Reasons for Lowering Fees

[clayop]

The fees are high compared to other crypto exchanges but their model is different. They issue IOU's in exchange for cheaper fees because the trading is all done off chain with the promise to honor the transactions (assuming they don't get robbed). Our trades are done on chain, no trust required, and therefore cost more. When compared to traditional exchange businesses we are insanely cheap. Best price the average consumer can get on the NYSE is about $7/trade - and that's not even "on chain".

So we can target the tiny crypto market or make it a fertile ground for people to run their businesses on and go after the "real" markets.

Theoretically, you're right. We have a different and better model and we can differentiate our product.

But, do we only have advantages? No. We also have two realistic problems.

First, many of our active trading pair are UIAs. They are not free from trust issue, so our advantage of "trustless" disappears. (but we still have the honest order book advantage)

Second, there may be additional fees to convert to Smartcoins. For instance, Transwiser charges 0.3% fee on converting CNY to bitCNY. So using trustless system is somewhat expensive to customers.


Using DEX is not that cheap realistically. Can you really persuade traders in Poloniex to use our DEX instead of Polo? The first reaction of them is "liquidity is low", and the second one would be "fee system is not attractive".

[Riverhead]

The fees are high compared to other crypto exchanges but their model is different. They issue IOU's in exchange for cheaper fees because the trading is all done off chain with the promise to honor the transactions (assuming they don't get robbed). Our trades are done on chain, no trust required, and therefore cost more. When compared to traditional exchange businesses we are insanely cheap. Best price the average consumer can get on the NYSE is about $7/trade - and that's not even "on chain".

So we can target the tiny crypto market or make it a fertile ground for people to run their businesses on and go after the "real" markets.

[theredpill]

We are refunding 99% of order creation fee if it is canceled.  So the cost to create/cancel is very small (just enough to prevent spam).

The end result is that the "order creation fee" becomes a "minimum fee" for filled orders which has the effect of preventing dust orders.

The minimum order fee will probably be similar to a transfer fee, $0.20 per filled order, $0.05 for lifetime members.

@bytemaster

Why charge a % fee on the maker just to maybe refund that if he cancels the order, when you can just charge all on the taker. Is the taker that pays the fee anyway by agreeing with the price + fee of the book, think about it.

Also I'm with clayop on fees, today I was showing the system to a friend of my and he asked about the high fee, we need to a least find some middle term acceptable, I think our main niche on short time are going to be exchange anyways, just look at centralized ones, They try to not charge much money on the in out process but only the actual match of order, but then charge high. I totally agree with this approach, is the exchange of goods that create most value for the parts, not transference.

[Empirical1.2]

@clayop, @Empirical1.2

You keep repeating over and over again that the transfer fees are too high for two reasons:
(a) because some community members "feel" it this way
(b) because other crypto-currencies are offering lower prices

It makes little sense to discuss a pricing policy without specifying a target group and a marketing strategy.
If your aim is to just target "everyone", then I think we will not find a common ground.

In this thread I made an effort to describe a marketing strategy which includes both online merchants and online consumers.
If you are willing to offer an alternative strategy - I'll be happy to see it.

I find that you continually distort responses and use subjective arguments to forward your point of view. I've already countered the majority of your points here and often had to repeat myself, so I would advise referencing my position there...  https://bitsharestalk.org/index.php/topic,19833.msg255105.html#msg255105

to all for this complicated but interesting and useful discussion from many key viewpoints, imo 

Just to share, there are a few interesting articles about popular crypto exchanges and a little bit on their fee structures/solutions...

  Very interesting and relevant to look at what other exchanges are doing.

Trying to break into a business field where the established competition already has razor thin margins is almost a guaranteed failure.  We need to focus on staying profitable and exploiting our niche market of decentralized trading.

 

Couldn't have said it better myself. 

What is the value of a decentralized exchange that no centralized exchange can replicate?  Sell that value.  If the value is non existent then the whole thing is pointless. If it is there then people will pay.

While the exchange can charge high fees once it's more established given it's advantages, in general, if you don't like competing with Centralized businesses on razor thin margins then you'd have to engage in business activities Centralized companies are often unable too.

An example of decentralized business that I predict will do well (because it adds massive value and is not competing against razor thin margins) is Augur sports betting.

- The average sportsbook operator charges up to 10% vig, and betting exchanges like Betfair charge a base rate of 5%. Augur will charge just 1%.
- Unlike crypto-exchanges which most markets have access too, sports betting is limited in many major markets.
- To address the problem of intial liquidity, it looks like Augur will have an automatic market maker to offer tight spreads.

So all the ingredients are there. Massive added value, initial liquidity and all for a vastly reduced price. Add a referral programme or even not and it's incredibly easy to see how they'll be successful. 

This isn't a pitch for Augur, though I'd support prediction markets. It's just to demonstrate there are decentralized business models that leverage the benefits of decentralization to add massive value while at the same time charging less & hopefully also addressing (yet to be seen) the initial liquidity problem.   

Getting into the crowded, competitive exchange business with the intention of charging more with low/no initial liquidity even with the benefits of decentralization is very challenging. I think you will ultimately settle on lower transfer fees or it may require a significant catalyst, like a major centralized exchange failure to focus the market on it's benefits & justification for charging more. (Similar to the way Cyprus and Greece were positive for Bitcoin.)

As stated previously if a $0.2 basic transfer is too expensive for users in many markets, the referral income from a lower transfer fee would logically still be meaningful too. Depending on customer acquisition and transfer rates, less may also ultimately be more, for all markets at this stage.

[thera]

  to all for this complicated but interesting and useful discussion from many key viewpoints, imo 

Just to share, there are a few interesting articles about popular crypto exchanges and a little bit on their fee structures/solutions:
http://www.coindesk.com/bucks-to-bitcoin-top-exchange-platform-fees-compared/

While anyone who is/will be interested in Bitshares could be willing to pay a little more due to the philosophy/current brand(what we have and are aiming for that noone else provides yet: no counter-party risk, privacy, stability(but still dependent on liquidity), blockchain speed & DAC platform, economically fair/ideal ecosystem & more), it's very important to keep our existing users preferences in mind, of course, as well. And bc the crypto exchange business is competitive- Gemini has low volume currently, though they seem to be aiming for more institutional traders http://www.coindesk.com/winklevoss-bitcoin-exchange-gemini-win-traders/ ,  maybe there are some ideas in them to consider(possibly another way to support the merchants as well)?:

http://theblogchain.com/bitcoin-exchange-reviews/bitfinex-review/
"Another benefit of Bitfinex is a very nice fee structure. They run a partial maker-taker system, where the market maker ends up paying between .1% and 0(!)%, and the taker pays .2%. I believe they’re able to offer these fees because of the unique free market leverage system they utilize. By moving their risk to the lenders, they lower fees. They also pick up a percentage of the interest (15%), which again helps to keep their advertised fees down while keeping profits up."

Also, I believe OKcoin uses withdrawal fees though not sure how well that's going as their CTO left to work for Bitfinex.
And Bitstamp seems to have lowered their fees to .25%.

http://www.coindesk.com/high-frequency-trading-on-the-coinbase-exchange/
"Market-making also delivers real social utility. The deeper the liquidity provided by market makers, the more difficult it is to cause erratic spikes in price. Market makers also reduce the bid-ask spread, a concept most people aren’t even aware of: a testament to successful practitioners on Wall Street.
Even at current trading volumes, a lot of value can be captured by smoothing out market fluctuations. If bitcoin were to grow, the need for liquidity would also increase. I’ve learned that infrastructure isn’t just servers and github repos. It’s also financial middlemen(bots) who make markets work. The mere fact that I could dabble in this, as nobody, illustrates the wonderful openness of bitcoin."
(Bitshares currently seems to be working on this now)

[clayop]

@clayop, @Empirical1.2

You keep repeating over and over again that the transfer fees are too high for two reasons:
(a) because some community members "feel" it this way
(b) because other crypto-currencies are offering lower prices

It makes little sense to discuss a pricing policy without specifying a target group and a marketing strategy.
If your aim is to just target "everyone", then I think we will not find a common ground.

In this thread I made an effort to describe a marketing strategy which includes both online merchants and online consumers.
If you are willing to offer an alternative strategy - I'll be happy to see it.

You're distorting my arguments in some points (actually b is correct)

(1) Our competitors are providing much lower fees than us (as you mentioned)
(2) Fee is relatively high compared to our market cap. You may want the number. We have 4,000 times higher fee relative to market cap than BTC
(3) If high fee drives out customers, referral program won't work
(4) Voting result suggests that shareholders want lower fees

If you truly believe high fees are better, why don't you complaining about currently lowered fee (now transfer fee is only $0.13)? Let's increase the fee

https://bitsharestalk.org/index.php/topic,19981.0.html

Add: @jakub I think high-fee advocates are also based on their own feelings. If not, can you provide reasonable numbers and statistics?

[jakub]

@clayop, @Empirical1.2

You keep repeating over and over again that the transfer fees are too high for two reasons:
(a) because some community members "feel" it this way
(b) because other crypto-currencies are offering lower prices

It makes little sense to discuss a pricing policy without specifying a target group and a marketing strategy.
If your aim is to just target "everyone", then I think we will not find a common ground.

In this thread I made an effort to describe a marketing strategy which includes both online merchants and online consumers.
If you are willing to offer an alternative strategy - I'll be happy to see it.

[clayop]

Bottom line: leave transfer fees alone at 15-20 cents. Update the trading fees per cryptonomex worker proposal.

If we lower the transfer fees below 15-20 cents, we might as well scrap the referral program.

For the referral program program to work we need the transfer fees to remain at 15-20 cents and they need to be paid by the sender (i.e. online consumer).
Otherwise the referral program is killed both in economic terms and incentive terms (as online merchants lose incentive to advertise BitShares to their customers).

My advice: don't be obsessed by referral program. Referral program will work only when our product is attractive than our competitors. If we have bigger ecosystem than Bitcoin, $0.2 fee may not matter. If you were a merchant, do you really want to use Bitshares? (Instead of Bitcoin with 3rd party services or even Nubits). If yes, why?

[Empirical1.2]

Trying to break into a business field where the established competition already has razor thin margins is almost a guaranteed failure.  We need to focus on staying profitable and exploiting our niche market of decentralized trading.

 

Couldn't have said it better myself. 

What is the value of a decentralized exchange that no centralized exchange can replicate?  Sell that value.  If the value is non existent then the whole thing is pointless. If it is there then people will pay.

Absolutely and unequivocally wrong.



I don't really think you're idiots but are perhaps too close to the project & are over-estimating it's value to the end user without first attracting liquidity.

 Liquidity > Decentralized > Centralized

You only have more value than a Centralized exchange when you pass a minimum liquidity threshold and if you cross that you may have a tsunami of customers but without it you are guaranteed to attract very few.

You need to use any means possible, promotions/low fees/marketing & advertising/other to attract those initial users. Even BTC38, an established, liquid, top 10 exchange still ran a free Doge promotion when they opened BTS 2.0 to trading.

Would you use a better constructed shopping mall with no shops/customers? A marketplace with no traders? A better dating site with no profiles? A club with no singles? A better social network site that no-one is on or a content site with no media?

Platforms and two-sided markets are difficult to kick off, in general.

There is often no inherent value in the standalone product for the user without users from the other side.

PayPal: When Paypal figured that eBay was their key distribution platform, they came up with an ingenious plan to simulate demand. They created a bot that bought goods on eBay and then, insisted on paying for it using PayPal. Not only did sellers come to know about the service, they rushed onto it as it already seemed to be getting popular. The fact that it was way better than every other payment mechanism on eBay only helped repeated usage.

Reddit: Reddit co-founder Steve Huffman admitted that the link-sharing site was initially seeded with fake profiles posting links to simulate activity.

Quora and AirBnB: Quora admins answered a lot of questions themselves at first. Brian Chesky talks about how they got the first users on AirBnB themselves literally going door-to-door.

Rentoid: A platform is useless without complementary products. Marketplaces, especially, are dead without sellers posting on them. To solve the chicken-egg problem, some marketplaces create fake supply to attract buyers. Services marketplaces put up fake projects to show activity. Steve Sammartino talks of how he seeded Rentoid.com by essentially buying the initial items himself and renting them out

Dating services know what men want (who doesn’t) and seed the network with photos of Latin American models with eclectic interests (not that the latter matters).

https://medium.com/platform-thinking/how-paypal-and-reddit-faked-their-way-to-traction-9411fb583205#.ajc28n7os

Nearly every successful business understands the importance of those initial users and liquidity to making their business a success and they're willing to get it by hook or by crook. The fact that you think the exchange has high value as it stands without those initial users and liquidity is absurd imo.

While the referral programme needs to be lucrative, fees need to be competitive.

Also if you don't like competing with Centralized businesses on razor thin margins then you'd have to engage in business activities Centralized companies are often unable too.

We're talking about the transfer fees, not the trading fees.  The transfer area is where the razor thin margins are. Bitshares will never win in that arena... And wisely it is not trying to.

Bytemasters worker proposal to update the trading fees is a good solution for bringing our exchange in line with other exchanges.  It will also allow liquidity bots to run which will in turn bring more liquidity.  The api will be upgraded for use with multiple interfaces, which will bring more liquidity.

Bottom line: leave transfer fees alone at 15-20 cents. Update the trading fees per cryptonomex worker proposal.

Personally I believe given that both Yunbi & BTC38 seem to have passed their LTM transfer savings onto the customer by lowering the withdrawal fee, that it's likely they feel the high transfer fee impacts their exchange business. The forum feedback is also that it's a barrier to adoption in China (Alt plus many more) Eastern Europe (a few) & South America (El Mato)

The argument might be that some of those users are not traders, but what else is there to do on BTS besides trading, isn't every current owner of crypto, a speculative trader in some capacity? So I don't really see a major distinction in the market at the moment.

I'm also not suggesting we attempt to 'win' in that area but being the most 'apparently' expensive in your market by a wide margin is likely to equal losing when your platform still has no/low value due to no/low liquidity.

[jakub]

Bottom line: leave transfer fees alone at 15-20 cents. Update the trading fees per cryptonomex worker proposal.

If we lower the transfer fees below 15-20 cents, we might as well scrap the referral program.

For the referral program program to work we need the transfer fees to remain at 15-20 cents and they need to be paid by the sender (i.e. online consumer).
Otherwise the referral program is killed both in economic terms and incentive terms (as online merchants lose incentive to advertise BitShares to their customers).

[clayop]

I don't really think you're idiots but are perhaps too close to the project & are over-estimating it's value to the end user without first attracting liquidity.

 Liquidity > Decentralized > Centralized

Would you use a better constructed shopping mall with no shops/customers? A marketplace with no traders? A better dating site with no profiles? A club with no singles? A better social network site that no-one is on or a content site with no media?

This gets my full support 

[clayop]

We're talking about the transfer fees, not the trading fees.  The transfer area is where the razor thin margins are. Bitshares will never win in that arena... And wisely it is not trying to.

Bottom line: leave transfer fees alone at 15-20 cents. Update the trading fees per cryptonomex worker proposal.

I am talking about both.

My argument: Change transfer fee to BTC level (0.03 cents). Lower trading fee as low as possible but efficient to prevent spam (1 BTS)

[lil_jay890]

Trying to break into a business field where the established competition already has razor thin margins is almost a guaranteed failure.  We need to focus on staying profitable and exploiting our niche market of decentralized trading.

 

Couldn't have said it better myself. 

What is the value of a decentralized exchange that no centralized exchange can replicate?  Sell that value.  If the value is non existent then the whole thing is pointless. If it is there then people will pay.

Absolutely and unequivocally wrong.



I don't really think you're idiots but are perhaps too close to the project & are over-estimating it's value to the end user without first attracting liquidity.

 Liquidity > Decentralized > Centralized

You only have more value than a Centralized exchange when you pass a minimum liquidity threshold and if you cross that you may have a tsunami of customers but without it you are guaranteed to attract very few.

You need to use any means possible, promotions/low fees/marketing & advertising/other to attract those initial users. Even BTC38, an established, liquid, top 10 exchange still ran a free Doge promotion when they opened BTS 2.0 to trading.

Would you use a better constructed shopping mall with no shops/customers? A marketplace with no traders? A better dating site with no profiles? A club with no singles? A better social network site that no-one is on or a content site with no media?

Platforms and two-sided markets are difficult to kick off, in general.

There is often no inherent value in the standalone product for the user without users from the other side.

PayPal: When Paypal figured that eBay was their key distribution platform, they came up with an ingenious plan to simulate demand. They created a bot that bought goods on eBay and then, insisted on paying for it using PayPal. Not only did sellers come to know about the service, they rushed onto it as it already seemed to be getting popular. The fact that it was way better than every other payment mechanism on eBay only helped repeated usage.

Reddit: Reddit co-founder Steve Huffman admitted that the link-sharing site was initially seeded with fake profiles posting links to simulate activity.

Quora and AirBnB: Quora admins answered a lot of questions themselves at first. Brian Chesky talks about how they got the first users on AirBnB themselves literally going door-to-door.

Rentoid: A platform is useless without complementary products. Marketplaces, especially, are dead without sellers posting on them. To solve the chicken-egg problem, some marketplaces create fake supply to attract buyers. Services marketplaces put up fake projects to show activity. Steve Sammartino talks of how he seeded Rentoid.com by essentially buying the initial items himself and renting them out

Dating services know what men want (who doesn’t) and seed the network with photos of Latin American models with eclectic interests (not that the latter matters).

https://medium.com/platform-thinking/how-paypal-and-reddit-faked-their-way-to-traction-9411fb583205#.ajc28n7os

Nearly every successful business understands the importance of those initial users and liquidity to making their business a success and they're willing to get it by hook or by crook. The fact that you think the exchange has high value as it stands without those initial users and liquidity is absurd imo.

While the referral programme needs to be lucrative, fees need to be competitive.

Also if you don't like competing with Centralized businesses on razor thin margins then you'd have to engage in business activities Centralized companies are often unable too.

We're talking about the transfer fees, not the trading fees.  The transfer area is where the razor thin margins are. Bitshares will never win in that arena... And wisely it is not trying to.

Bytemasters worker proposal to update the trading fees is a good solution for bringing our exchange in line with other exchanges.  It will also allow liquidity bots to run which will in turn bring more liquidity.  The api will be upgraded for use with multiple interfaces, which will bring more liquidity.

Bottom line: leave transfer fees alone at 15-20 cents. Update the trading fees per cryptonomex worker proposal.

[Method-X]

Once the api is updated for use with 3rd party trading platforms, bts is going to rocket.  Stay focused on the exchange side. That is our niche, and a very lucrative niche at that.  Forget about competing with bitcoin for transaction scraps.

If we keep having this argument about lowering transfer fees, I'm guessing we will eventually try them out of pure annoyance.  Then we will see the price not go up at all and we will be sitting here with an ultra inflating blockchain.  Devs will disappear because of the lack of funding.  And we will have crushed all the businesses that are building models around the current structure.

Just have a little patience.

You have so many hopes. Do traders like high fees? Lower fee always generate low revenue? (If you say yes, you maybe skeptical about Black Friday's sales).
I'm trying to increase the value (or attractiveness) of BTS. Since I'm a active user (you can see my account page with many trade and transfer records), I have a right to say this.

1. Traders trade where their money is safest and the order execution is best.  Their are hundreds of ultra low spread brokers out there.  Most go out of business within 2-5 years because they can't do both things listed above well.  Plus bitshares is $.15 per transaction... That's nothing. Stop looking at it in bts terms where you think bts should be $1 per share.

2. Black Friday is similar to bait and switch... A low priced item is advertised to get you in the store where you will pay full price for 90% of all the other items you buy. Plus this low priced items is usually held in low stock.

3. Low fees MIGHT generate more revenue, but it definitely will lower our margins.  If low fees don't increase the transactions enough, we are dead in the water as we have just killed any business trying to build on our current fee structure.

Trying to break into a business field where the established competition already has razor thin margins is almost a guaranteed failure.  We need to focus on staying profitable and exploiting our niche market of decentralized trading.

  This guy gets it.

[Empirical1.2]

Trying to break into a business field where the established competition already has razor thin margins is almost a guaranteed failure.  We need to focus on staying profitable and exploiting our niche market of decentralized trading.

 

Couldn't have said it better myself. 

What is the value of a decentralized exchange that no centralized exchange can replicate?  Sell that value.  If the value is non existent then the whole thing is pointless. If it is there then people will pay.

Absolutely and unequivocally wrong.



I don't really think you're idiots but are perhaps too close to the project & are over-estimating it's value to the end user without first attracting liquidity.

 Liquidity > Decentralized > Centralized

You only have more value than a Centralized exchange when you pass a minimum liquidity threshold and if you cross that you may have a tsunami of customers but without it you are guaranteed to attract very few.

You need to use any means possible, promotions/low fees/marketing & advertising/other to attract those initial users. Even BTC38, an established, liquid, top 10 exchange still ran a free Doge promotion when they opened BTS 2.0 to trading.

Would you use a better constructed shopping mall with no shops/customers? A marketplace with no traders? A better dating site with no profiles? A club with no singles? A better social network site that no-one is on or a content site with no media?

Platforms and two-sided markets are difficult to kick off, in general.

There is often no inherent value in the standalone product for the user without users from the other side.

PayPal: When Paypal figured that eBay was their key distribution platform, they came up with an ingenious plan to simulate demand. They created a bot that bought goods on eBay and then, insisted on paying for it using PayPal. Not only did sellers come to know about the service, they rushed onto it as it already seemed to be getting popular. The fact that it was way better than every other payment mechanism on eBay only helped repeated usage.

Reddit: Reddit co-founder Steve Huffman admitted that the link-sharing site was initially seeded with fake profiles posting links to simulate activity.

Quora and AirBnB: Quora admins answered a lot of questions themselves at first. Brian Chesky talks about how they got the first users on AirBnB themselves literally going door-to-door.

Rentoid: A platform is useless without complementary products. Marketplaces, especially, are dead without sellers posting on them. To solve the chicken-egg problem, some marketplaces create fake supply to attract buyers. Services marketplaces put up fake projects to show activity. Steve Sammartino talks of how he seeded Rentoid.com by essentially buying the initial items himself and renting them out

Dating services know what men want (who doesn’t) and seed the network with photos of Latin American models with eclectic interests (not that the latter matters).

https://medium.com/platform-thinking/how-paypal-and-reddit-faked-their-way-to-traction-9411fb583205#.ajc28n7os

Nearly every successful business understands the importance of those initial users and liquidity to making their business a success and they're willing to get it by hook or by crook. The fact that you think the exchange has high value as it stands without those initial users and liquidity is absurd imo.

While the referral programme needs to be lucrative, fees need to be competitive. Which might mean that the low referral income will only be attractive in 'World excl. North America & Western Europe' to start.

While the exchange can charge high fees once it's more established given it's advantages, in general, if you don't like competing with Centralized businesses on razor thin margins then you'd have to engage in business activities Centralized companies are often unable too.