Proposal Details
Proposal #740
Proposal title
Add 0.01% fee pools to Volume Splitting Groups - OSMO/ETH, TIA/USDC, OSMO/USDC, OSMO/USDT
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Proposal #740 description
This proposal would create new volume-splitting groups to include 0.01% spread pools for incentivized pairings that have a 0.05% pool in dominant use.
Background
This proposal extends the Volume Splitting Groups for existing groupings to include 0.01% Spread Factor pools after promising results from adding 0.01% and 0.00% OSMO/ATOM pools in Proposal 718.
Early results show that since the lower fee pools were included on the 12th of February, there have been beneficial results for Osmosis' incentives sustainability and trader experience with no additional incentives expended.
Lower fee pools within the group have quickly gained a large volume share, catering to over 50% of all ATOM/OSMO trading volume on-chain. As this volume has increased, more incentives have been pulled towards these pools, attracting more liquidity and enabling more volume to pass through these pools.
This, in turn, has led to volumes in this pairing crossing the trend line of volume overall in what was a declining trading volume pair due to the lowered overall fee. Graph of ATOM/OSMO Pairing Volume since VSG implementation
The same Osmosis incentives supplement these lower fee pools as applied previously to higher swap fee pools. However, as the Protocol Taker Fee remains constant with a changing pool spread factor, a greater proportion of trading fees go to the protocol and are either retained in the Community pool or distributed to Stakers. This ratio of fees going to the protocol has rapidly increased in the ATOM/OSMO pairing from where it had leveled off at 57% to a share of 75%.
A primary KPI for the performance of incentives is whether a protocol pays out more for liquidity than it earns in return. While Osmosis has previously crossed the Fee Subsidy rate of 1 overall, meaning that pool liquidity is mainly sustained by swap fees rather than incentives, it still pays out more than is earned by the protocol itself. Implementing these low-fee pools and further incentive optimization initiatives reduces this towards the 1:1 target. Graph of Protocol Revenue Ratio Shares
Importantly, this has resulted in a typical swap fee paid by traders between ATOM and OSMO reducing from 0.18% to 0.14%. By expanding these low-fee pools to other major pairings, the typical swap fee on Osmosis will continue to lower, particularly for multi-hops through these pools onto pools that have not had the volume to sustain a low swap fee pool without incentives or multiple quote asset pairings. Graph of Average Swap Fee for ATOM/OSMO
The complete statistics of the pools within this grouping, which comprise the data behind the charts above, can be found here.
Proposed Groupings
OSMO/STABLE
- OSMO/USDC 0.2%
- OSMO/USDC 0.05%
- OSMO/USDC 0.01%
- OSMO/USDT 0.2%
- OSMO/USDT 0.05%
- OSMO/USDT 0.01%
- OSMO/DAI 0.2% Classic
- OSMO/DAI 0.2%
OSMO/ETH
TIA/STABLE
Forum Thread: https://forum.osmosis.zone/t/add-0-01-fee-pools-to-volume-splitting-groups-osmo-eth-tia-usdc-osmo-usdc-osmo-usdt/2467