TIP-93: Reinstate tBTC mint fee, increase redeem fee

Proposals
1

Vote Type

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

DAO-elected Sponsors

@Eastban @JohnPackel @ramaruro1

Timeline

  • 5 days for comment / discussion on this proposal.
  • Token holder DAO Snapshot with a 7-day vote period.
  • 30-day delay implementing fee changes (from date of Snapshot passage)

TL; DR

  • Reinstate 0.1% mint fee for tBTC
  • Increase redeem fee from 0.2% to 0.25%
  • Authorize Treasury committee for 6 months to adjust fee levels within ranges

Background

Threshold launched tBTC Optimistic Minting in January 2023 with a 0.1% mint fee, and redemptions went live in July with a 0.2% fee. In November of that year TIP-65 proposed a 60-day fee holiday for both mint and redemption (i.e, zero fees), and this was approved by snapshot on December 6th.

In February 2024, TIP-75 proposed reinstating the 0.2% redemption fee, keeping the mint fee holiday and authorizing Threshold’s Treasury Committee to make changes as needed over the next 6 months (this was approved February 19).

The stated rationale for the mint fee holiday was, “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.”

Rationale

Threshold’s Treasury Committee has monitored tBTC mint and redemption activity this year and with the expiration of the 6-month authority to revise fees, it has debated the merits of retaining a fee holiday vs. reinstating a mint fee, as well as adjusting the redemption fee.

While there was no one arguing in favor of reducing the redemption fee, the argument for maintaining a mint fee holiday for a longer period is that a mint fee works directly against growing TVL, a primary goal for Threshold. Competition for TVL growth is high, and we’ve seen new Bitcoin bridges including Coinbase’s cbBTC launch with zero fees.

Others argued that we have had a mint fee holiday for nearly a year, this has cost the treasury substantially (expenses for tBTC liquidity provision is ~$1M/year and payments to beta stakers, guardians and minters is ~$730k/year, which doesn’t include contributor compensation and other expenses, all of which totals $4M annually) and the longer customers do not have to pay for the service, the harder it will be to reintroduce a mint fee. There was agreement that the redemption fee isn’t a major disincentive, and some question how much a mint fee holiday has increased tBTC deposits.

In terms of tBTC revenue accrued and projected:

  • For H2 2023, 4.14 tBTC was received from mint fees (equating to ~$124k revenue)
  • For H1 2024, the mint holiday was active, so no tBTC was received from mint fees. It has been calculated that 5.6 tBTC likely would have been received from mint fees if the mint holiday was not active (equating to ~$336k of revenue)
  • To date, ~15.4 tBTC has accrued from redeem fees (worth ~$1.33M at tBTC price mid-November 2024)
  • Based on the average quarterly mint and redeem figures, the projected yearly revenue from mint fees (at 0.1%) is ~10 tBTC and the projected yearly revenue from redeem fees (at 0.25%) is ~17 tBTC (together worth ~$2.3M as of mid-November 2024)

Considering all this, the Treasury Committee voted to recommend to the DAO that we reinstate the mint fee at 0.1%, raise the redemption fee to 0.25% and authorize the committee to adjust fees for 6 months within the ranges outlined below.

We include a 30-day delayed implementation following Snapshot vote results, partly to give the market time to respond and as a consideration for those in favor of continuing the mint fee holiday (e.g., if there is a strong response one option would be to increase the delay prior to mint and/or redemption fee change).

Execution & authorizing TTG to adjust

Given the impact on TVL and overall market dynamics, we propose the following flexibility for the Threshold Treasury Guild (TTG) to adjust fees for 6 months from implementation of new fee amounts without another tokenholder vote:

  • Initially reinstate 0.1% Mint fee for tBTC
    • Authorization to adjust to between 0% and 0.25% without a tokenholder vote, based on continuous assessment
  • Initially increase Redeem fee from 0.2% to 0.25%
    • Authorization to adjust to between 0.2% and 0.3% without a tokenholder vote, based on continuous assessment
4 Likes
2

Hello Threshold Network DAO members,
Following a discussion with some of the team members regarding this proposal, we thought we would share some thoughts from the ULTRADE project regarding the fee reinstatement proposal.
ULTRADE is planning to integrate with Threshold’s technology, to enable non-custodial orderbook trading of Bitcoin with direct deposits/withdrawals (utilizing Threshold’s proxy solution). Effectively, this means tBTC would be used as an on/off ramp for bitcoin into the trading platform, but without the user having to do manual mint/redeem. As a solution this is geared more towards BTC traders rather than tBTC users.

While we recognize that mint/redeem fees are a significant source of revenue for the Threshold Network participants, we wanted to share with you our specific use case and our concerns about the proposed fees. We believe such fees may be prohibitively expensive for users who are simply looking to trade BTC, kind of similar to a situation where a Centralized Exchange would charge their users 0.1%/0.25% to deposit/withdraw BTC for trading.

Ultrade is about to launch its mainnet any day now, supporting non-custodial, bridgeless crosschain orderbook trading across Ethereum, Solana, Base, Arbitrum, BNB, Avalanche, Optimism, Polygon, Algorand and several more chains coming. BTC is next on our todo list and the plan has been to use tBTC with proxies for that purpose, yet we are now concerned about the fees. We have some ideas on alternative solutions where the fees perhaps could be exempted in specific use-cases like ours, and instead may provide trading fee revenue share as compensation for Threshold Network.
As we engage with the Threshold team, we would also love to discuss with the DAO members and hope to find a path forward for our mutual benefits.

2 Likes
3

I am very much in favour of this, something worth noting from a growth perspective is that tBTC is slowly being added as collateral assets for Bitcoin LSTs. Once tBTC is deposited into these LSTs, the tBTC will be unwrapped and deposited into Babylon as BTC.

The recent 260 tBTC increase on Base is because of tBTC being added as a collateral asset to SolvBTC. Since its expected that these funds will be off-ramped and TVL won’t be retained, Threshold should make the most of this opportunity and profit from it.

1 Like
4

Thank you for the thoughtful proposal. While I understand the rationale for reinstating the mint fee, I believe we should prioritize growth by maintaining free mint fees while modestly increasing redemption fees. Below is my perspective, supported by data and projections:

1. Free Mint Fees Prioritize Growth

Threshold is in a competitive race with WBTC and cbBTC for mindshare and market share. Introducing a mint fee at this stage could discourage new users, limiting our ability to grow TVL. A mint fee works directly against our primary goal of onboarding more BTC into the system. Keeping mint fees at 0% for another 6 months would sustain our momentum while the market continues to learn about the unique benefits of decentralization.

2. Redemption Fees Provide Sustainable Revenue

Increasing the redemption fee from 0.2% to 0.25% strikes a balance between covering treasury expenses and maintaining a competitive edge. Redemption fees, unlike mint fees, are less likely to deter adoption because they only affect users exiting the system.

If we had applied these fees historically:
• To date, 7,630.64 tBTC has been redeemed. If a 0.25% redemption fee had been in place for all redemptions, it would have generated 19.08 tBTC in revenue, compared to 15.26 tBTC under the current 0.2% rate—an increase of 3.82 tBTC.
• In the last 3 months, 2,123.40 tBTC was redeemed. Under a 0.25% fee, this would have generated 5.31 tBTC, compared to 4.25 tBTC under a 0.2% fee—an increase of 1.06 tBTC.

3. Projections Show the Impact of a Modest Fee Increase

If the trend from the last 3 months continues, annualized revenue from redemption fees would be:
• 16.99 tBTC at the current 0.2% rate
• 21.23 tBTC at the proposed 0.25% rate

This modest fee increase could generate an additional 4.24 tBTC per year, helping to offset treasury expenses without introducing significant friction for users.

4. Mandatory 30-Day Delay for New Fees

I strongly recommend implementing a mandatory 30-day delay between any decision to adjust fees and their implementation. This gives the market adequate time to respond, ensures fairness to current users, and provides time to communicate changes effectively.

5. Flexibility for Treasury Guild Adjustments

I also support granting the Treasury Guild authorization to adjust fees within defined ranges. This flexibility ensures Threshold can respond to market conditions without requiring frequent tokenholder votes.

Proposed Revision to TIP-93:

1. Maintain a 0% mint fee for another 6 months to drive growth and adoption.
2. Increase the redemption fee from 0.2% to 0.25% to generate sustainable revenue.
3. Grant the Treasury Guild authorization to adjust:
• Mint fees: Between 0% and 0.1%
• Redemption fees: Between 0.2% and 0.3%
4. Introduce a mandatory 30-day delay between any fee adjustment decision and its implementation.

By taking this approach, we can prioritize TVL growth, sustain treasury operations, and preserve Threshold’s competitive edge as the only permissionless BTC offramp in the industry while we continue to educate users on the benefits of decentralization.

1 Like
5

I’m not supportive of possible increase in redemption fee to 0.3%, nor do I think we should increase it to 0.25%.

In this proposal, TTG is authorized to increase total fees for a round-trip to as much as 0.55%.

Higher fees results in increased spread on the tBTC/WBTC pair. Arbitragers need a profit margin to step in. I believe we should continue to reward this effort to make tBTC both easy and affordable to not only enter, but exit. Predictability is important in decision making, I therefore suggest that TTG is not authroized to make futher changes and that any new fee change will require a token holder vote.

The most important path forward is growing the protocol TVL, liquidity and volume. Increasing fees is not helpful in that goal and can even work against it.

As for need of income, let’s instead look into what costs we can cut.

I am very much in favour of this, something worth noting from a growth perspective is that tBTC is slowly being added as collateral assets for Bitcoin LSTs. Once tBTC is deposited into these LSTs, the tBTC will be unwrapped and deposited into Babylon as BTC.

The recent 260 tBTC increase on Base is because of tBTC being added as a collateral asset to SolvBTC. Since its expected that these funds will be off-ramped and TVL won’t be retained, Threshold should make the most of this opportunity and profit from it.

I believe scheming of this nature should be discouraged in the DAO. Users of tBTC should feel safe from targeted persecution.

For these reasons I suggest that we leave status quo at 0% deposit fee and 0.2% redemption fee.

4 Likes
6

Thanks for sharing - a few questions, if you don’t mind.
How soon will your platform launch? What trading volume do you anticipate?

1 Like
7

Ultrade mainnet is about to launch literally any day now (most likely next week). We’ve been building it a long time. It will support crosschain orderbook trading between 9 chains initially (most EVMs + Solana and Algorand) on day one.
As for trading volumes it’s hard to predict. But we should point out that Ultrade is a Whitelabel SaaS Infrastructure that lets anyone launch their own Native Exchange (NEX) in a shared liquidity network, literally in 10 minutes, no coding, zero cost. Ultrade already has more than 60 whitelabel partners who are interested in launching their own NEX and self-list their own token for trading etc. As a B2B2C platform it’s hard to predict the user and volume growth in advance but we think there will be hundreds of NEXs live in the next 2 years.

1 Like
8

Re-instating the minting fee creates too much friction for growing our TVL at this crucial time in the market. There are newcomers like dlcBTC, fBTC and others that are options for people turned off by mint fees.

I don’t see how all of these DAO expenses are caused by the mint fee holiday. My only takeaway from the paragraph is the theory that by not re-instating mint fees now, it makes it harder later. I don’t necessarily believe that to be the case.

I think we should leave the current tBTC fee structure as is and re-visit in another 6 months.

1 Like
9

Hello

Thanks for such a detailed and well written proposal.

While I also recognize the the minting/redemption fees as an important source or income for Threshold, I think the time is not the best to reinstate the tBTC mint fee.

The first point is the moment and opportunity it is going through. There have been a significant amount of solutions on BTCfi that drives the need for solutions like tBTC. People have been looking for such solutions in order to avoid having to pass through a centralised exchange to have their BTC tokenized and operate on the various DeFi solutions and tBTC is surely the best one.

For all these newcomers any minting fee can make them think twice, stay on their comfort zone and use other solutions instead during a time there is rising demand.
I have been presenting tBTC to some people recently and the first question I got more than once was “Does it have any fees to get?”

Just to mention one solution that delivers similar permissionless BTC token and have been having a fair amount of attention is Lombard Finance’s LBTC. They have a zero mint/deposit fee.

Furthermore the recent release of tBTC Direct Mint to Arbitrum and soon on Base and perhaps Solana is another factor that can drive newcomers and increase TVL and any TVL growth on these networks is important for facilitating liquidity.
Having more tBTC TVL on their networks is specially important during times while Ethereum transaction fees have been significantly high.

Another factor to add up that I see potential to bring newcomers is thUSD. Its features of being decentralised, censorship resistant and interest free are points that add up to this momentum tBTC can gain. APY on tokenized USD borrow recently has been much higher than normal and thUSD (and therefore tBTC) have an advantage over other products

Not less important I agree it is also a time where competition for TVL growth is high and tBTC has a great opportunity to consolidate itself ahead of the others during the bullrun.

To resume, suggestion for TIP-93 is:

  1. Maintain a 0% mint fee for another 6 months to drive growth and adoption.
  2. Maintain the redemption fee at 0.2%.
  3. Grant the Treasury Guild authorisation to adjust:
    • Mint fees: Between 0% and 0.1%
    • Redemption fees: Between 0.2% and 0.25%
  4. Introduce a mandatory 30-day delay between any fee adjustment decision and its implementation.

I am also at the view the the most important path forward is growing the protocol TVL, liquidity, and the next months and year ahead is a good moment for that.

1 Like
10

Mostly agree on my side.

In principle, I hate giving away something we’d like to charge for for free. I was against the initial fee holiday because when users get used to a price of “0”, they are more likely to be entitled, get used to the free service, and won’t want to pay later.

A number of competitors have cropped up in this environment. And while they might have free deposits… none of them offer permissionless redemptions at all, to my knowledge.

Which means tBTC has a natural monopoly.

I’m of the opinion that we should leave the mint fee at 0%, and give the TTG flexibility to carefully experiment with redemption fees between 0.1% and 0.4%.

1 Like
11

I support this change to the proposal.

12

I fully support reinstating a mint fee and adjusting the redeem fee. I feel that after almost 1 year introducing a modest fee is a realistic step to ensure our network’s sustainability, especially as we prepare for more future implementations on L2 chains that seem to require significant resources devs, relayers and latest effort to offer smooth L2s mint experience.

I also advocate for giving the TTG the ability to adjust fees which is beneficial with this transition because it allows the DAO to respond effectively to the network’s needs. I advocate for starting with a low fee and suggest we announce the implementation 30 days in advance. This gives everyone ample time to prepare and adjust accordingly.

If the new fee structure doesn’t meet our expectations and it affects the protocol, we have the flexibility to reduce the fees back to zero. This approach balances our immediate needs with a commitment to our users’ experience, but ,I dare say that, at no time we should be afraid of competing wrappers because they offer a significant different model of business and same as ethereum network when gas fees are high users have a choice but they still prefer to pay for inclusion because of the quality proposition of the whole ecosystem, same should apply here with tBTC.

13

I’m generally against raising the minting fees for now - my reasons match many of those stated above so I won’t repeat them.

@Agoristen raises a great point regarding the spread between wBTC and tBTC. We need tBTC to be friction minimized in order to become a big player in the DeFi world. The spread and price disparity between wBTC and tBTC is something we should keep in mind - what are we aiming for? what is our acceptable range?

Only once we’ve answered those questions can we decide on a fee scheme that works for us long term. If we wish to keep these assets trading within 0.5% of each other (or less really), that sets hard limits on our fees otherwise we price out any arbitrage.

I would be open to a fee structure of Mint 0.05% and Redeem 0.15% (same overall cost for Mint plus Redeem)

2 Likes
14

I’m also in favor of this suggestion

15

Hey Ultrade, not sure if you’re in contact with Threshold already. Happy to chat a little more indepth around a tBTC integration on discord or in Telegram (my handle is getmorebullishh).

1 Like
16

Excellent to see all this discussion! We will discuss it in tomorrow’s Treasury committee call, and then I’ll post here proposed snapshot choices that encompass all POV expressed here (may need to split into 2 votes as not all are mutually exclusive, but let’s see what people think).

As to this point @shoegazer69, I didn’t mean to suggest that mint fee holiday has cost all those expenses; the point was simply to give people visibility into the 4 main buckets of DAO spend.

Thanks

4 Likes
17

From all the discussion, we have 3 questions: what tBTC fees should be, whether to grant Treasury committee discretion to adjust fees and whether to impose a mandatory 30-day delay for fee changes.

I’ll look at the options for complex votes on Snapshot to see whether these can be combined, but in the meantime let’s make sure everyone is comfortable with the way these proposed snapshot choices capture the options discussed.

A. What fee levels:

  1. Reinstate 0.1% mint fee & increase redeem fee to 0.25% (the TTG recommendation)

  2. Reinstate 0.1% mint fee but keep 0.2% redeem fee

  3. Keep 0% mint fee but increase redeem to 0.25%

  4. Reintroduce mint fee at 0.05% and lower redeem fee to 0.15%

  5. No change (mint fee stays at 0%, redeem at 0.2%)

B. Whether to give TTG discretion

  1. No, future fee changes should require DAO vote
  2. Yes to TTG discretion for 6 months, ranges in TTG reco
  3. Yes to TTG discretion for redeem fee only
  4. Yes, but shorter (3 months?)

Rather than try to capture all the suggested discretion ranges in separate vote choices, how about we start with this and if option 3 or 4 gets the most votes we can do a follow-up snapshot with a variety of ranges?

C. Whether to add a mandatory 30-day delay for fee changes to take effect

  1. Yes
  2. No
2 Likes
18

I think voting on these options reflect fairly the discussion

1 Like
19

The options are malformed because several of the choices split votes, which can lead to an unpopular option winning (e.g. voters for A1 likely have A2 as a second preference, same for A3 and A5, etc.).

20

Edited based on further input (thanks, @Luna5, for talking me through the challenges with split votes).

Looks like we need multiple votes, the discretion vote in stages if first vote is approval:

  1. Mint fee - weighted vote options: 0%, 0.05% and 0.1%

  2. Redeem fee - weighted vote options: 0.15%, 0.2%, 0.25%

  3. Give TTG discretion to adjust fees: yes/no

  4. Introduce 30-day delay on fee changes: yes/no

If result of vote 3 is yes, then we have a follow-on vote(s) to decide ranges and length of discretionary period.

Clearly we need DAO discussion on how best to balance avoiding split votes vs. governance/voting fatigue (and people missing the follow-ups), but for now please let us know @maclane (and anyone else) whether the above makes sense to you and if not, how you’d adjust.

Snapshot offers options for ranked choice, approval voting and quadratic we could discuss, but doesn’t look to me like any address well our vote on TTG discretion, ranges and length.

3 Likes