RFC-000-031: Setting the initial BurnAndMint fee

[Thomm]

@Sabobi

I would like to suggest setting the BurnAndMint fee as low as 0.01 (1bps)

I like your train of thought, and as you say a high burnAndMint volume increases demand for ren assets across the board which should incentivize the minting of ren assets which still carries a high fee. One way to look at it might be as follows, if ren assets are virtually free to magically pop from one chain to another this greatly increases their utility.

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@Liberty

i seriously doubt there will be any meaningful difference for most users between five basis points or 15

Maybe so when fees get in a certain range, but what we observed at Anyswap is that charging a 0 fee on MIM did greatly increase its volume compared to other assets as MIM was the bulk of total volume (unfortunately cannot find the exact numbers right now). I think fees follow an S type curve, where near zero fees (0 - 5 bps?) greatly incentivizes usage, when you get to median fee range (5 - 50 bps?) usage is quite inelastic to the fee but very elastic compared to zero fees, once you go above a threshold (100+ bps?) usage almost completely teeters out as it becomes simply irrational to use it. Where the actual ranges are is anyone’s guess at this point though.

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@fuzzylogic

Should we see this as bootstrapping period?

Agreed it should be a bootstrapping period only, this is also implicit by the fact that a proposal to change fees can be created at anytime by anyone.

However, if we go this route we might need to be prepared to keep burnAndMint fees at near zero for quite some time in order to allow stable liquidity to build up.

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@Woodgast

Here is a table with different fee strategies/number of nodes, to estimate the protocol earnings, assuming a daily volume of 200M$

I like this approach! However, there is one assumption to this table which is that volume is completely inelastic to the fee. What we should not forget too is that this is a new transaction type so it will come on top of the fees that we are currently earning.

@Woodgast

That being said, 0.01% seems very low, an agressive strategy, with decent darknode earnings would hang more around 0.05% - 0.07% in my view. When I mean decent darknode earnings, I mean enough to attract new DNOs, community members, and REN holders

Apart from just earnings we can add to this equation usage, growth rate and potential future earnings. Doing 1B volume per day, with consistent growth numbers might be better for community growth than doing 10M per day with declining usage but slightly higher fees for operators. Of course those are extreme examples to drive the point and there is a large area in between

[MaxRoszko]

@Thomm

As for the structure of the RIP vote, I think it makes sense to go with a ranked-choice vote.

Agreed, and this is available in Snapshot as well! I strongly suggest we should go with this option for the reasons @Thomm mention.

[JayM]

I support bootstrapping H2H by beginning with a low fee. However, 1 bps does seem quite low without at least a roadmap or guide to follow on how we will increase the fee over time.

Whether it is time based (after x months, fee increases to y) or volume based (once volume z is reached for x amount of time [days, weeks, months?] in a row, fee increases to y), I’d prefer to have some idea on how we plan to proceed in the future. I don’t know what the value of those variables should be, but it should be based on some sort of market research like what @Woodgast posted above and not just what we think might work.

Detailing a plan to increase the fee of course would still allow us to raise or lower the fee with a new vote as needed or as new information becomes available or as market conditions shift. But planning to act in a reactionary way should not be our default. Even if a plan is not followed to the letter (are there any whitepapers that are still relevant/accurate?), it is always better to have something in place.

[davoice321]

i think a key question people have is they don’t know whether low fees actually attract users versus having an easy to use product that’s accessible and also has the assets you want to bridge.
Ren hasn’t had this, so the argument that RenVM needs to compete on price may not be accurate. Rather it may be hat RenVM needs to compete on features and accessibility.

Right now the Darknodes are largely symbolic. They don’t do any work and are really just there to demonstrate that people are willing to lock up capital in exchange for some percentage of fees flowing through the network.

Given the need to keep DNOs on board during this period (and the recent rash of de-registrations due to low/stagnant fee income), I think some nominal fee that splits the difference between creating accessibility for partners and maintaining some level of income generation for DNOs who are comparing yields to other opportunities for their assets should be considered.

I vote for higher than .01, but enough income to keep DNOs happy and engaged as volume (hopefully) increases as it becomes easier to use the network.

[Amaguq623]

running a DNO, you’d like to see 10-15% steady return and a nice crypto printing press, and possible market value increase for the future. My FIAT index funds brought in 20-25% the last few years. Nodes are leaving now because the volume sucks and the market value of Ren is super anemic. Although one major exchange that integrates Ren and takes off might change the entire outlook, for sure.

[Lightning]

We need to seriously consider this low fee approach for BurnAndMint. what we need is more eyes on RenVM as a product, integrations with protocols driving volume and deep liquidity for renAssets. A low fee achieves all 3.

This is an important time for Ren and I think we need to take some bold action and a page out of Anyswaps book. They took a risk and it paid off. They have market share and awareness thanks to their initiative.

I want all DNO’s to consider this; if there is no liquidity for renAssets our whole ecosystem collapses. We need to make RenVM an attractive integration for protocols so they can do the job of providing the swaps at low slippage so that renAssets can move frictionlessley between chains.

I support a BurnAndMint fee of 0.01 to bootstrap the network

[Maggie]

@ShilliamShakespeare raised a good point in last community call: many users complain the high minting fee for renassets (0.36%) prevent them from using the bridge.

The way I see it we may have two contradictory actions working at the same time. On one side we have a high minting fee to deter high TVL for security and to facilitate Greycore transition and on the other side we want cheap (almost 0 as has been suggested) H2H transactions. It’s like rowing in two opposite directions because cheap H2H transactions do not address the fact the opening transaction is perceived as high by the users

If we are therefore serious in increasing the volume and bootstrapping the initial period of H2H with cheap fees then we should think in also decrease the initial minting fees (from 0.36 to 0.15 -0.2% ?) while preserving the low burning fee.

This way all factors are set in the most favourably way to increase volume

[Arsengasp]

I would highly suggest we stay between 0.1% - 0.2% range. I would be quite disappointed to see it being lower or higher than these perimeters judging with all the data we have gathered over the last 14 months or so.

[preston]

I think with every good feature that required as much work as this, which will bring on new use cases we should charge for. We are a premium product, in terms of safety and feature sets. I think since these transactions are new a discount from the MINT seems reasonable, but something above our burn which is very low. I think 0.15% - 0.20% seems right, but knowing that many people on the call were advocating for free, I would be happy with at least 0.1%.

[Liberty]

After yesterday’s community call, I have been swayed to the position that we would gain market share and users much faster if we offered BurnAndMint at a low-or-no-fee introductory rate. I like the idea of having a three or six month term to let users see what RenVM can do for multichain arbing and other strategies.

The important point here is that users will still need to pay mint fees to get into the RenAsset ecosystem, and burn fees to get out. But what a bonanza it might be if users knew that, for a little while, whatever crosschain moves they made once they paid the price of admission would incur no extra fees. This would also allow us time to see what use cases were most popular and shape a resulting fee structure from the data.

My suspicion is that, with all the competition for bridging right now, nodes will profit more from this strategy in the long run than coming out of the gate charging burn fees, mint fees, and crosschain BurnAndMint fees all from the launch of this next milestone in Ren functionality.

Of course all of this hinges on there being people out there actually willing to build tools, scripts etc. to try out BurnAndMint, so we’ll want to start raising awareness ahead of the official roll-out.

[Thomm]

@Maggie

It’s like rowing in two opposite directions because cheap H2H transactions do not address the fact the opening transaction is perceived as high by the users

Not disagreeing with the fact that our current minting fees might be an obstacle to adoption and volume, but as @Sabobi mentions in the OP renBTC already has good liquidity, so here we can see good volume without requiring additional minting.

Either way, Max reiterated on the call that the team feels very strong about trying to keep the TVL somewhat in check while the first graycore members are being onboarded. Personally I feel lowering all fees as part of an introductory period would be ideal to increase volume, but if we are not able to lower mint fees due to security concerns and the fact that it creates obstacels for graycore onboarding, then I would definitely settle for a low introductory rate on burnAndMint transactions.

Would be good if the team can also talk to both of the points though

[Arviee]

Links for reference:
https://apeboard.finance/ape-bridge (compilation of bridges with fees shown)
https://app.rango.exchange/ (bridge aggregator)
Bridgooooooors - Google Sheets (bridge table)

This is a long post guys, but this might be one of the most important and impactful decisions with long term implications that we as a community have faced and there’s no short way to explain everything in detail, so bear with me guys. I also recorded a video if someone prefers hearing my accent and speaking practice instead of reading this wall of text

2022 01 13 19 37 02

A short background of where I’m coming from, so my POV is easier to understand. I’ve been involved in crypto for four years now and over time I’ve become a member of a number of specialized crypto chats, and I’m fortunate to be able to communicate with and to observe a lot of crypto professionals who are current (or potential) target audience of Ren Bridge and its upcoming H2H functionality. This is why I believe I have a valuable perspective from the other side that I’d like to share with you…

Speaking plainly, we, as in Ren, are completely off the bridging radar for an overwhelming majority of people. My groups wouldn’t even know we existed if it wasn’t for my fanboyism. This view is supported by the Google spreadsheet I’ve linked here. People mostly bridge and farm with stables… That’s one thing.

The second thing people showed by their actions and choices is that they don’t care about what our community likes to call a “premium product”, if it is more expensive. Team, number of hacks, name, decentralization are basically a non-factor for them when making a decision. For example most know Anyswap’s faults: low liquidity with certain chains, risk of funds being stuck longer than expected and piss poor support, but as you can see from the stats it’s not that much of a deterrent. People prioritize low fees, speed and overall UX, in order of importance. They just want to move assets from chain A to chain B as cheaply and as swiftly as possible. If we’re speaking about masses - they don’t care about anything else. And we want to get masses on board, right?

Third thing is that there’s a war going on. A real bridging war! During 2021 a ton of new bridges popped up and now are competing for users and market share. Just check the links to see how many there are! Yes, we were first with renBTC and we did send a certain hype wave with it… But we’ve got to face the facts here: we’re very late with H2H and we’re not going to have the same “wow effect” that we had with renBTC. Most other assets that needed to be bridged are already being moved…

Some fee examples are as follows (only bridge fees, NOT gas):

USDC ETH → USDC FTM - FREE (anyswap)
USDC FTM → USDC ETH - 0.1%, min $80, max $1000 (anyswap)
ETH ↔ Solana - FREE (wormhole)
ETH → AVAX - currently FREE + some kind of airdrop
BSC ↔ Solana - FREE (wormhole)

As you can see from the examples above we’re entering an extremely competitive land and what I propose is a very aggressive approach to user acquisition, in line with the wild times that we are in - let’s go for FREE* for H2H transactions!

For a limited time of course, but free nonetheless. Let’s kick the door down and enter the big interop party with a bang! Currently there’s a free or close to free way to bridge almost any asset to any chain and I’m certain we’re going to struggle, if we go not just with big fees, but with any fees at all.

Did you notice the asterisk near the word “free”? That’s because it’ll be free only when there’s enough liquidity, but that will not always be the case and certainly not the case at the beginning, so people will still have to pay our very high 0.36% minting fee to bring their assets to RenVM, at least initially. And that’s enough of a barrier to overcome as it is. So please keep in mind that free H2H transactions do NOT equal no increase in overall fees earned! H2H assets will have to be minted initially and we will see a boost to DN earnings even with 0% burn&mint fee…

Compared to the real world our (DNO) user acquisition expenses are so low, that it might seem unreal to non-crypto business people. We have no salaries to pay (thanks to Alameda <3), we have no rent, no insurance and close to no hardware costs. And we don’t really have to incentivize users (ex. like PayPal did), because they are already incentivized by the yield opportunities out there. If you look at the user acquisition angle from this perspective you’ll realize we really are in an incredibly dreamy situation and we should take full advantage of it! With this approach we’re generating ZERO negative cashflow and making sure that people actually do come and try our (superior) product. We want RenVM to be in every bridging spreadsheet and to be the top choice on bridging aggregators for every chain we support.

(soon to be) “Decentralized bridging solution with zero hacks and moderate fees” will not create the hype wave on its own, but “The battle tested bridge with $9 billion volume that is FREE*”, with friends like Curve, just might be enough to send the shockwave across crypto-twitter and hopefully some crypto media.

We want to make using our bridge a no-brainer choice! And if some people will not use it, we want their colleagues to make fun of them for not doing so, because the smart choice is so obvious. That’s what we should go for.

We do have incredible fundamentals, but it’s not helping if users don’t know about them. And with us, DNOs, not rushing for short term gains, opens up the creation of this opportunity, that will allow us to form new relationships with an insane amount of new crypto people!

Now pause and think how valuable this is! We just have to be content with a moderate increase to Darknode earnings for a few months… Companies literally pay millions for opportunities like this and it is so easily accessible to us! Of course this also should be paired wi th marketing push for maximum effect. On the community call I’ve asked Max about this and he said that we can expect support from our partners on this front, which is great!

So I propose that we go for 3 months of this introductory rate and add an extra ~3 months (subject to reevaluation) when the offer is about to end. Thill will allow us to:

1. Squeeze more juice from the same idea (think of it like sequels, new twitter posts from partners, community members, etc)
2. Make sure that we’ll have plenty of time to ensure there is sufficient liquidity
3. Allow for maximum number users to get acquinted with RenVM and for word of mouth to reach its peak
4. Create a habbit of using our services and hopefully build up brand loyalty

…I really do think this is one of the most important decisions with serious mid-to-longterm implications that we’ve been faced with as a community and I hope that you’ll see the value (and need!) of the aggressive approach mentioned above.

Thank you, guys!

[Maggie]

@Arviee

People prioritize low fees, speed and overall UX, in order of importance. They just want to move assets from chain A to chain B as cheaply and as swiftly as possible.

If I follow you correctly, these people you are talking about who favoured cheap transactions above all else will somehow not care about the initial 0.36% fee for the privilege to use our bridge “for free”? This does no seem very consistent and if what you are saying is true then this add to my point that we also need to lower the initial minting fee for max impact.

@Thomm

team feels very strong about trying to keep the TVL somewhat in check

I understand this however this is a critical launch in an already crowded and contended space. This is like asking us to run a marathon with a 3kg weight on our heels.
As it has been mentioned, this is for a short bootstrapping period of time where we low fees to bring users.

We also don’t know how long more will take for the Greycore nodes to be fully operational.

I think the worst thing we can do moving to this new period is ignoring the feedback we have already received about our fees from our users or potential users.

@Thomm

as @Sabobi mentions in the OP renBTC already has good liquidity, so here we can see good volume without requiring additional minting

Maybe, maybe not. This is a costly assumption. These users that are already in renbtc may have a complete different profile and just be happy with long term positions.

Overall I will support extremely low H2H fees (0.01-0.03) only if initial minting fee is also decreased in order to be consistent. Otherwise I would vote for a H2H transaction fee between 0.05-0.1.

[Arviee]

@Maggie

If I follow you correctly, these people you are talking about who favoured cheap transactions above all else will somehow not care about the initial 0.36% fee for the privilege to use our bridge “for free”? This does no seem very consistent and if what you are saying is true then this add to my point that we also need to lower the initial minting fee for max impact.

Some liquidity will be incentivized. It was mentioned Fantom is very friendly in this regard. Perhaps Ren Labs, Curve, Saber and/or other partners are willing to help bootstrap initial liquidity. More communication from the core team is welcome on this matter.

Some people will understand that they have to pay the initial minting fee only once and then it’s smooth sailing with free transfers. Very worthwhile for users who frequently move assets.

We also have CEF that can help with this to some extent, for 1 asset or two, where the liquidity will be in demand, but lacking…

And some people will not have to pay this fee at all, because there will be enough liquidity for their desired asset on their chain (renBTC, wink-wink)…

…there’s a ton of renBTC already locked in RenVM on different chains. Solidifying it as the de-facto choice for interchain Bitcoin is our goal numero uno. Allowing it to be moved for free is a good place to start!

[Maggie]

@Arviee

Some people will understand that they have to pay the initial minting fee only once and then it’s smooth sailing with free transfers.

Yeah but why would they do that if as you mentioned, they are already doing the transaction in other bridges for much lower cost. The initial barrier is still there.

Additionally, for how you describe this user, we will not be able to raise fees later on because they will migrate to the next cheap, no fee bridge. So we better start charging something small (0.05-0.07?) and no starve DNO for an unknown period of time. We need balance here.

[Arviee]

@Maggie

Yeah but why would they do that if as you mentioned, they are already doing the transaction in other bridges for much lower cost. The initial barrier is still there.

Barrier gets removed by the points that you didn’t quote. The quoted user’s portrait is of one who is already loyal to Ren (Bridge), who has tested it with renBTC, is fine with paying uncapped fees and shares our values in regards to security. He’ll gladly pay one time fee to use the bridge freely in the foreseeable future.

@Maggie

Additionally, for how you describe this user, we will not be able to raise fees later on because they will migrate to the next cheap, no fee bridge. So we better start charging something small (0.05-0.7?) and no starve DNO for an unknown period of time. We need balance here.

By charging it you’re just handing out market share to other bridges. Nothing beats “F-R-E-E”. And by having free transfers you’re making bridging competition bleed. You’re taking their food, that they would eat later on (because nobody is going to have free transfers indefinitely).

And getting user’s attention now allows us to communicate with them and educate them on the benefits of RenVM. And as I already mentioned in the OP, this approach stimulates the formation of a habbit. People are extremely habitual beings and the power of that habbit should not be underestimated. This goes hand in hand with building brand loyalty, which is opportunity that becomes possible only after you get masses on our side.

[Maggie]

@Arviee

The quoted user’s portrait is of one who is already loyal to Ren (Bridge),

I’m sorry Arviee but it seems there is a contradiction here. In your long post you mentioned an user that doesn’t know we exist, this cannot be a loyal renBridge user. I thought the point of your post was to attract this user or more new users.

To attract new users or users as the ones you describe that don’t know us, is required to set the table in a way to make it worth it to go and try. So to compete with what is already out there we need to make it really appealing.

Imagine pub 1 where there is a sign that say, all drinks free, entry:$100. Next door there is pub 2 that says: all drinks free, entry: $20 (by the way you are trying to convince regular customers from pub 2 to go to bar 1). Hard to compete.

[Arviee]

@Maggie

I’m sorry Arviee but it seems there is a contradiction here. In your long post you mentioned an user that doesn’t know we exist, this cannot be a loyal renBridge user. I thought the point of your post was to attract this user or more new users.

The loyal user is not the subject of my long post. But the loyal user does exist and he will help provide the liquidity to the users I portrayed in the OP.

There is no contradiction.

[Amaguq623]

next pub door says closed for business, we gave all our drinks for free and didn’t charge a cover.

[BlockchainBard]

First of all, thanks for putting this all together Arviee - it’s a very compelling proposition and well worth the read given the potential impact on the protocol.

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I agree completely that H2H should have strong incentives such as the ones you outlined in this post (if not free TXs). Host-to-host is an incredible opportunity for us to onboard new users, and I think our priority should be to incentivise using the new tech as much as possible.

I also have to agree with @Maggie regarding the current minting fee, which I think is very likely surpressing the project from gaining increased user adoption on the altar of TVL. As you pointed out above (and in the call) - the user simply evaluates bridges on face value, and opts for the cheapest one. My fear is that offering H2H incentives won’t have any impact on people who are already unwilling to pay the 0.36 fee (and are using AnySwap instead as a result etc.)

If we’re going to offer such awesome new tech to the space, then users should be given the chance to use it and benefit from it with as little friction (and barriers to entry) as much as possible. We can already compete in terms of security, robustness, reliability, and speed; but we aren’t competing at all on the fee front - and I worry this has cost us a lot of potential users to cheaper bridges (that we may have to win back).

With H2H, we should instead focus on getting people ‘through the door’ as much as possible trying the tech, increasing user adoption, obtaining feedback from them, and letting users experience first-hand the benefits of our bridge. At what point do we start prioritising TVT over TVL? I think H2H is our golden opportunity to do just this.

Having such a high minting fee disincentivises and discourages user adoption by making our cheaper competitors look more attractive, creating a financial ‘barrier-to-entry’ - when we should be making the RenBridge accessible and usable to all people regardless of TX sizes etc. There’s no better way to attract user attention than to announce discounted fees across all TXs, or ‘FREE’ certain TXs as you highlighted yesterday. Words like ‘Cheaper’ and ‘free’ will always harbour attention from the market - regardless of the business or product.

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As mentioned in yesterday’s community call, I’d rather see something along the lines of:

0.1% to 0.15% | Mint fee
FREE to 0.15% | H2H TXs
FREE to 0.1% | Burn fee (to assist with TVL).

This way:

The expensive ‘barrier to entry’ is removed (making H2H usage more likely).
We become competitive in ALL areas (security, robustness, fees etc.)
We have the best chance at attracting new users/increasing our user base post-H2H.
We have a better chance at ‘winning back’ potential users we may have lost to cheaper competitors.
DNOs could make potentially increased fees from the incentivised mints/burns.

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As hard as it might be to sell this to the community, it would obviously be temporary like Arvie’s 3-6 month suggestion for example. If there was enough support from the community I would be willing to create an RFC for this, with a key metric being to see if we increased our user adoption/daily volume averages etc.

Just my thoughts