TIP-065 | tBTC Fee Holiday

Vote Type

Token holder DAO Snapshot with a 7-day vote period.

DAO-elected Sponsors

@sap, @JohnPackel, @Eastban


5 days for comment / discussion on this proposal.
Token holder DAO Snapshot with a 7-day vote period.


Reduce tBTC mint fee to 0%, and reduce redemption fee to 0% for 60 days.

After 60 days, mint and redemption fees will be reinstated at their current values of 0.1% mint and 0.2% redemption.


This proposal suggests a temporary pause of the tBTC mint fee, and a reduction of the redemption fee, to eliminate friction for new users of tBTC and enable new utility and use cases.

tBTC is at a crucial inflection point in its growth trajectory. Liquidity and TVL have grown steadily since launch, but mainstream DeFi use cases, such as lending markets and derivative trading, are pending an increase in TVL and volume.


Threshold DAO currently charges a 0.1% mint fee, and a 0.2% redemption fee, which imposes a cost to DeFi users that wish to mint tBTC, and a spread between the tBTC and BTC price for traders. This reduces the amount of capital that can flow into tBTC, as well as the likelihood of arbitrage opportunities for tBTC traders and bots.

A pause of the bridge fees will enable new tBTC to enter the system, and reduce tBTC and BTC spread. This allows users that want to earn BTC yield to do so without reducing their principal, as well as market makers to quote tighter spreads, and provide more liquidity with confidence.

A short term reduction in fees will allow tBTC to reach the critical mass required for mainstream DeFi use cases.


A valid concern of a reduction of bridge fees is that it removes the disincentive of tBTC redemption, which could allow tBTC supply to be drained.

Other considerations on the dynamics of fee reduction in the face of a drain attack:

  • A symmetrical advantage. Traders that want to redeem tBTC to arbitrage create demand for tBTC, which motivates tBTC mints.
  • LP Incentives. tBTC has constant demand pressure from T token LP incentives. If tBTC LP TVL reduces, APY increases.
  • Single-sided deposit bonuses. LPs are incentivised to return stable pools to a balanced position, which creates an additional incentive to mint and deposit tBTC.
  • No change in fundamentals. tBTC allows BTC users to grow their BTC holdings. Users sidelined due to the mint fee will be able to enter the system without cost.


The desired outcome of the fee holiday is to encourage new tBTC into the system, and create opportunities for interchain arbitrage, to boost tBTC volume. The goal is to enable new tBTC use cases with leading DeFi protocols.

Execution and Timing

tBTC fees can be adjusted by the Threshold Council with a delay of 48 hours, before the fee change can be finalised.

Once the fee update has been executed, the fee holiday will commence and remain in place for 60 days.

There will be a similar delay to reintroduce fees, which means the process to reintroduce fees will commence after ~58 days.

The proposal can be accompanied by a “tBTC Holiday Season” type campaign, to spread the word of the reduction in fees over end of solar and lunar year holidays.


The experiment will be more definitive and provide more valuable information with 0 redemption fees.

A few points to support/for consideration:

  1. Sophisticated market participants will still include the cost of rebalancing into pricing & spreads via the potential need to pay redemption fees.

  2. When evaluating the quality of the tBTC product, any redemption fee is a deterrent to someone looking to mint knowing that they will pay a tax on the way out / be captive to fees. Given its considered a temporary fee holiday, the proposal is unlikely to be able to address this but the observed behavior around the start and end will be useful.

  3. With respect to concerns about large redemptions during the fee holiday, if holders have a reason to redeem, keeping a 10bp fee won’t cause a marginal user to stay in tBTC - this point is just conjecture however.

With this in mind I would be in favor of 0 mint & redeem fees. That will address point 1, less clear how its interpreted for 2 and 3 though.

1 Like

This proposal has been moved to Snapshot. Note that, based on discussion with the community, the proposal was changed to reflect a 0% fee for both mint and redemption.