Abstract
The document outlines a Protocol Revenue Sharing Agreement between Bitfrost and Osmosis, aiming to foster the adoption of Bitfrost-denominated UTXOs within the Osmosis ecosystem. The agreement proposes waiving bridging fees when transactions originate or terminate on Osmosis, in exchange for a share of taker fees generated by trading DOGE.int3 on mainnet. BTC.int3, LTC.int3, and BCH.int3 are also on mainnet pending liquidity, with XRP.int3 upcoming on Osmosis Testnet. DOGE.int3, BTC.int3, LTC.int3 and BCH.int3 are currently Alloyed on Osmosis as a single asset alloy; the revenue share model would be applied to any future Alloyed additions at the time of addition.
Public Documents
Website: https://int3face.zone/
Bridge: (INT3FACE)
Github: (BitFrost · GitHub)
1. Introduction
The proposal outlines a Protocol Revenue Sharing Agreement between Bitfrost and Osmosis, aiming to foster the adoption of DOGE.int3, XRP.int3, BTC.int3, LTC.int3 and BCH.int3 within the Osmosis ecosystem. The agreement involves waiving bridging fees from Bitfrost in perpetuity when transactions originate or terminate on Osmosis, in exchange for a share of taker fees generated by trading Bitfrost assets or their derivatives on Osmosis.
2. About Bitfrost
Bitfrost is a decentralized, non-custodial bridge for UTXO chains such as Bitcoin, Dogecoin, Bitcoin Cash, and Litecoin to IBC-enabled chains like Osmosis. BTC.int3, LTC.int3, BCH.int3, and DOGE.int3 (Bitcoin, Litecoin-, Bitcoin Cash–, and Dogecoin-backed assets provided by Bitfrost) are live on Osmosis, along with Interchain Deposits. This feature allows Osmosis users to deposit BTC, BCH, LTC, and DOGE directly within the webapp of Osmosis to receive BTC.int3, BCH.int3, LTC.int3, and DOGE.int3, respectively.
To ensure controlled growth during the early stages of adoption, Bitfrost currently has:
- A capacity limit of 100 BTC, 10,000 BCH, 300,000 LTC, 10,000,000 Doge for BTC.int3/BCH.int3/LTC.int3/DOGE.int3 respectively. (This capacity will change as the protocol grows in liquidity.)
- A deposit fee of 0%.
- An IBC transfer fee of 0%.
These parameters mirror the cautious approach taken with previous Bitcoin integrations, scaled appropriately for Dogecoin’s supply and market value.
3. Proposal Details
3.1 Objectives
This proposal signals the addition of a protocol revenue share agreements that will replace future bridging costs with a share of taker fees gathered from trading activity on Osmosis. Bitfrost will benefit from increased adoption of the aforementioned assets across applications on Osmosis, rather than just profiting from arbitrage or one-time bridging fees.
This proposal will directly add the protocol revenue share parameter agreements for BTC.int3, LTC.int3, BCH.int3, and DOGE.int3, as well as create the revenue share link between the bridged assets and their Alloys.
Osmosis users benefit by gaining a low-cost, decentralized bridge to UTXO chains, onboarding an initial route for UTXO asset liquidity and allowing UTXO holders to interact directly with the Osmosis ecosystem. There is currently no other route to bring UTXOs like Dogecoin to Osmosis in a decentralized way. This partnership lowers the barrier for UTXO liquidity to flow into Osmosis, tapping into one of crypto’s largest communities in a trustless manner.
Osmosis and Bitfrost governance will directly control the proportion of taker fees allocated to this split. This proposal sets that proportion of taker fees is set at at 10% for Bitcoin and 30% for all other proposed assets (details below) for a minimum term of six (6) months from activation on both sides, or until superseded by mutual agreement.
4. Revenue Sharing Mechanism
Bitfrost plans to charge users a set fee. However, as we are focused on gaining traction and users, we have currently set all fees in our control to 0. Once this new fee structure is put in place, Osmosis users will have this waived. We use DOGE and BCH as examples in this section, but the same terms apply to XRP, LTC and any bridged asset with the revenue share parameters in place.
4.1 Source of Revenue on Osmosis
When a trade is performed on Osmosis, the protocol levies a taker fee on the input token of the swap, which is currently set at 10 bps (0.10%) by default. Under this proposal, when a swap route involves one of the assets (LTC.int3, BCH.int3, or Doge.int3), Bitfrost will receive 30% of the total taker fees on that swap.
For swaps not directly involving one of the proposed assets but involving an alloyed asset of the proposed assets (if introduced), Bitfrost will receive a portion of that fee share in proportion to the asset’s composition.
| Swap Route | Int3face’s Share of Taker Fee |
|---|---|
| Doge.int3 ↔ OSMO | 30% |
| OSMO ↔ Doge.int3 | 30% |
| Doge.int3 ↔ allDoge ↔ OSMO | 10% |
| allDoge ↔ OSMO | 12% (assumes 40% Doge.int3 in allDoge; 0.4×30%=12%) |
| OSMO ↔ allDoge | 12% (same assumption as above) |
Note: In the example above, we assume Doge.int3 constitutes 40% of the allDOGE asset. Actual numbers depend on the composition.
For Bitcoin only, as there has already been a revenue sharing proposal in place:
| Swap Route | Int3face’s Share of Taker Fee |
|---|---|
| BTC.int3 ↔ OSMO | 10% |
| OSMO ↔ BTC.int3 | 10% |
| BTC.int3 ↔ allBTC ↔ OSMO | 10% |
| allBTC ↔ OSMO | 4% (assumes 40% BTC.int3 in allBTC; 0.4×10%=4%) |
| OSMO ↔ allBTC | 4% (same assumption as above) |
Note: In the example above, we assume Doge.int3 constitutes 40% of the allBTC asset. Actual numbers depend on the composition.
Accrued revenue-share fees will periodically be transferred to Bitfrost as Osmo/USDC and distributed according to Bitfrost’s standard protocol revenue distribution mechanism. This ensures that bridge operators (and potentially stakers or participants in Bitfrost’s economy) receive these Osmosis fee shares in Osmo/USDC, aligning incentives to grow Doge.int3 usage on Osmosis.
4.2 Osmosis Bridging Fee Exemptions
In return for this revenue share, Osmosis users will no longer be charged the usual Bitfrost bridging fees for bridging UTXOs via Osmosis. Specifically, Osmosis users will not pay any deposit fee when bridging the proposed UTXOs into Osmosis via Bitfrost, nor any transfer fee for moving these assets between Osmosis and Bitfrost.
- This exemption applies when Osmosis is the terminating chain for an asset transfer through Bitfrost. No IBC transfer fee will be applied for transferring the proposed UTXOs from Bitfrost to Osmosis.
- Likewise, there will be no percentage-based bridging fee or IBC fee for depositing the proposed UTXOs directly to Osmosis from their native network via Bitfrost.
- If a user bridges these assets to a different zone (not Osmosis), standard fees would still apply.
- A flat miner fee may still be charged on withdrawals back to the native chain to cover on-chain transaction costs.
- IBC Rate limits will be used to prevent the onward transfer of Bitfrost assets from Osmosis to other chains to allow Bitfrost to benefit from bridging fees to other destinations.
5. Mathematical Model
To analyze the viability of this revenue share, we can model the relationship between waived bridging fees and earned taker fees from trading. Using Doge as an example (Bitcoin will follow the same model with a 10% revenue share):
- p = the percentage bridging fee that is waived for Osmosis users (as a decimal). Here, p = 0.01 (1%).
- f = the Osmosis taker fee rate (default f = 0.001, i.e., 0.1% per swap).
- r = the revenue share fraction allocated to the bridge operator. Here, r = 0.30 (30%).
When a user deposits an amount of Doge D into Osmosis, the bridge foregoes the upfront fee of p × D. Instead, it earns fees each time D is swapped on Osmosis. For a single swap of the full amount D, the bridge earns r × f × D.
To find the break-even number of full-volume swaps (N) needed for Bitfrost to earn the same total as the waived fee, set:
N \times (r \times f \times D) = p \times D
Canceling D from both sides yields:
N = \frac{p}{r \times f}
6. Breakeven Analysis
Plug in the actual values:
- p = 0.01 (1% deposit fee waived)
- r = 0.30 (30% revenue share)
- f = 0.001 (0.1% taker fee on Osmosis)
N = \frac{0.01}{0.30 \times 0.001} = \frac{0.01}{0.0003} = 33.3
Result: About 33 full-size swaps of the deposited amount are required for Bitfrost to earn back the equivalent of the 1% fee it waived.
For comparison, under a 10% share (e.g., r = 0.10 in a previous Bitcoin arrangement):
N = \frac{0.01}{0.10 \times 0.001} = \frac{0.01}{0.0001} = 100
This shows why a higher revenue share for Dogecoin (30%) significantly shortens the number of swaps (from 100 down to 34) to break even.
If you consider a full round-trip (deposit + withdrawal) fee, which might sum to 1.3% under a normal model (1% deposit + 0.3% withdrawal), then p = 0.013:
N = \frac{0.013}{0.30 \times 0.001} = \frac{0.013}{0.0003} = 43.3
So if a user exits back to Dogecoin after minimal swaps, Bitfrost earns less than it would under the old flat-fee model. But if the user trades frequently, Bitfrost can eventually earn more via revenue share. This aligns incentives for Bitfrost to encourage active usage of Doge.int3 on Osmosis, benefiting both platforms.
7. Summary
This proposal establishes a mutually beneficial revenue-sharing agreement between Bitfrost and Osmosis, promoting greater integration of Bitcoin, Dogecoin, Ripple (upcoming), Litecoin, Bitcoin Cash, and liquidity into the Osmosis ecosystem while aligning incentives for both parties. It is important to monitor these assumptions during the initial 6-month term.