume with 100k transactions worth 100$ each rather than two 5M$ transactions.

The bigger the user base, the better for long term success. Introducing a 5$ minimum fee would draw back a lot of small tx, we can not afford to ignore this market. Plus, a lot of unhappy people are louder than a few happy one. I believe cross chain micro payment are going to be a thing, I vote for RenVM to be the standard for this from the start.

Lastly, RenVM is a new technology, it can be a bit scary to use for the first time.
Host-to-host is coming and is probably going to add some UX ambiguity. A lot of new users will welcome the possibility to play around and discover the protocol with relatively small test tx, and of course, small fees :).

Cheers

[darknode_bot]

I wanted to highlight a few things that were said here and to update my previous comment a bit. I retract my support for the $5 min. Let me explain:

From @Sabobi:

First point and a question, in a future where low cost TXs are widespread, we will likely see quite a few high frequency transfers from one chain to another, right? – @Sabobi

This is good; we’d love this. In a multi-chain future with all kinds of financial products on each, the opportunity and need to balance pools will be commonplace. Much like KeeperDAO does, running multi-million dollar arbs that make a few hundred dollars, we want these transactions flowing through Ren VM, so a simple percentage of any transaction makes the most sense to enable this future.

I think you have seen in other posts in forum from me that I’m generally against tinkering for small amounts. (yup 125k is tiny ), I firmly believe focus should be outwards on onboarding more users and integrations, not strangling existing small userbase to gain more revenue. Take any big TradFi company as example, early stages they always sacrifice revenue over user growth.

Agree. As I’ve argued in the Ren Report, volume and integrations are all that matter right now. Now that we have our main ETH L2 and ETH competitor chains live, getting renBTC supported is as many products being built on those chains as possible is paramount.

There are many ways to increase revenue as well, the adjustment you suggest makes more sense to me when the project is well established with at least 100x more revenue, at that stage it will have much more input from developers and much more data to go on.

+1 to this as well

From @DeFi_Whiskey:

My issue, however, is not with the proposal per se , but the lack of strategic clarity we have regarding revenue. Simply put, what are we trying to achieve each epoch?

IMO, continually more volume, thus more fees. It’s a better marketing tactic volume-wise to be adding new integrations and “destinations” for Ren-wrapped assets, as thus volume, than squeezing our existing base for a little more at this juncture, as Sabobi mentioned.

When I run the numbers, one thing is clear: if we want to maximize Darknode revenue each epoch, we need to focus on renBTC. It’s 99% of our volume. But it’s hard to craft a strategy when I’m not even sure what we are trying to achieve now, what we want to maximize, minimize, etc.

Maybe it’s not even renBTC? Maybe is going to be renUSDC that takes us to the next level? Ok, if that’s the case, when will this go live? Who are the typical users, and how will our fee structure change? Will it differ from our renBTC structure? Have we thought this through? Or is this more a 2023 question, so we’re back to thinking of what we want to do with renBTC in the meantime?

Other wrapped assets are nice but the market cares about BTC first and foremost. RenFIL and renDOGE are nice to have, but as as DNO, they really don’t put money in my pocket in an amount that I care about. I just let those fees sit in my dashboard and maybe I’ll withdraw them one day but for now, I personally only care about BTC as it’s nearly all of our volume and will continue to be, probably until USDC launches.

In light of this strategic vacuum, I tend to prefer keeping things simple. Which is why I’m not too keen to tinker at the edges of pricing, when there is something fundamentally missing right now: an actual sales strategy. So I would be against this proposal until we have a strategic framework that helps us all align on what we want to do to increase revenue. Ideally linked to a product roadmap, and aligned with our major partners. Or at least some insight into who those partners should be. Until then, I like .15% everywhere.

+1 to this as well.

[DeFi_Whiskey]

@darknode_bot

IMO, continually more volume, thus more fees. It’s a better marketing tactic volume-wise to be adding new integrations and “destinations” for Ren-wrapped assets, as thus volume, than squeezing our existing base for a little more at this juncture, as Sabobi mentioned.

Ok, but we’re back to my question on TVL. Does it matter? Or perhaps better stated, how much does it matter at this point in Ren’s development, and how much should it influence our sales, marketing, and partner strategy?

Because the short term is all about renBTC. As darknode operators, we would like to maximize our monthly income. That seemed to be the point of the original post. Ok, so let’s maximize. Clearly to do that we need to go after the market leader, wBTC.

In August 2020 I would have told you it’s only a matter of time before we overtake wBTC. Why use a centralized option when renBTC is cheaper, faster, etc. But from a peak in October, we have slowly declined, while wBTC has greatly expanded. Why? Yes, I realize we don’t primarily care about TVL, it’s volume through RenVM. But let’s keep it real, TVL greatly impacts volume at this stage in our development.

So either we go after wBTC through proper marketing, partner offerings, etc., and accept a likely much higher TVL if we succeed, and (more importantly) much higher ratio of TVL to locked REN, or we don’t. I don’t see any other sales play in the short term (over the next 12 months or so) that can really move the needle in any significant way.

Speaking of partner offerings, isn’t the owner of Ren one of the largest users of wBTC? Seems a pity we can’t convince him to give all or at least some of that business to us, right? Why is that? Have we asked?

I would use Greycore on mainnet as the game changer, and aggressively market renBTC as a replacement to wBTC in parallel with this launch. I would lobby Alameda Research and their affiliates to use and promote renBTC, as well. I would start to talk to all major projects about renBTC as a replacement for wBTC, certainly every project that is part of Greycore. But again, TVL…

[Nabako]

I’m also against this idea; as it would negatively impact small users; that will be turning to other solution. We need to grow our user base. Those users with minimal fees; once used to RenVM will probably come back; no matter what is their amount in the future (smaller or bigger). We need to create one of the easiest way to Defi; without excluding anybody; and create this eco-system of chain iteroperability; where people come back; because it is easy to use, and accept anybody, and has tons of integration available.

[ubersnazz69]

I completely agree with this sentiment – my general impression from community discussions so far is we’re expecting host <> host to bring a lot of arbitrage to RenVM, which will increase DNO earnings. Arbitrageurs are going to look for the path of least resistance, so really I think our target should be more along the lines of “what’s the bare minimum we need to charge to divert routes away from other solutions”

Has anyone conducted any analysis on bitcoin addresses interacting with RenVM that also interact with WBTC? I’d be very curious whether we see some users utilizing both, and whether transfer patterns indicate why one might pick a solution over another (e.g. maybe we see large sums going through WBTC and smaller more frequent sums going through RenVM?)

[Big]

I feel like a minimum may not be the best approach. That said it seems most volume seems to come from large mints, and I think these large mints would happen regardless of fees. Therefore I think a strong case could be made for 0.5% mint/burn or even 1% fees.

[Fredy87]

I agree that mínimum fees should exist, but they should be as low as possible, preferably lower than all other competitors. I would suggest using a 5$ mínimum fee across all assets and chains.