Proposal Details
Proposal #795
Proposal title
nBTC Revenue Share Proposal
Submit time
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Proposal #795 description
This proposal outlines a Protocol Revenue sharing agreement, which entails waiving Bitcoin bridging fees when a transaction originates or terminates on Osmosis. In return, a proportion of taker fees generated by trading nBTC or its derivatives on Osmosis will be shared with Nomic.
About Nomic
Nomic offers a decentralized, non-custodial Bitcoin bridge to IBC-enabled chains like Osmosis. nBTC, the Bitcoin-backed asset provided by Nomic, is live on Osmosis today, along with Interchain Deposits. This feature allows Osmosis users to deposit BTC directly within the Osmosis app to receive nBTC.
Nomic aims to provide a seamless on-ramp for Bitcoin liquidity and, to ensure controlled growth during the early stages of adoption, currently has a capacity limit of 21 BTC, a deposit fee of 1%, and an IBC transfer fee of 0.5%.
Proposal
This proposal signals the addition of a protocol revenue share system that will replace these bridging costs with a share on taker fees gathered from trading activity on Osmosis, resulting in Nomic benefiting from increased adoption of nBTC across applications on Osmosis rather than just arbitrage against the value of native Bitcoin.
Osmosis users benefit by gaining a low-cost decentralized bridge to Bitcoin, onboarding an initial route for Bitcoin liquidity and allowing BTC liquidity to interact directly with the Osmosis Ecosystem. There is currently no other route to bring Bitcoin to Osmosis in a decentralized way.
Osmosis and Nomic Governance will directly control the proportion of nBTC taker fees allocated to the split. This proposal is for an initial term of six (6) months from the activation on both chains, or until superseded by mutual governance action.
Source of Revenue on Osmosis
When a trade is performed on Osmosis, the protocol levies a taker fee on the token that enters the trade, which is currently set at 10 bips by default.
When a swap route involves nBTC on Osmosis, Nomic will receive 10% of the total taker fees on the swap charged by Osmosis.
For swaps not involving nBTC, but involving alloyed BTC (of which nBTC is a component), Nomic will receive a cut of the 10% rev share in proportion to nBTC’s composition of the alloy. For example, if nBTC makes up 40% of the allBTC alloy, Nomic will receive 4% of the Osmosis taker fee on that swap.
The accrued rev share fees will periodically be transferred to Nomic as nBTC and paid out according to Nomic’s regular protocol revenue distribution mechanism.
Osmosis Bridging Fee Exemptions
In return for this revenue, Osmosis users will no longer be charged a bridging fee for depositing BTC via Nomic to Osmosis or a transfer fee for moving nBTC between Nomic and Osmosis.
This exemption from bridging fees is applicable when Osmosis is the terminating chain and a transaction is performed through Nomic. In such a scenario, there will be no IBC transfer fee for transferring to Osmosis from Nomic. Also, there will be no IBC transfer or percentage bridging fee for depositing to Osmosis directly from Bitcoin. A fee will still be charged for depositing from Nomic to other chains unless similar agreements are approved by Nomic governance.
A flat Bitcoin miner fee may still be charged on withdrawals to Bitcoin to cover gas fees on the Bitcoin chain.
IBC middleware will be used to prevent the transfer of nBTC from Osmosis to any other chain except Nomic. This will prevent Osmosis from becoming a new routing chain for nBTC due to the comparative lack of IBC routing charges and retain Nomic as the routing hub for nBTC across the Cosmos Ecosystem.
Implementation
This mechanism would be implemented during a future software upgrade if approved by both Nomic and Osmosis governance. If solely approved by either governance, the mechanism may be implemented on the approving chain in case further agreements are reached with different parameters or alternative parties. The first chain to integrate the software upgrade with the enabling mechanics should activate the benefits in a further proposal after the upgrade proposal to ensure that the start date of both mechanisms is synchronized.
Full Proposal: https://forum.osmosis.zone/t/nbtc-revenue-share-proposal/2791