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