Name: Temporarily Decrease Minting & Burning Fees In Time For H2H
Author(s): Shilliam Shakespeare (@BlockchainBard)
Contributors: Various community participants (Discord)
Category: Protocol & Fees
Scope: To discuss the potential reduction of minting and burning fees to incentivise H2H usage.
Host-to-host arriving on the RenBridge brings with it an enormous opportunity to put our bridging technology into new hands, and exponentially increase our userbase, network volume, feedback, and overall target audience. It also gives us a much-needed opportunity to become competitive in the bridging space once again, by incentivising and encouraging usage of Ren’s products - especially our anticipated H2H capabilities and features.
My personal concern is that the currently excessive 0.36% minting fee is surpressing the project from gaining increased user adoption on the altar of protecting TVL. As Arvie pointed out in this week’s Community Call, when choosing a bridge - the user simply compares minting fees and opts for the cheapest one (regardless of any other benefits/features). These users also do not share our concerns over TVL, and simply want the bridge that offers them the least friction possible.
My fear is that offering just H2H incentives won’t attract users while this 0.36% fee continues to potentially act as a financial ‘barrier-to-entry’, and we should in fact consider TEMPORARILY reducing friction on a protocol-wide basis to encourage H2H adoption and usage (from the user’s first mint).
Given some of the support from other community members, I feel there should be a strong discussion on significantly decreasing the minting and burning fee to compliment the H2H launch and announcement.
When it comes to tracking the effectiveness of reducing fees, I think the following are good starter metrics for the community to consider and analyse:
- An increase of unique addresses using the RenBridge (can this be tracked?)
- An increase in unique visits to the RenBridge site?
- Daily volume target: $15m-$20m (currently $7,429,269)
- Monthly volume target: $400m - $500m (currently $208,019,554)
- Darknode fee target: $500 - $1,000 per epoch (currently ~$400).
The community is more than welcome to provide additional suggestions as to how we track the success of H2H with such fee incentives.
Direct evidence/data here is a tricky one, but I will share some of my personal observations which I feel support the premise of the RFC:
Several users on social media have pointed out to me (months ago) that the fees were too high for them, and they wanted me to explain why. I’ve spent a long time going through my old tweets but finding their original comments is unfortunately like trying to find a needle in a haystack.
We’ve also seen a visible reduction in mints through the RenAssets bot for example. With the overwhelming majority of bigger TXs being burns. This I feel has indeed helped to reduce the TVL as the team wanted back in September 2021.
While trying to compare fees, I managed to find this AnySwap medium article from June 2021, where they ran a free trial incentive for the public for one month to support ‘Anyswap Router V3’. They also claim to be the most competitive on the fee front, having the ‘cheapest fees amongst all cross-chain plaforms’
Something for the community to consider:
A Twitter user yesterday shared his views with me regarding Ren’s current fees:
Feedback from DeFiDad regarding the current fees:
Here are the results so far from my ongoing Twitter poll, but the responses are too unreliable to be taken with serious consideration:
I think our current approach towards fees sends a conflicting and contradictory message to users (especially as we’re on the cusp of heavily promoting H2H usage).
On the one hand:
We will announce H2H and promote it as heavily as possible as a community, as well as plan marketing incentives/use the CEF etc.
But on the other hand:
We’re also telling users not to use our bridge ‘too much’ because we’re more concerned about security, and we’ve put up this high minting fee to discourage such usage. I don’t think this is a good look, or the right message to send out to potential users. Especially if one of our goals is to increase volume.
As you may already know, the main argument for increasing the fees to begin with was because the team shared their concerns about the TVL being too high. This was a completely valid argument, and the community voted to raise minting fees and lowering burning fees to decrease the TVL.
The core objective was to significantly decrease the TVL and prioritise security as much as possible (especially with the upcoming transition to the Greycore). Ren is not 100% collateralised, and with all the hacks that have occured in DeFi - the community (including myself) voted to change the fees to favour TVL.
My personal issue with the TVL fee change, was that there was no clear objective, or definition of what a successful change in fees would do for the TVL. No target was specified, and the fees were changed on the loose premise of ‘reducing the TVL as much as possible’.
- Has the current minting fee impacted the TVL?’
If we look at data from the Command Centre, we can see that 3 days before the Snapshot vote was passed - the TVL was sitting roughly at $1.1bn:
One month later, on October 26th - the TVL went on to hit an all-time high at $1.5bn:
The TVL did finally start to come down, as expected after the snapshot vote. But it took until early December before we were back down to the TVL seen at the time of the snapshot.
On the 13th December - the TVL finally went below the levels at the time of the snapshot.
As of today, the TVL has shown a trend that supports the predicted decrease after changing the fees. Also worth noting that network volume has also declined during this same period.
- Since the time of the snapshot vote (23rd September) The TVL has been reduced by $196,135,434.
Whether this reduction was worth changing the fees is ultimately for the community to decide.
Other points to consider:
The RenBridge in its current state can already compete in all the key areas required of a bridge:
- Speed etc.
But I feel we aren’t competing in the main area users care about most - fees. I worry and speculate this may have cost us a lot of potential users to cheaper bridges (users that we may have to win back).
With H2H, we should instead focus on getting people ‘through the door’ - even for just a few months - 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. Playing with the UI, and taking advantage of our superior UX. I believe there will have to be a point as a project where we start prioritising TVT over TVL - and H2H could be our perfect opportunity to do 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 amounts etc. Announcing a reduction of fees on top of the launch has the potential to act like a double catalyst - with words like ‘cheaper’ and ‘free’ always attracting user interest as Arvie highlighted yesterday.
Another question I think the community needs to address is:
‘Prioritising the TVL over user adoption and competitiveness will come at what cost?’
Here is how I envision the new fees being implemented (subject to a community vote)
- 0.1% to 0.15% | Mint fee
- FREE to 0.15% | H2H TXs
- FREE to 0.1% | Burn fee (to assist with TVL).
With this approach towards fees:
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.
Making the changes temporary:
Such fee changes would obviously be a temporary venture with the aim of supporting and complimenting the H2H announcement. After a time period of 1-3 months, the community could review the impact of H2H, or change the fees once more if the volume and TVL reach unstable levels (see below).
The obvious disadvantage to reducing fees in this manner is that the TVL could indeed begin to increase dramatically. While most of the community anticipates an increase in network volume after H2H, it is impossible to predict by how much.
If the TVL and volume were to dramatically increase, then I would be happy to support another RIP/RFC to raise fees once more - but the specifics will need to be decided.
- What level of TVL is too much?
- What fees would we revert back to if so?
- How long would we be willing to keep the H2H incentives going if the TVL stays the same?
One way this could be addressed is by having conditional changes to the fees (as proposed by @Thomm I think).
The community could agree to keep the H2H incentives as long as TVL < $2.5bn for example. If the TVL went above that figure we could always increase the minting fees once again.
These exact figures however need to be addressed and agreed by the community beforehand.
Please share your concerns in the mean time fRens, if there’s enough support for this RFC then I shall encourage its escalation to an RIP.
Given the expected launch of H2H at some point this month, the community would have to act swiftly and vote to reduce fees in time for the announcement