I would like to build on the solid research already published by Clockwork (
https://steemit.com/bitshares/@clockwork/bitshares-fees-the-fee-schedule-and-dex-profitability) and Abit (
https://steemit.com/bitshares/@abit/bitshares-block-chain-historical-data-search-analysis-and-visualization)
I was interested with Clockwork’s observation that the BitShares reserve pool is running at a chronic deficit. So far as the community desires fiscal balance and sustainability, it’s clear we must decrease expenses (witness/worker proposals) or increase income (revenue from fees). Decreasing expenses significantly is short-sighted because BitShares has a lot of growth ahead and doing so would be akin to cutting the legs from under ourselves. So naturally we should have a conversation about increasing network operations and or the fees associated with those operations.
I am against raising networks across the board before considering how the bitUSD/CNY variable fee can be used to support the health of the network (witness/worker proposals). As shown below, fees are already rather high, even by centralized exchange standards. For some of the more popular trading pairs, users face fees over 0.3% in total. With only a small fraction of that actually going to support the core infrastructure of the platform.
Fees in context:
Hypothetical fees incurred on 100 bitUSD round-trip trade for BTC and back
BTS Network Fee bitUSD Variable Fee Private Gateway Fee
OpenLedger 0.01156 $0.10 $0.20
GDEX 0.01156 $0.10 $0.10
RuDex 0.01156 $0.10 $0.05
The private gateway fees are off the table for this discussion. What is immediately noticeable is how much greater the bitUSD variable fee is than the network fee. Of course, the difference is less on smaller orders and greater on larger orders. Still, considering bitUSD/CNY have shown robust trading activity this is a data point that the market can bear significantly higher fees than the flat network fee.
When the bitUSD/bitCNY variable fees were originally introduced I was against them. Notwithstanding the results of the liquidity market operations (the explicit intention of the additional fee) I have come around to realize a much bigger point. The demand for trading bitUSD has proven rather inelastic with respect to the transaction fees.
Elasticity is a short-hand economics term meaning how much market participants will alter their behavior in response to a given change. E.g. alcohol and cigarette taxes are considered the most efficient taxes because they do not alter behavior significantly – people who smoke will likely continue to smoke whether the cost of a pack amounts to two USD or three. The upshot here is that bitUSD is a unique token and the market demand for trading remains robust despite the increased fee. If we want to increase the reserve pool, we should consider tapping some of the current fees levied on bitUSD/CNY or increasing network fees slightly on those assets alone.
A second observation is the 20/80% referral vesting mechanism. Even a strong increase in network activity/revenue will have a muted effect so long as only 1/5 of the revenues are actually returning to the reserve pool. I understand the original reasoning for such lucrative referral structures. I also think it’s worth having a discussion whether this structure has yielded the results the community feels is worthy of such a high price to pay. This is the most immediate way to increase the force multiplier of network activity. At the same time I recognize this may be a sensitive topic because people may have planned according to this current 20/80 program.
So my calls for discussion are:
1) What do you think of augmenting the fee structure on bitCNY/USD to increase the flow to the reserve pool from the trading of those assets?
2) What do you think of slightly modifying the ratio between referrer vesting and reserve pool income?