DIP-8: Reduction of LP Fees for Major Stablecoin Trading Pairs

Abstract

DIP-8 proposes reducing the LP portion of the trading fee for the USDC-USDT (ETH) and BUSD-USDT (BSC) trading pairs on the DODO platform to improve our competitiveness in the stablecoin trading market. This proposal includes increasing the rewards for LPs to compensate for this decrease.

Motivation

DODO's stablecoin trading fee is currently 0.01%. Because of this relatively low fee, the liquidity for stablecoin trades on DODO is very good, which gives us a competitive edge in the market. However, DODO's price advantage in the stablecoin trading market has been challenged by the adjustment of the Balancer DAI/USDC/USDT pool’s trading fee to 0.01% and the addition of a pool with a 0.01% swap fee to Uniswap v3.

Rules

We propose to adjust two stablecoin trading pairs on the Ether and BSC networks, namely USDC-USDT (ETH) and BUSD-USDT (BSC), by reducing the LP portion of the trading fee to 0 for these two pools, with the other portions of the fee for these pairs remaining unchanged.

Ever since the DIP-3 proposal was passed, 80% of the trading fee was allocated to the liquidity provider (LP), 15% was used to repurchase DODOs and distribute them to vDODO holders in the form of vDODOs, and 5% was used to establish a community vault.

If this DIP-8 proposal is passed, then for the USDC-USDT (ETH) and BUSD-USDT (BSC) pools, the fee will be reduced to 0.002%, of which 75% will be used to repurchase DODOs and distribute them to vDODO holders in the form of vDODOs, and 25% will be used for the community vault.

Since the LPs of both pools will no longer receive a portion of the trading fees, DIP-8 proposes to compensate the LPs by increasing the DODO token rewards for both pairs to cover the LPs’ reduction in fee revenue. Specifically, the token rewards for both pools will be increased by 10%, as follows:

• The USDC-USDT (ETH) rewards will be increased from 2 DODO per block (1 DODO for USDC and USDT respectively) to 2.2 DODO per block.
• The BUSD-USDT (BSC) rewards will be increased from 0.4 DODO per block (0.2 DODO for BUSD and USDT, respectively) to 0.44 DODO per block.

Summary

• Lowering the stablecoin trading fees could improve DODO's competitiveness in the stablecoin trading market, and could allow us to gain more trading volume, bring in more users, and potentially attract more whales and professional traders - making DODO the best place for stablecoin trading.
• LPs on USDC-USDT (ETH) and BUSD-USDT (BSC) will not receive revenue from trading fees, but they will receive more revenue from DODO tokens through the compensation plan and overall revenue will exceed what it was before fees were reduced.
• Fee income and equity will remain the same for both the platform and vDODO. Increased liquidity will lead to increased trading volume and therefore higher dividends for vDODO holders.