BitShares fees, the Fee Schedule and DEX profitability

Suggested Duration: 10 to 20 minutes

Clockwork has analyzed the net flow of BTS fees through the BitShares reserve pool over the past 6 months. He has found after accounting for all the fees collected and all of the witnesses and workers paid from the reserve pool, that reserve pool is currently operating at a daily loss of 326.5k BTS per day.

"Meaning the reserve pool subsidizes the running of the DEX ..."

More details are below with emphasis added

"As you can see, the majority of the transactions are transfers,order creations and order cancellations. Keep in mind that only filled/partially filled orders are charged the creation fee. And only about half of the orders created are actually filled (and thus pay fees) before being cancelled.

"Turns out that with the current fee schedule, the total fees over the last 6 months come to a total sum of just over 3m BTS.

"This means that approx 600k BTS is returned to the reserve pool from fees or just over 100k BTS / month (3500 BTS / day).

"Around 25% of that comes from transfer ops, a staggering 40% or so from asset issuance performed by gateways and 20% from account creation.

"So >85% of the DEX reserve pool revenue comes from non-trading operations.

"Furthermore, the DEX reserve pool (replenished at 3.5K BTS / day as stated above) is spending approx 330k BTS daily at the moment. ~30k for witness payments and 300k on worker proposals.

"So it's running at a loss of about 326.5k BTS PER DAY at the moment.

"Even if we consider worker proposal payments as an investment for the future rather than a running cost, although workers incldue the infrastructure worker payments, and only consider witness payments as running costs, the loss is still 26.5k BTS /day.

"Meaning the reserve pool subsidizes the running of the DEX to the tune of 88% or so.

"The initial decision to have very low trading fees was taken to entice and bring in more users to the DEX. But as things stand the current base fee of 1/8th of a cent (0.0012 USD to be exact) for order creation of ANY size is way too low.

"The end result is that trading fees (order creation/update/cancel) account for just 4% of the DEX revenue despite accounting for >50% of the total usage.

"I know this might not be immediately obvious to people because a lot of assets are gateway assets with an associated percentage based market trading fee which is high compared to most CEXs (usually 0.1% compared to 0.05% or less in competing CEXs) but that's a gateway issue.

"It is my belief that the BitShares fee schedule should be updated to increase fees for most operations and ensure the long term viability of the platform.

"I have a Fee Schedule proposal I am currently working on that would see most fees raised 4x. Combined with a proposed 10% decrease in witness pay to 0.9 BTS / block, the reserve pool would only subsidize the platform to around 25%. Thus, with a 25% increase in usage/userbase the platform would go back to breaking even (if considering witness pay as the running costs) which sounds a lot healthier."