Background
The new v3 contracts enable a more complex protocol fee structure. The fee consists of a “base fee”, which is shared by all members of the batch, and an “incremental fee”, that is paid by each user separately. For example, a high volume pool can enjoy smaller fees, because it shares the “base fee” among all 25 orders in the scoop.
This ADA is collected and paid to a smart contract controlled by the SUNDAE token holders directly. The DAO can then vote to use this revenue to fund operations, R&D, or further incentive programs.
However, this leaves the DAO with the decision for how to leverage these parameters for the good of the protocol.
Currently, the major DEX’s charge a scooper / batcher fee as follows:
| DEX | Fee | Notes |
|---|---|---|
| SundaeSwap | 2.5 ADA | |
| Minswap | 2 ADA | |
| Wingriders | 2 ADA | |
| Meusliswap | 2.33 ADA | split between matchmaker and frontend fees |
| Spectrum | 1.5 - 1.8 ADA | |
| VyFi | 1.9 ADA | |
| Teddyswap | 2.5 - 2.8 ADA | split between matchmaker and frontend fees |
| Geniusyield | 1 ADA ? | The UI advertises multiple different fees; still investigating. |
Context
After a discussion with the Sundae community, we’ve extracted 4 reasonable choices for an on-chain vote.
One option would be to avoid changing the fee structure: leave “base fee” at 0, and set “incremental fee” to 2.5 ADA. In practice, this has limited popular support, as keeping the fees high will be a deterrent to market participation, especially in an ecosystem with such heavy DEX aggregator presence, but I’ve included this for completeness.
Another option would be to lower our fees, but keep them targeted in the middle of the pack for other protocols. This would generate more protocol revenue, but leave other protocols as more attractive outlets for traders. One example of parameters that would generate this is a base fee of 0.332 ADA, and an incremental fee of 1.418 ADA. A single order in a batch would result in the user paying 1.75 ADA (and generating 1.418 ADA revenue for the protocol), while a batch of 25 orders would result in a fee of 1.43128 ADA per user (and generate 34.282 ADA revenue for the protocol)
Another option would be to seek a reasonable, but lower end fee: cheaper than many other protocols, but still bringing in protocol revenue. One example of this setting would be to target a 1 ADA fee, with a base fee of 0.332, and an incremental fee of 0.668 ADA. A single order batch would end up paying 1 ADA fee (and generate 0.668 ADA in protocol revenue), while a 25 order batch would result in a fee of 0.68128 ADA per user (and generate 15.532 ADA in protocol revenue).
Finally, the protocol could seek to significantly undercut the market to attract volume and thus liquidity to the platform for a set period of time, and revert to another one of the options. One example setting would be to set the base fee to 0.332 ADA, and the incremental fee to 0.168 ADA. A single order batch would end up costing that user 0.5 ADA (and generate 0.168 ADA in protocol revenue), while a 25 order batch would cost just 0.18128 ADA (while generating 3.032 ADA in protocol revenue).
For avoidance of doubt, the reason the number 0.332 is showing up as the base fee above, is because that is the transaction cost of a scoop with a single order in it.
Keep in mind that the DAO can always vote to update this in the future, or direct the treasury administrator to update it in accordance with some clear macroeconomic principles. This is just deciding on our initial strategy.
Summarized in a table (all units are in ADA):
| Base fee | Incremental Fee | Maximum User Fee (1 order) | Protocol Revenue (1 order) | Minimum User Fee (25 orders) | Protocol Revenue (25 orders) |
|---|---|---|---|---|---|
| 0 | 2.5 | 2.5 | 2.5 | 2.5 | 62.5 |
| 0.332 | 1.418 | 1.75 | 1.418 | 1.43128 | 34.282 |
| 0.332 | 0.668 | 1 | 0.668 | 0.68128 | 15.532 |
| 0.332 | 0.168 | 0.5 | 0.168 | 0.18128 | 3.032 |
Summary
Please vote for what the initial fee policy for the Sundae v3 protocol should be:
- Vote No Change to initially set the base fee to 0, and the incremental fee to 2.5 ADA, to mirror the current behavior of the v1 contracts.
- Vote 1.75 ADA to target a maximum fee of 1.75 ADA by setting the base fee to 0.332 ADA and the incremental fee to 1.418 ADA
- Vote 1 ADA to target a maximum fee of 1 ADA by setting the base fee to 0.332 ADA and the incremental fee to 0.668 ADA
- Vote 0.5 ADA to target a maximum fee of 0.5 ADA by setting the base fee to 0.332 ADA and the incremental fee to 0.168 ADA; This rate will be in place for 3 months, and then revert to the second highest voted option.
Please vote in the poll below if you would like to see this proceed to an on-chain vote.
- Interested - Proceed to an on-chain vote