chimp1984
commented
4 years ago Thanks for the summary. It seems we lost quite a good portion of BSQ fee trades in favor to BTC fee trades over the past months. Roughly a decrease from 50% to 33%. Even 50% is way below our target of about 80%. I think we have to adjust BSQ fee ration to give more attraction that users use BSQ for fee payment.
I would suggest instead of changing the % we spend from BTC fee revenue to reimbursements, to try to get BSQ/BTC fee ration back to our target. That would reduce the total amount we use for the reimbursement automatically.
MwithM
sqrrm
m52go
ripcurlx
When a mechanism for security incident repayments was determined in #209, two determinations were left to be made:
This proposal covers the first item.
Background
The filter to start repayments was put in place around 20 July 2020. Since then, almost all of Bisq's BTC fee revenue has been routed to repayments through the filter mechanism detailed in #205.
This proposal contends that a 100% allocation of BTC fees to repayments is unsustainable for the DAO and seeks to establish a 50% limit to return price stability to the BSQ market.
BTC fee revenue
With all BTC revenues being routed to repayments, very little is left for the burningman to buy BSQ, significantly reducing demand in an already fledgling market.
Unfortunately determining precise BTC trading fee revenue directly is not easy, so we must use alternate approaches.
BSQ bought by burningman relative to overall BSQ volume
BSQ bought by the burningman is a significant portion of overall BSQ volume.
Numbers above are meant for illustrative purposes only. BSQ price has fluctuated over the past few months, BSQ burned includes BTC from arbitrated trades, and burning amounts listed above don't necessarily correspond to the time period they're listed in.
Having said that, quick back-of-napkin arithmetic suggests that the burningman can account for a sizeable portion of BSQ trading volume, often as much as half.
Number of trades using BTC to pay trading fees
We do have precise numbers for (i) total trades on the network and (ii) number of BSQ fee payments, so we can determine the (effective) number of trades using BTC to pay trade fees:
# Effective BSQ Trades = total number of BSQ trade fee payments divided by 2A drawback of this approach is that it disregards the size of fee payments.
Approximate BTC fees from proof-of-burn and arbitrator reimbursements
I created such a chart before based on estimates but it wasn't very accurate, so I won't offer an updated one here unless requested.
Proposed Action
BTC fee revenues are a considerable portion of total network revenue. Given the importance these fees play in supporting the BSQ market, directing 100% of BTC revenues to repayments is not wise.
The filter should be modified to divert 50% of BTC fees to the donation address.
Already the BSQ market has been weakened in the past few weeks since the burningman hasn't had much BTC to buy BSQ as a result of repayments started 4 weeks ago. Zero BSQ has been burned in this cycle so far, and there's only about 0.2 BTC in the donation address right now. Unless there have been any purchases that haven't been burned yet, this is far from the amounts burningman was burning before the filter was put in place.
A weak BSQ market spells major trouble for the whole project, and jeopardizes the chances repayments are completed at any point in the future.
Considerations
Since the portion of BTC fees going to repayments is proposed to be a percentage, repayments will go up as BTC fees go up. They'll go down if BTC fees go down. None of these effects are different from the current situation.
When BTC revenues increase for a sustained period of time (or if BSQ usage increases considerably), it may be appropriate to increase this percentage through a separate proposal in the future.