Bancor Improvement Proposal ETH/BNT Fee to 0.05%

Bancor Improvement Proposal ETH/BNT Fee to 0.05%

This proposal is expected to appear on Snapshot for voting on Saturday 28th August 2021 at 4:00 pm UTC. Make sure to stake your vBNT for voting BEFORE this date and time to participate in the DAO decision.

The effect will be active on 1st September

TL:DR

• Without testing, nobody knows the optimal fee for the ETH/BNT pool.
• The fee has been at 0.1% for a long period of time and data on performance already exists for that time period. A higher fee of 0.15% has been reverted.
• This proposal suggests a fee decrease to 0.05% in order to evaluate any changes in volume, fees generated, vBNT burned and fees/TVL of all pools

Current Fee

The 0.1% fee associated with the ETH/BNT pool has been static for a long period of time. Certainly long enough for a wealth of data on:

• Volume
• Fees
• vBNT
• Fees/TVL

Now that we have a baseline measurement, this proposal suggests that we decrease the fee by a very modest 0.05% in order to monitor the consequences on the measures above.

If this performance of the protocol improves, a future proposal could suggest a further decrease to zero. If performance sufferers, a future proposal could suggest a increase in the fee.

A Philosophical Argument

The Bancor Protocol has many parameters that can be adjusted in order to fine-tune its economics. Another such example would be the Vortex Fee.

This proposal argues that in the rapidly changing world of DeFi and AMMs, we should actively be experimenting with and testing these parameters in order to consistently improve the performance of the protocol over time. This approach is similar to Toyota’s Kaizen philosophy.

To quote the great Mr Dylan, “he who is not busy being born is busy dying”.

A Rational Argument

The BNT / ETH pool has the most volume as shown above. This means most trades are ETH / TKN to enter the bancor ecosystem. Best case would be to attract more volume to bancor by further lowering the fees to 0.05%. If overall volume goes up but the ETH pools performance is worse than before bancor should consider compensating the ETH pool. Basically this means to subsidize the ETH pool in order to gain more volume. If this is succesful zero fees should be considered aswell.

Timing is essential

The increase to 0.15% had a bad timing. It was impl. at the top in May and was rolled back at the bottom in July

Due to bitcoins seasonality, as shown below, the fee should be lowered on September 1st and evaluated on November 1st.

Measure success

There are several ways to measure success but trade count is probably the best we have. A lot of variables affect the total trades, including market volatility, gas fees, news hype, etc. If we take the weekly moving average of total trades we should be able to calculate if an increase in trades is related to lower fees or overall market conditions.

The proposal is a success if the average weekly trade count goes up more or goes down less than expected. Voting should start on the 29th of August

What happens after November 1st

If it was a success a follow up proposal will be created to set fees to 0% and add permanent BNT rewards for the ETH pool. Aiming for 5-10% APR.

If it failed fees will be reset to 0.1%

Voting Instructions

To support changing the fee to 0.05%, vote FOR

To oppose changing the fee, vote AGAINST