RIP-000-003: Increase minting fee to 0.25%

[loong]

Name: Increase minting fee to 0.25%
Category: Protocol
Status: Final - Accepted - Implemented
Scope: Increase the minting fee to 0.25% and monitor impact.

Overview

This RIP proposes increasing the minting fee for all assets to 0.25% at the end of the current epoch (4 days from now). After at minimum one week, and at maximum four weeks, a new RIP will be proposed.

The new RIP may propose raising the minting fees to 0.3%, lowering the fee to 0.2%, or keeping the fee at 0.25%. Generally, this will be guided by the impact on revenue that is observed: no impact resulting in a raise or staying of the fee, and negative impact resulting in a lowering of the fee. The new RIP will be the point at which everyone can voice their opinion about the impact (whether it has been positive or negative for income).

The reader should be familiar with RIP-000-001 and RIP-000-002 because this RIP is, in some sense, a continuation of them. Much of the discussion already had on these RIPs applies to this one too.

Details

After last month, the TVL within RenVM has decreased as desired, and the revenue of RenVM increased slightly (despite the decline of DeFi yields). As required by RIP-000-001 it is time to propose the next change in the minting fee to continue trying to find the right fee based on demand, but also to continue demonstrating that we can lower the TVL without necessarily impacting revenue.

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. It is important to isolate impact as much as possible, so this RIP only proposes modifying minting fees, and strongly recommends that burning fees not be changed until experimentation is complete. See RFC-000-007 for many in-depth discussions about this particular point.

Minting fees should be adjusted to meet demand, however, we must also be mindful of changes in market conditions, and the fees of other projects that also offer BTC on Ethereum (given that this is dominantly our current major source of revenue). The suggestion to raise to 0.25% is lower than 0.3% (as proposed by RIP-000-002; which was must more contentious), and is the same as the cost of minting WBTC.

The expectation is that after one week (and before four weeks) a new RIP will be opened that proposes a further increase, or a decrease. This is an opportunity for the community to come to an agreement about whether there has been a material impact or not.

This RIP has no impact on future chains, which will begin with 0.1% minting and burning fees, unless another RIP proposes otherwise (and is accepted).

Implementation

Nothing is needed to implement this change. RenVM governance (currently controlled by the Ren team as per https://github.com/renproject/ren/wiki/Phases ) can set the minting fee with a call to the renBTC (and other) smart contracts.

[Twinkieboy]

I am super In favor of this rip as our current bump to 0.2% has had no negative affects !

[preston]

Based on what I have gathered, it seems like we are seeing the desired effect from raising the fees, an increase in burns, a decrease in mints, decrease in TVL, while maintaining income and potentially growing it partially.

There are other factors weighing in increase in BTC value which has caused an increase in the total TVL of the entire DEFI space, despite the total BTC locked growth rate has slowed down substantially in comparison to the last 2 epochs.

wBTC a direct competitor, has managed to continue to grow their TVL since it is of no concern to them throughout this period. However it is worth noting the slower rate of growth which is in line with we see in most of DEFI.

I support this RIP for an increase, and further in support of starting new chains with a higher Mint fee than 0.1%, if we are concerned about an overly congested TVL then we shouldn’t heavily incentivize too much volume with new chains.

That being said, if we want to encourage both Volume coming in from new chains with a low MINT and balance the TVL, the team might consider a continuous fee, it’s a sure-fire way to get people to BURN with some expediency, and it exists for this very condition we are burdened with.

[Rentard]

It would be useful if Loongy could clarify whether this applies just to RenBtc or not? The first sentence states this will relate to all assets. Does that also include renbch and renzec?

I am not in favour of increasing the mint fee at this time since I feel we need a competitive advantage over wbtc until we start seeing volumes improve.

[Thomm]

I support this motion!

[loong]

This new minting fee applies to renBTC, renZEC, and renBCH on Ethereum. It will not apply to new assets or new chains that are coming in the future.

[kopriwac]

I am more in favor and I support the increasing of the mint fee to 0.25% (this RIP) rather than directly to 0.3%. I think smaller steps are better to avoid potential abrupt changes in minting volume.

[MaxRoszko]

I am in favor of this proposal.

[DavidPerkins]

The data shows that over the past epoch, mint revenue increased despite mint volume continuing to steadily decrease.

Below is the daily volume of mints vs. burns. The green line is the 7d moving average of mint volume, which has been decreasing steadily and is currently at all-time lows.

Below is the daily revenue from mints vs. burns. The green line is the 7d moving average of mint revenue. Despite mint volume decreasing compared to the previous epoch, mint revenue increased.

Based on this data, I’m in favor of 25 bps for minting renBTC on Ethereum only. Because we’ve already built up liquidity, mint revenue is likely now more important than mint volume for renBTC on Ethereum. It may also incentivize minting on other chains, which would benefit the Multichain. And TVL did decrease, but more due to a surge in burn volume (see red line in first chart), which should be unrelated to mint fee changes, than the steady decrease in mint volume.

Disclosure: These graphs do not account for changes in market conditions. While it’s difficult to isolate the effects of our fee changes against the market, this data is still relatively valuable.

Thanks to Jon T. for these graphs and your SQL wizardry!

[DavidPerkins]

It’s worth keeping in mind that these fees will also affect burn-and-mint fees once these transactions are enabled early next year, as bridging renBTC from Acala/BSC/Solana/etc. to Ethereum would cost 10 bps to burn and another 25 bps (under this RIP) to mint on Ethereum (35 bps total).

[BodyMulah]

I am in favor. In terms of collecting data, I believe the increase is too little to get meaningful causality given the immense noise of data. But better than no increase.

Eying wBTC mint fees is a valid argument, but I actually think it is important to see what happens if we go beyond that. How rational is the market and how much is the ease of use worth to users?

[JBMasterCrypto]

As stated on the previous RIP, I am in favor of increasing the minting fee to either 0.25% or 0.30%.

[DeFiFrog]

@preston

I support this RIP for an increase , and further in support of starting new chains with a higher Mint fee than 0.1% , if we are concerned about an overly congested TVL then we shouldn’t heavily incentivize too much volume with new chains.

@preston and I have many shared sentiments as shown in the RFC7 and RIP2 threads. I also agree here and support an increase to 0.25% + separately, unrelated to this RIP, I support an increase to fees for new chains (or at least support a discussion on the topic)

Personally, I think the more aggressive approach of

1. jumping from 0.2% to 0.3% and adjusting down to 0.25 or 0.35 afterward is more favorable than
2. jumping from 0.2% to 0.25% to 0.3%… but I default to the Ren team’s leadership and judgment.

I have yet to re-examine/update how the recent 0.1% to 0.2% has impacted volume/revenue. Last time I checked, our volume only decreased ~20% and revenue actually increased by ~60% while TVL declined. With this trajectory, a mint fee increase should continue to bring us to equilibrium.

[Greg]

I am in favour of this proposal.

[yahtzeefish]

I am in favor! Long live Ren!

[Joel]

I am in favor of this proposal.

[Fabian]

I support this proposal

[Baro]

I support it, just like the proposal for 0.3%.

[DeFiderek]

I support this proposal. I have read all of the proposals/comments so far since forum has been live. But this is my first time getting involved in any way. Looking forward to putting in my 2 cents in the future. I do tend to agree with some others that putting the fee up to 0.3% then bringing it down from there would possibly be more beneficial rather than bringing it up 5bps I can’t see this having much of an impact with such a small increase. However willing to see the outcome.

[TooOrangey]

Whenever there’s a degree of information asymmetry, I find it’s always beneficial to back the person in whose favour the asymmetry lies. If Loong thinks this is the way forward, then I’m willing to follow his lead. I’m therefore in favour of this proposal.

#rentoten #everyonewilluseren