Temperature Check: Modification of Taker Fee distribution for Non-OSMO assets

This implementation would adjust the way that non-OSMO tokens obtained via the Taker Fee are distributed to both stakers and the community pool as follows:

  • Assets going to the Community Pool
    • Take the form of the Quote asset involved in the transaction. As Quote assets are Whitelisted for Supercharged pool creation, this will cover the majority of trades.
    • All other transactions not involving a Quote asset will attempt to swap to a governance adjustable asset, initially USDC, before being sent to the community pool.
  • Assets going to stakers
    • Will be swapped to OSMO before distribution, similarly to the mechanism by which Transaction fees in non-OSMO assets are distributed.

Current Distribution

The current wording of the Taker Fee distribution for non-OSMO assets was established in Proposal 530 and reads:

• Of all fees paid in other assets, 67% are to be distributed to OSMO stakers (subject to validator commission rewards)

• The remaining 33% of non-OSMO fees are to be converted to one of Osmosis’s whitelisted quote assets and then deposited into the Osmosis community pool.

Problem Statement

With over 200 tokens currently listed on Osmosis and growing, the list of assets in which a taker fee will be accumulated is extensive, with many being minuscule amounts per OSMO staked, causing two main problems:

Increase in Gas Costs

  • Each asset claimable will require additional gas for the claim to process.
  • This cost will likely offset the benefit of claiming most dust assets received.
  • The increase in overall gas used to perform staking reward claim transactions increases the block space filled and will contribute to network congestion.
  • When sufficient assets are claimable, the total gas requirement to claim staking rewards may exceed the maximum gas allowable in a single transaction, requiring this parameter to be increased and increasing congestion.

Poor User Experience

  • Staking users will begin accumulating microscopic levels of each asset, cluttering their interface and making realizing this yield into a favored asset time-consuming.
  • Each claim transaction will incur hundreds of staking income events, increasing the complexity of tracking for reporting purposes.
  • This discourages users from routinely compounding their stake, potentially leading to decreased staker engagement and chain security.

Proposed Distribution for Non-OSMO Assets destined for Stakers

The V5 Software Upgrade established a mechanism for transaction fees to be paid in tokens alternative to OSMO. These would then be swapped to OSMO at epoch and distributed to Stakers to prevent the accumulation of a large number of dust assets by stakers as more gas tokens were authorized.

This implementation uses the same accumulation mechanism in a module account with a routine swap event to convert non-OSMO assets to OSMO before distribution to stakers at epoch.

Bulk conversion to a single asset will minimize the gas required for the claiming mechanism while returning real value collected by the protocol to OSMO stakers.

A side benefit is that inactive staking accounts accumulate OSMO, reducing circulating supply and benefiting all active OSMO holders.

Proposed Distribution for Non-OSMO Assets destined for the community pool

This implementation would relax the original requirements by allowing the community pool to accumulate assets in any authorized Quote asset rather than a single one. This allows further diversification of the community pool while restricting the diversification to a small subset of assets that make up the core of trading on Osmosis.

Non-OSMO Quote assets are currently:

  • USDT
  • USDC
  • WBTC
  • ETH
  • ATOM

As Supercharged pools always contain a quote asset and the taker fee is collected in this, this will likely cover the majority of collected fees.

Any fees collected that are not already a quote asset would be sent to a new module address in the txfee module, where they would be swapped to a governance adjustable single asset at epoch, initially set to USDC.


Both a go.

Very good to consider the possible future clogging of blockspace, which might be real if Osmosis becomes the big-hitter it wants to be. Prepping for the future is a real thing.


Definite yes to both.

TBH for the fees going to stakers, I assumed this was the intent of the proposal from the beginning. With all the eyes we had on it at the time, I’m surprised we all missed adding this language to the proposal. :sweat_smile:

Good catch. Let’s make it happen!

You mean I won’t be able to execute my evil plan of trading CRBRUS just so stakers will see CRBRUS dust in their wallets from the taker fees I pay? :rofl:

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So am I going to get to execute my evil plan of annoying stakers with CRBRUS dust?

It will get converted to Osmo before distribution, so no :slight_smile: