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

[tfns]

This proposal is expected to appear on Snapshot for voting on 2022-01-16T00:00:00Z. 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 OCEAN pool from 0.2% to 0.5%.
• The OCEAN pool on Bancor has the deepest liquidity in a DEX, 4.22x 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 OCEAN pools on Ethereum are:

The OCEAN/BNT 0.2% Bancor pool with $10,942,593 liquidity [1].

The OCEAN/ETH 0.3% Uniswap v3 pool with $684.91k liquidity [2].

The OCEAN/ETH 0.3% Uniswap v2 pool with $2,590,169 liquidity [3].

The OCEAN/ETH 0.3% Sushiswap pool with $747,777.16 liquidity [4].

Motivation

The OCEAN/BNT pool is 4.22x larger than the second-largest pool for OCEAN is on Sushiswap at 0.3% fee.

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.

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 OCEAN pool from 0.2% to 0.5%.

Against

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

[1] Bancor: Converter 554 | 0x5a7BB6aDF00A1d6284773887fCAdce079c636567
[2] Uniswap Info
[3] Uniswap Info
[4] https://analytics.sushi.com/pairs/0xee35e548c7457fcdd51ae95ed09108be660ea374