Proposal: Expand Custom Taker Fee on Stable to Stable Trades

To be posted to Snapshot December 31st, 2023

TL;DR

A previous proposal was brought up to the Bancor DAO that set a 0.001% fee on stable to stable trades for certain trading pairs.

This proposal is looking to expand that list with other possible combinations of those five (USDC, USDT, DAI, FRAX, LUSD) tokens.

Overview:

The default taker fee on Carbon is .2% which means that anyone taking an order from the protocol has to pay this amount. A previous proposal:

was brought up to the Bancor DAO to lower this fee to 0.001% on stable to stable trades for certain trading pairs in order to make Carbon more competitive with stable to stable swaps that are normally lower across all DEXs.

This list currently encompasses the following trading pairs:

  • USDC/USDT
  • USDC/DAI
  • USDC/FRAX
  • USDC/LUSD
  • USDT/DAI

But left out other possible combinations between these five tokens:

  • USDT/FRAX
  • USDT/LUSD
  • DAI/FRAX
  • DAI/LUSD
  • FRAX/LUSD

This proposal is seeking to expand the custom taker fee to these other stable pairs.

FOR: Update the taker fee to .001% on the following trading pairs USDT/FRAX, USDT/LUSD, DAI/FRAX, DAI/LUSD, FRAX/LUSD

AGAINST: Take no Action

2 Likes

Has that existing adjustment to fees on stables resulted in Carbon earning more fees towards fixing the deficit? It doesn’t look like that’s the case, so I don’t see why we should be minimising what little fees are being or could be generated on the less-used stablecoin pairs. Discourage the DAO from doing anything that doesn’t actively increase fees for fixing deficit.

Stable coin pairs in general generate the most fees from volume as the fees for these pairs tend to be low in comparison to volatile token pairs (you can look at Uniswap v3 and curve to see that the vast majority of volume has happened on the 0.01% fee stablecoin pools USDC-USDT & DAI-USDC and 3pool on curve).

Without having low fees for these pairs, this means that Carbon is not a competitive venue for trading these coins as most volume will go towards pools with lower fees.

1 Like

Having reviewed existing strategies and all-time volume on Carbon, it does not appear that the current 0.001% fee has been competitive or compelling to bring in traders with any size, even on the most popular stable pairs. I don’t see how sacrificing more fees on less popular pairs helps address the deficit; all it seems likely to do is artificially inflate values like TVL.

Carbon needs both makers and takers in order to be a successful protocol. We need to be competitive on stable pairs so that makers creating strategies in the protocol will have good order execution. Good order execution on stable pairs is hard to achieve with a taker fee of .2% and orders might not execute properly unless the two assets see significant divergence against each other.

Without having competitive fees on stable pairs, it means that the market will not prefer Carbon for taking orders (assuming stable coin strategies are created in the future). We might not have that many stable pair strategies created on Carbon currently but we should make sure that we are setting up makers for success if they decide to create them in the future.

4 Likes

This has now been implemented.

5 Likes