Proposal: Change the fee in the BAT pool from 0.2% to 0.5%

## 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 BAT/BNT pool from 0.2% to 0.5%.
  • The BAT pool on Bancor has the deepest liquidity in a DEX, 6.95x the liquidity of the second largest pool.
  • 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 BAT pools on Ethereum are:

The BAT 0.2% Bancor pool with $19,727,975 liquidity [1].

The BAT/ETH 0.3% Uniswap v3 pool with $2.84m liquidity [2].

The BAT/ETH 0.3% Uniswap v2 pool with $1,023,135 liquidity [3].

Motivation

The second-largest pool for BAT is on Uniswap V3 at 0.3% fee but with 14.40% of the BAT/BNT liquidity.

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.

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 BAT pool from 0.2% to 0.5%.

Against

  1. Keep the pool fee in the BAT pool at 0.2%.

[1] Bancor: Converter 547 | 0xd72e360Eb08B36450849dc533edC1B8dB1Bd6D91

[2] Uniswap Info

[3] Uniswap Info