Community members are urged to read nikolaalx’s comments in full; however a brief summary of the most important points are provided below:
- If the fees are enforced at 0.15%, the pools currently under nikolaalx’s control will no longer be profitable.
- The changes could make Bancor more attactive for swappers in the short term. However, the lack of profitability for liquidity providers will result in shallow pools, and rising slippage costs. The slippage costs are a much greater concern for traders than fees, meaning the overall result is likely to be contrary to what BIP4 asserts.
- APR alone is what attracts liquidity providers, and in its current state, the V2.1 protocol cannot deliver a compelling incentive with mandatory 0.15% fees across all pools.
- Responsible liquidity providers can fine-tune their commission using data from public aggregators to manage the finances of the pool.
- An overwhelming majority of BNT/USDT orders below 4k BNT (80% vs 20% on Uniswap) was captured on the Bancor pool, despite a dramatically higher fee (1.5% vs 0.3%).
- The outcry from the community regarding apparently toxic influence of the 1.5% fee was therefore unfounded.
- Comparing Bancor to Uniswap is fundamentally erroneous, as the risk geometry of the two platforms are entirely different.
The rebuttal also provided a counter-proposal: leave the flexible trading fees as they are, and educate pool owners to better utilise them. In particular, using tools such as 1inch.exchange to reverse-engineer, backtest, and fine-tune the pool settings. Nikolaalx asserts that high liquidity and properly configured fees should be able to attarct approximately 50% of organic trading traffic to Bancor.
Nikolaalx also proposed a price discoverability oracle with access to the same tools could provide a dyanmic, automated fee structure. However, discussions with the Bancor team revealed that this represents an overhead expense that well outside of the realm of reasonability.
The case argued by nikolalx is that a mandatory 0.15% fee structure is untenable, and highly damaging to liquidity provider APRs. Taken to its logical conclusion, this will create a runaway problem where shallow liquidity pools experience high slippage, thus more than offsetting the intended relief for swappers. Nikolaalx speaks from a claimed position of authority, providing upwards of $300,000 worth of liquidity to the system.
The development team is preparing to release an important upgrade to the Bancor V2.1 pools. Nikolaalx’s comments have been prominently displayed on gov.bancor.network, and on Discord, where they have already been subject of discussion between community members and Bancor developers. Therefore this repeal already satisifies the requirements for community engagement as detailed in BIP3, and can be considered ready to begin voting immediately.