TLDR

This proposal seeks to increase the pool fees on the ZCN pool from 0.2% to 0.5%.
The ZCN pool on Bancor has the deepest liquidity in a DEX, 55.43x the liquidity of the second largest pool.
An increased pool fee will help siphon more profits from arbitrageurs to the protocol and most likely not affect volume therefore increasing APYs for the LPs in the pool.

Abstract

Deepest ZCN pools on Ethereum are:

The ZCN/BNT 0.2% Bancor pool with $5,185,099 liquidity [1].

The ZCN/ETH 0.3% Uniswap v3 pool with $93,537 liquidity [2].

Motivation

This pool shares some similarities to the TRAC pool in which we have the largest amount of liquidity for a specific token.

An analysis on the effect of the pool fees on pool volume conducted on the USDT/BNT pool showed that there is not enough evidence to support a linear relationship between them (Figure 1).

Figure 1 - USDT pool fee changes with market share before and after the Fee change. The 1000 and 2000 x axis values represent a 0.1% and 0.2% fee, respectively.

Mark’s comment on the TRAC pool fee experiment sheds some light into the topic.

"It’s not a bad idea. Analysis of fee changes the DAO has made up to the present suggest we are still in the noise - in general, fee changes make zero difference to trade volumes, and understandably so. To a wide variety of users, the difference between a 0.2% and a 0.5% swap fee is essentially zero. More importantly, lower fees to drive higher volume is not commensurate with increased returns; Uniswap v3 has attained some truly remarkable volumes, but is currently running at a $20M loss."

In conclusion, increasing the pool fee will help siphon more profits from arbitrageur to the protocol, most likely not affect volume and therefore increase APYs for the LPs in the pool and protocol-earned fees.

For

Increase the pool fee in the ZCN pool from 0.2% to 0.5%.

Against

Keep the pool fee in the ZCN pool at 0.2%.

[1] Bancor: Converter 554 | 0x22615044bb10521828845A06ec2176800A3c4B5E [2] Uniswap Info