Proposal: Stablecoin pools fee experiment and analysis

This proposal is expected to appear on Snapshot for voting on [date=2022-01-02 timezone="Europe/Lisbon"]. Make sure to stake your vBNT for voting before this date and time to participate in the DAO decision.

TLDR

• This proposal seeks to set the USDT/BNT, USDC/BNT and DAI/BNT pool fees to 1%, 0.5%, and 0.2%, respectively, from 0.2%.
• There isn’t enough evidence to conclude that there is a linear relationship between pool fee and volume, given that many other factors influence volume in the pools.
• The three stablecoins serve as an interesting experience, as we can set their pool fees to different values and evaluate the impact of the change.
• The goal is to ultimately increase APYs for these pools.

Abstract

Weekly volume and fees from the USDC, DAI and USDT pools from the week of the 30th of August have been consistent (Figure 1 and 2).

Figure 1 - Weekly Fees for DAI, USDC and USDT pools.

Figure 2 - Weekly volume for DAI, USDC and USDT pools.

Total volume on Bancor for intervals ending in November 2021 can be found in Figure 3.

Figure 3 - Total Volume on Bancor for intervals this year

And since there were fee changes for all the stablepools to 0.2% in February 2021, we can look at the Bancor Volume at the 7, 14, 21 day intervals either side of the change (Figure 4).

Figure 4 - Volume on Bancor either side of Fee Change.

Motivation

An analysis on the effect of the pool fees on pool volume conducted on the USDC/BNT, USDT/BNT, and DAI/BNT pools showed that there is not enough evidence to support a linear relationship between them (Figure 5, Figure 6, and Figure 7).

For the DAI pool (Figure 7) there is a minor (not statistical) decrease in market share upon changing the fee 0.1% -> 0.2% as measured at the 7, 14, 21, and 30 day intervals. While the overall market share has significantly increased (300 days either side).

Figure 5 - USDC pool fee changes with market share before and after the Fee change. The 1000, 2000 and 3000 x axis values represent a 0.1%, 0.2% and 0.3% fee, respectively.

Figure 6 - 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.

Figure 7 - DAI pool fee changes with market share before and after the Fee change. The 1000 and 2000 x axis values represent 0.1% and 0.2%, respectively.

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

https://gov.bancor.network/t/proposal-trac-bnt-fee-change-schedule-and-performance-analysis/3239/2

In conclusion, there isn’t enough data to conclude that changing the pool fees is affecting the volume. With this experiment, the USDC/BNT, USDT/BNT and DAI/BNT pool fees will be set to different values, and an analysis and comparison between them, similar to the analysis on the TRAC pool, will be performed.

In the end, this trial alongside the TRAC pool one, will hopefully provide more data to assist in choosing appropriate fees to optimize APYs for the LPs. Further experiments may be presented to the DAO if the results from this one are inconclusive.

For Change the pool fees for the USDT/BNT, USDC/BNT and DAI/BNT to 1%, 0.5%, and 0.2%.

Against

Keep the pool fees for the USDC/BNT, USDT/BNT and DAI/BNT at 0.2%.