Proposal: Change the fee in the AMP pool from 0.5% to 1%

[tfns]

## This proposal is expected to appear on Snapshot for voting on 2022-01-02T00:00:00Z. Make sure to stake your vBNT for voting before this date and time to participate in the DAO decision.

For this proposal to pass, it requires a 20% quorum and 66.7% supermajority.

TLDR

• This proposal seeks to increase the pool fees on the AMP/BNT pool from .5% to 1%.
• The AMP pool on Bancor has the deepest liquidity in a DEX, 1.45x the liquidity of the second largest pool.
• The second largest pool, AMP/USDC on Uniswap v3 has a pool fee of 1%.
• 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 AMP pools are:

The AMP/BNT 0.5% Bancor pool with $17,718,863 liquidity [1].

The AMP/USDC 1% Uniswap v3 pool with $12.10m liquidity [2].

The AMP/WETH 0.3% Sushiswap pool with $4,080,183.81 liquidity [3].

The AMP/ETH 0.3% Uniswap v2 pool with $6,964,529 liquidity [4].

Motivation

The second-largest pool for AMP is on Uniswap V3 and it is paired with USDC, which means LPs in the pool can incur significant IL. Fees are set to 1%.

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.

Proposal: TRAC-BNT fee change schedule and performance analysis

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. This i…

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

1. Increase the pool fee in the AMP pool from 0.5% to 1%.

Against

1. Keep the pool fee in the AMP pool at 0.5%.

[1] Bancor: Converter 582 | Address 0x6a74941C1Cf4151b3f15CdD84eE3abDe713A999B | Etherscan

[2] Uniswap Info

[3] Uniswap Info

[4] https://analytics.sushi.com/pairs/0x15e86e6f65ef7ea1dbb72a5e51a07926fb1c82e3

[glenn]

It’s a good pool to experiment with since we also have LM rewards ongoing which means that LPs are getting yields from BNT rewards (should there be any negative consequences in volume). Hopefully, this will let us draw some useful conclusions based on the fee changes that have happened and determine what the right percentage should be. My only concern here as compared to the TRAC pool is that there is liquidity in other DEXes whereas for the TRAC pool it is clear that we have no competition whatsoever (the uniswap pool is tiny in comparison). Is there an interval of time for how long we are looking to evaluate the changes in this pool?