CIP-3: Trading Fee discount for COW holders

@bh2smith’s two points are very important. I’d like to add two comments.

I think for someone to receive a discount they should be holding some type of time-locked token (e.g. veCOW).

Since the fees are proportional to the value being traded, the discount should also be proportional to the amount of tokens held, capped to a certain limit of value traded. If not, then accounts that trade millions (and can save thousands of dollars in fees) would need to own the same amount of account tokens for people that trade a few thousand dollars (and therefore could only save a few hundred from a fee discount).

For instance, holding $10k worth of veCOW should give you a 10% fee discount for trades up to $100k.

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Note that the protocol does not currently charge fees according to the trade size. Only fees at the moment are for execution costs (not proportional to the volume of the trade). So I’m not entirely sure, at least for the moment, that the discount needs to be related to the size of the trade.

Perhaps protocol fees as a function of trade size will eventually become a thing - as they would generate some revenue to be distributed to stake holders & solvers.

In either case it might make sense to put a lower bound on the trade size before discounts come into play. Since low volume trades don’t necessarily contribute to COWs :cow: :cow2:.

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Oh I see, I did a quick test before posting this and I noticed I was getting lower fees for lower trade sizes. That could be because large volumes occasionally require more complex routes.

Thanks for the clarification. I agree that putting a low blind makes sense.

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Definitely need people LOCKING tokens away to help the growth of the protocol and its future staying power. This below may be a lil extreme in terms of % or time of lock, but you get the point. We should encourage people lock if you want the best discount and highest LP rewards (aside from the Solvers, which would prob be an entirely diff thing). Remember, if CoW Swap wants to become a major DEX player out there, there’s gotta be a reason to come and spend time in this ecosystem. The liquidity and hype will follow when volume starts coming in and the snowball effect hits.

I think we need to look at Uniswap and others to see how we can improve upon their mistakes of their LP incentive model and enhance CoW Swap with a veToken model that drives $vCoW adoption.

  • 50% trade fee discount for a 4 year lock + LP incentives + largest voting power.

  • 40% trading fee discount for a 3 year lock + LP incentives + voting power

  • 30% trading fee discount for a 2 year lock + LP incentives + voting power

  • 20% trading fee discount for a 6 month lock + LP incentives + voting power

  • 10% trading fee discount for a year lock + LP incentives, however this tier does not have voting power at all

$vCoW holders who don’t want to lock at all can stake to earn a smaller portion of the LP and trading fees dependent on their size of tokens staked. Also, this would apply to lockers as well and the size of their tokens locked. You can also get creative by adding the ability to unlock, but with penalties that get paid back to lockers.

If we train Users’ brains to always think they need to be a part of the protocol by staking or locking tokens away, then it’s a win-win for everyone.

I understand the protocol’s rev stream and volume would need to be rocking for all of the above to work but just wanted to throw my 2cents in to ensure we are at least thinking about how a $vCoW holder/locker can benefit from this cool ecosystem just buy buying and staking, at the bare minimum.

I feel being aggressive on the fee discounts w/longer lock periods will help the protocol grow, albeit possibly slower, but with more people feeling included, whether you hold a small or large $vCoW holding. And that’s the biggest thing of all - how do we ensure every person feels a part of this ecosystem?

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Should look further into the 1inch offering when it comes to cashback/fee discount.
their model has been very succusful imho

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What do you think about a “$-box” instead of “time-box” for this fee discounts? The DAO would have to reimburse solvers for the reduced fees they will be receiving for those orders (otherwise they would have a reduced incentive to actually include these discounted orders in settlements).

This way you would change the proposal to something along the lines of “allocate X$ for additional fee subsidies for COW holders/lockers with the following rules…”. The proposal can then be renewed in order to continue the fee subsidy.

I guess some of the details will also depend on CIP-Draft: Solver Rewards as this defines how solvers are rewarded and reimbursed for their operational costs (i.e. gas costs).

I would vote for this.

It could be much like a bonding curve. For example, the longer one hodl the token, the less swap fee one pays?

" Tier 1; By hodling 100~? Tokens for 30 days, a traders fee’s will be reduced to (%) over time and end up at the maximum fee reduction in this tier EoM".

With the possibility of several fee reduction tiers, all depending on how many tokens one decides to hodl.

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I agree with a tiered discount. Someone who uses the platform often for large sums would wish to obtain higher tiers to save more.

I also believe anyone who fulfilled the investor option, should receive some type of discount, since they maxed out their option and agreed to sit on that investment for 4 years.

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I pretty much agree with everything @Zapps wrote here.

Aggressive for long term lockers who align their incentive with the future of CowSwap. I’d even argue for a extremely long locking (perhaps through bond-like incentive), longer than 4 years.

I agree - locking tokens for discounts makes more sense than just holding them. Also having different tiers based on locked amount/time locked makes a lot of sense to me as well.

That being said, the amount of work-time required for having trading discounts for locked tokens instead of just tokens held is much higher (it would involve an additional smart contract with an audit). Specifically, I don’t think this is something that we can deliver in the short time until the token becomes tradable (unless we rush things along, which is never a good idea with smart contract development :stuck_out_tongue_winking_eye:). Long term, however, I 100% think that tokens should be locked/staked in order to users to be eligible for trading fee discounts.

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It’s been a few days since there was activity on this thread. Based on the discussion thread of the CIP “vCOW to COW redemption”, it’s important to focus on adding some utility to the token before making it tradable as it will help reduce sell pressure. Lets work on that and move forward with this proposal to offer fee discount to COW token holders.
Trying to find a consensus between the different suggestions in this forum discussion and looking at what’s technical feasible in a short time period, I would suggest the following:

  • simple holding of token makes users eligible for the discount. Lets not yet make locking a requirement to reduce the burden of writing & auditing a new smart contract, and lets also not require any minimum holding time to reduce the entry barrier.
  • an address’ balance is accounted for per network (GnosisChain balance provides fee discounts for GnosisChain; Mainnet balance for fee discounts on Mainnet). Of course it would be nicer if the overall balance of an address across different networks would count, but this requires more technical ressources and the impact is not huge (not too many addresses should be affected by this).
  • lets introduce different tier levels for rewards. I would propose to start with 4 levels and then adjust it at a later stage if useful. Usually less complexity is better, but having less than 4 tier levels might be insufficient.

I am proposing the following four tiers - not necessarily convinced of them, but helpful to kick off the discussion:

Tier 1 1,000 COW Discount: 5%
Tier 2 10,000 COW Discount: 10%
Tier 3 100,000 COW Discount: 20%
Tier 4 1,000,000 COW Discount: 40%

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Yes please, and please share a link - I was trying to dig more into it as well, but somehow couldn’t find the relevant information.

All excellent points, however I think the tiered discount system should not be used in the short term.

Many users of the protocol have not accrued the quantities of tokens suggested to access the discount. Perhaps holders over a certain quantity (e.g. 1000) get access to a 10% discount. This will help drive additional demand for the token.

There also really needs to be some sort of time held check mechanism in place otherwise the incentive will be abused.

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If the goal is to reduce sell pressure, then having a single tier of 1K tokens is likely not enough. Users could sell everything but 1K tokens, having multiple tiers could circumvent/reduce the likelihood of such a scenario.
How about removing the 4th tier?

What do you have in mind how users would game the system? For Mainnet, high gas costs make it unfeasible to buy and sell COW for the benefit of fee discounts. On GnosisChain gas is playing less of a factor, but slippage for large trades that are needed to reach the higher tiers would also make gaming a non-sensible matter. As there’s currently no volume based fee, but the fee discount is strictly related to the gas costs, gaming should not be economical viable on neither chain.

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I think this is a good idea, multiple tiers allow to reward different stakeholders. If we only had one tier rewarding users, we would miss out on attracting / rewarding those who hold more tokens. It’s important to show appreciation also to larger stakeholders.

I don’t worry about users “gaming” the system to receive the subsidies - the subsidy anyways only affects the gas costs, not worthwhile to cheat (+ cheating costs would be high on mainnet).

The suggested tiers seem ok to me. Would make sense to start with these, they can be adjusted in the future.

Great job on writing up this proposal!!

Need a discount for tier 500 COW.

Always good to see ways to bring utlity for governance tokens. Also like the idea of having set parameters that govern the use of the fee discount and having a set amount form treasury to cover these expenses for a set amount of time.

Couldnt one just us a flashloan to game the discount system every time they wanted to make a trade? Could we bake in a mini-vesting period of needing to have acquired COW no more than x blocks prior to the trade, preferably at least 24h worth? Or some other duration that at least requires some exposure to COW.