Discussion: tbtc v1 signer fee

Users of tbtc v1 pay a signing fee of 0.05%. On a 1 btc deposit this represents a fee of ~$20, and ~$100 on a 5 btc deposit. The ETH fees for minting at current (~30gwei) gas prices are ~$300 - $500.

Node operators currently receive signer fees + KEEP network incentives. The network incentives are slated to stop at the end of November, at which point signing fees will need to be sufficient in order to convince node operators to continue providing collateral for tbtc v1.

Right now there is rarely 5 or 1 btc minting capacity, and tbtc trades at a 3.6% premium over renbtc and wbtc on dexes. This implies that there would be plenty of demand even with higher minting fees.

Therefore, I propose we start to slowly increase minting fees over the next few months, and use a 1% fee as a starting point for our discussions.

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I agree increasing minting fees makes sense from a perspective of the demand + what a user is getting with tBTC compared to the centralized solutions out there.

Personally I don’t expect that in v1 there will be a scenario where the fees are interesting enough to keep providing collateral without the incentives. With current parameters each BTC is backed by 2BTC in ETH, so a 1% fee is still only 0.5% vs collateral bonded. Since there is a lot of 'mint & hold / use for long term. This 0.5% fees is for locking the ETH over a longer timeframe (months or longer).

The coverage pools with reduce the ETH collateral to BTC ratio, but still it won’t increase to levels where it’s economically interesting from that perspective I’d think

This is all planned to change in v2, due to much less collateral need.

A concern on increasing the fees could be a higher premium for tBTC. A higher premium could be negative when the c-ratios are lowered after the coverage pool is launched, and the coverage pool would have to pay a higher price to acquire the tBTC in case of a liquidation. But maybe this is negligible.

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… I’m all for it. Increasing the minting fee now, then decreasing the collateral ratio once coverage pools are live feels like the right move to stakers on the network today.

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Seems reasonable to me, it would be good to add a small barrier for the arb bots when people are trying to get their ETH out after redeeming keeps.

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I think experimentation is a really good thing - to generate data on how participants respond to different product variables - and changing fees should be a good way to get data.

And network incentives are supposed to bootstrap activity until the product is self-sustaining, so I agree that locking ETH (even at a lower collateralization ratio) for potentially 6 months needs to be rewarded by the customer.

But for me this raises the question of what we want and expect of v1 after v2 is live. I thought the expectation was that all activity would shift over to v2. While v1 will still exist, why do we want to “convince node operators to continue providing collateral for tbtc v1”?

If there remains a market for v1 then I agree it needs to have fees that support it, but 1) while the incentives last I don’t know that we’ll really know what the fees need to be, and 2) it would be good to articulate who we expect will want to use v1 and why.

This is a good point. I guess where I see the value is…

  • v1 offers a different security model than v2, and that diversity is good for the market
  • v1 can be used to mint v2 in case someone prefers that route
  • It’s in line with our stance on immutability in v1 to up the fees

I also don’t think there’s much chance of v1 cannibalizing v2. The economic scalability of v2 is an overwhelming improvement… so increasing v1 fees is sort of give existing stakers a consolation prize for keeping things running smoothly, rather than making it attractive over v2.

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Echoing @mhluongo’s points, I do think there are some differentiating features that v1 provides. Whether or not these end up being worth the increased cost for users is an open question, but it seems like it’s a least worth attempting to find a market if users are willing to pay the fees.

For context, for the past month or 2 there has been basically 0 collateral available on tbtc v1, even with incentives, so at worst increasing fees will keep the status quo, at best it will reveal a viable market for node operators. It seems worth at least trying.

If we want to move this proposal forward, what are the next steps? Some sort of signalling vote to determine what percentage to target (how does one do this)?

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I further suggest we drop the rewards on the tbtc/weth pool. TBTC already trades at a premium, we don’t need to increase the demand for further right now. + those rewards can go to the new launch.

47% is quite juicy rates on a weth/btc pair.

I’m not in favor of increasing minting fees, esp since right now most of the mints fail, and users are out the eth fees. (I still think that we should rebate failed mints as the right thing to do for end users)

I assume this is still on the table @Will? I’m wondering whether it makes sense to wrap a few of these up by combining them - or if needed set up a few votes to run concurrently?