Original Thread: Commonwealth
Proposal 530 on chain seeks governance approval for the development and implementation of a taker fee for swaps performed on Osmosis. On top of the 0.2%-0.3% swap fee an additional taker fee of 0.15% is proposed.
This would result in a fee charged for traders between 0.35% and 0.45%.
As it stands right now, this proposal is going to pass; giving the green light for the development of this taker fee, which should give additional yield to OSMO delegators. This is a good narrative to provide additional value for OSMO as a coin, but it has the downside that traders will experience an additional fee.
I want to highlight 2 remarks; 1 from myself and another from @Johnny Wyles
I did a small comparison between other exchanges, to get an idea of our position versus these competitors:
- Binance gives a 0.1% taker fee for everyone and lower for big traders / BNB holders (so 4x less than our intented effect)
- UniSwap has in general a 0.3% swap fee (so also lower than we propose in this proposal)
- PanCakeSwap in general has a 0.25% swap fee (so 0.1%-0.2% lower than this proposal)
And I want to highlight this tweet from @Johnny Wyles which gives insight in the possible routes where we benefit from the taker fee without hurting the traders:
This brings us to the point that it has to be clear when and how we will implement this taker fee to get the best of both world with respect to securing volume and trades on the exchange (since that is what matters for an exchange in the end) while also providing value to OSMO.
Litbit (Notional) suggested to create a board of experts to do (some) research and come up with a recommendation:
This thread is to gauge ideas and the temperature f
Better to start lower and increase if no adverse volume effects are observed.
I would think starting at 0.1% and introducing higher costs after determining tiers/tranches would also be healthier than starting at the highest tranche and offering lower tiers as perks + privileges, second.
I would even be in favor of a fee as low as 0.02% but not higher than 0.15%.
Until perks + privileges can differentiate Market Makers & High Frequency Traders from other price insensitive less voluminous traders; a lower fee does not favor/disadvantage any group over another. With tranches/tiers designed then higher fees can be implemented in a way which incrementally taxes usage from low to high.
The protocol taker fee is a great feature to accrue some value for OSMO holders. However as you mentioned above, it should not come at the expense of the traders and a worsening of the UX.
Adding an additional fee on trades will definitely come with some negative repercussions for the protocol. Even though Osmosis is by far the nr.1 DEX in Cosmos, competition is not sleeping (Duality Dex, Astroport ect) and upcoming chains like Sei or dYdX are likely to take away some of its market share. Despite the better UI and UX, traders will eventually move to places where they face lowest swap fees and best price execution. Should traders have to pay up to 0.45% on a swap on Osmosis, it won’t take much time and folks will migrate to alternative DEXes.
Thus, I think no swap on Osmosis should ever exceed a taker fee of 0.3%.
A 0.15% protocol taker fee might be a compelling tokenomics narrative, nonetheless we should back up this number with some research and propose some alternatives like 0.05% or 0.1%.
One important thing to note is that the UI/UX of Osmosis might not even matter in the end when people use DEX Aggregators where that specific protocol searches for the most optimal trade anyways and where the user itself doesn’t experience on which DEX she/he is even trading.
Worth nothing that it should be expected that most liquidity will shift to lower spread factor pools post Supercharged Liquidity launch.
That being said, I’m very much in favor of mechanisms of decreasing taker fees based on things like trading volume, staked OSMO, and referral mechanisms.