VBP - Taker fees down to 2bp and more generous discounts

🗳️ Governance Proposals Batch Proposals
1

After of discussion in the community we suggest reducing fees to a more competitive level.

2

Proposal JSON, except closing and enactment timestamps are TBD and need updating; if the discussion takes a long time then end_of_program_timestamp should be updated; currently it is about 1 year.

{
  "batchProposalSubmission": {
    "rationale": {
      "title": "VBP-9 Reduce taker fees and update fee discount tiers",
      "description": "Update network-wide maker and infrastructure fees as well as liquidity fees to reduce the total taker fee on the three major markets (BTC, ETH, SOL) to 2 basis points, and enact a generous volume discount scheme. Forum discussion can be found [here](https://community.vega.xyz/t/vbp-taker-fees-down-to-2bp-and-more-generous-discounts/4505)."
    },
    "terms": {
      "closingTimestamp": "TBD",
      "changes": [
        {
          "enactmentTimestamp": "TBD",
          "updateNetworkParameter": {
            "changes": {
              "key": "market.fee.factors.makerFee",
              "value": "0.00011"
            }
          }
        },
        {
          "enactmentTimestamp": "TBD",
          "updateNetworkParameter": {
            "changes": {
              "key": "market.fee.factors.infrastructureFee",
              "value": "0.00007"
            }
          }
        },
        {
          "enactmentTimestamp": "TBD",
          "updateVolumeDiscountProgram": {
            "changes": {
              "endOfProgramTimestamp": "1749303840",
              "window_length": 30,
              "benefitTiers": [
                {
                  "minimumRunningNotionalTakerVolume": "10000",
                  "volumeDiscountFactor": "0.1"
                },
                {
                  "minimumRunningNotionalTakerVolume": "100000",
                  "volumeDiscountFactor": "0.2"
                },
                {
                  "minimumRunningNotionalTakerVolume": "500000",
                  "volumeDiscountFactor": "0.3"
                },
                {
                  "minimumRunningNotionalTakerVolume": "2500000",
                  "volumeDiscountFactor": "0.4"
                },
                {
                  "minimumRunningNotionalTakerVolume": "10000000",
                  "volumeDiscountFactor": "0.5"
                }
              ]
            }
          }
        }
      ]
    }
  }
}

FYI I just did an edit to camelCase the end of program timestamp field to endOfProgramTimestamp as it wasn’t correct before.

3

This all looks good to me.

4

Lower fees is always better, but is this big cut in infrastructure fees also supported by the validators?

5

I think they can be brought on board but it would be good to hear their input here.

  1. if (as anticipated) lower fees will lead to a big increase in volume (say 10x volume) then overall they’ll be better off. But on its own 10x increase in volume is still not sufficient. Which is where the next point comes in.
  2. Main income for validators are the additional staking rewards in the form of vega tokens. So this has relatively little short term impact.
6

At the moment the majority of validator income is from VEGA token emissions. From what I’ve heard from LPs and community members, going low on fees now would be good for users and increase volume, so may even result in more infra fees being paid over time.

So from my side, as I understand these fee levels are around what LPs and other pro traders think should be in place, including the idea to prioritise maker fees/rebates more, this proposal seems to make sense.

7

Take Commondum DAO’s validator key as a reference (top validator as of writing, but minimal self-stake).

  • Last epoch they earned 7.79 USDT in infra fees.
  • This proposal lowers that by almost 77% (currently at 3bps, proposed 0.7bps)
  • They would earn 1.18 USDT in infra fees at the new rate.

Both are pocket change, although increasing this fee in the future to make it a significant income stream for validators might be hard. Vega emissions cannot last forever, so infra fees has to be come the main source of income for validators?

8

All true but, basically, either the volume goes significantly up (which it probably won’t unless the fees - and liquidity - and spreads become competitive) or the chain isn’t sustainable. Whether it’s 7.79 per epoch or 1.18 per epoch - it won’t matter.

There needs to be a path to 20x, 50x, 100x the volume we’re seeing and high fees are blocking the path.

Other pieces are falling in place to lower the costs, in particular the Arbitrum bridge is no up, so deposits are dirt cheap. Markets are being migrated to settle in Arbitrum USDT removing another cost and friction (converting between arbUSDT ethUSDT used for settlement).

With 20x volume the top validator per epoch income becomes 20.36 USDT per day which is probably close to break even.

9

I agree with a fee reduction.

Benefits:

  • Now that the volume is low, validator can sustain themselves with VEGA emission; so it won’t actually change much now having less USDT fees in the pocket. Instead, lower fees to get VEGA more competitive should be the priority in my opinion, now. Increasing the volume is the only way Validators and LPs can keep working on VEGA without a token emission. So I see this as an investment for now.

  • Similarly, it also makes sense to enact generous volume discounts to encourage integrations and uptake by professional and high volume users.

3 Likes
10

We attempted to propose this, however got the timestamps wrong. Another attempt can be done next epoch unless someone else proposes before then: VEGA Explorer

11 
https://governance.vega.xyz/proposals/b3d9513b8d84f367d15b2bc7dd9c7c18c9f5a93ce51f53d9ecc552806d12e851
1 Like