TIP-075: tBTC Bridge Fee Holiday - part 2

Vote Type

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

DAO-elected Sponsors

@Eastban , @JohnPackel, @Vict0r

Timeline

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

TL; DR

  • Reinstate 0.2% redemption fees
  • Maintain 0% minting fees
  • Give the Treasury Guild decision power on changes on the bridge fees for 6 months.

Background

As per TIP065, a two-month tBTC bridge fee holiday has been implemented on December 10th, 2023.

Accordingly, tBTC mint and redemption fees have been reduced to 0% for 60 days. Mint and redemption fees are slated to be reinstated at their original values of 0.1% for mints and 0.2% for redemptions on February 10th, 2024.

Proposal

tBTC still remains at a crucial inflection point in its growth trajectory. TVL and volume has been growing. This proposal aims to attract new capital inflow to the bridge by extending the 0% mint fee, while reinstating the outflow fees to their original 0.2%. We also believe it is important to give the Threshold Treasury Guild Committee the flexibility to adjust these fees for the next 6 months.

Rationale

Threshold DAO eliminated minting and redemption fees with the implementation on TIP-065, allowing users to avoid any cost both for inflows and outflows of the system. As expected, this has brought a rise in volume to the bridge.

The idea of extending the reduction in minting fees should be viewed as a tactical course of action. This extension would effectively allow for increased inflow of capital, thereby providing a stimulating influence on volume and TVL of tBTC. This decision to extend the ‘holiday’ or reduction period for mints is not only appropriate but also necessary given the prevailing market conditions.

The primary objective of this strategy is to enable tBTC to attain the critical mass that is indispensable for it to be utilized in mainstream DeFi use cases. The attainment of this critical mass is a prerequisite for the widespread adoption of tBTC, and hence, the proposed extension on minting fees reduction is targeted towards achieving this objective.

Moreover, in an effort to ensure a faster reaction time and greater flexibility in adapting to rapidly changing market conditions, we propose that the Treasury Guild be granted the authority for six (6) months to direct the Threshold Council to adjust fee parameters. By delegating this decision to the Treasury Guild Committee it will allow for a more agile and responsive adjustment of fees in line with market fluctuations.

However, it is crucial to maintain a balance between flexibility and governance. Therefore, after this six-month period, any further changes should once again be subject to the existing governance processes. This will ensure that while we adapt to the market, we also maintain the necessary checks and balances in the system.

6 Likes

“As expected, this has brought a rise in volume to the bridge”
– can you provide more detail on how you determined this and attribute the TVL rise to the mint fee holiday?

I like the idea of the Treasury Guid having discretion over fee parameter adjustments. I don’t like being locked into a mint fee holiday for a fixed period of time given changing market conditions.

1 Like

– can you provide more detail on how you determined this and attribute the TVL rise to the mint fee holiday?

There are a number of factors that impact tBTC volume. The removal of the redemption fee created a tighter BTC peg, which makes it more useful as an arbitrage instrument. Alongside this, it introduced a BTC offramp from DeFi cheaper than available options, which created more demand (albeit, in the wrong direction). These are two reasons it may have had a positive impact on volume, at the cost of TVL.

1 Like

Snapshot live here: Snapshot

1 Like

This proposal has been approved by the DAO with the following results:

Results:

  • For: 895M T - 91.69%
  • Abstain: 81M T - 8.31%
  • Against: 0 T - 0%

This will be notified to the Treasury Guild Committee for the next steps on its execution.

2 Likes