[bisq-network/proposals] Bisq revenue generated by BTC trading fees belong to the contributors (#207)

Florian Reimair notifications at github.com
Mon Apr 13 11:28:41 UTC 2020

> _This is a Bisq Network proposal. Please familiarize yourself with the [submission and review process](https://docs.bisq.network/proposals.html)._

- the more active BSQ trading becomes, chances rise that Bisq revenue by BTC fees does not reach the contributors
- make sure contributors get their share of revenue
- not a permanent or final solution, but a place to start

# Problem statement

Recently, the BSQ market has been discovered by at least one trader. Given the attractive gap between buy and sell offers, it is a perfectly legit strategy to buy cheap and sell expensive. However, the BSQ market is not balanced at all, sell volume is significantly higher then buy volume.

![Screenshot from 2020-04-13 12-05-11](https://user-images.githubusercontent.com/1070734/79116593-33b96100-7d89-11ea-9750-b67c2ca9e0ca.png)

That opens up different scenarios, of which an incomplete list is given now.

## contributors cannot keep up with their sell offers

The issue is, that contributors are not and maybe cannot keep up with their sell offers and more importantly, the prices. This can have different causes.
- contributors do not care about selling stuff: seems unlikely. Every contributor investes hours of her time. Not all of them have the luxury to work for free.
- contributors struggle to keep up with adjusting their rates: one has to be online all the time and actively adjusting the offers, it takes time and it prevents contributors to focus on work.
- contributors do not want to underbid each other because they only hurt themselves and other contributors. If only a few contributors have to sell to make a living, they, given the market balance, might just destroy the market completely. External traders, however, do not care if they sell for ...50 or ...95 as long as it is over their buying price (saw it myself. Tried to sell BSQ multiple times. Once, price went from ...95 to ...63 within a day, nothing has been sold, but the price stayed at ...63)

## non-contributors (traders) receive Bisq revenue

The burning man process is to buy at top price. What first seems like a legit solution shows some drawbacks when viewed from a contributors perspective.

Imagine the following scenario:
- A trader, Alice, puts up a buy offer over 1k BSQ for a price of ...6 BTC/BSQ.
- A contributor, Bob, takes the offer.
- Alice put up a sell offer over 1k BSQ for a price of ...9 BTC/BSQ.
- The burning man takes the offer.

As a result, the Bisq revenue is spread like
- Bob, the contributor, gets ...6 BTC
- Alice, the trader gets ...3 BTC
- from Bisq revenue generated by BTC trading fees.
This situation might occur already, but will occur more regularly when more traders join the BSQ market. Again, as more and more traders join the BSQ market, the issue will intensify.
# Proposal
I propose to adjust the burning man process in order to route Bisq revenue generated by BTC trading fees to the contributors.

- The current budgeting solution and its effect on compensation requests stay as it is
- The burning man still prioritizes the refund agent
- After the refund agent is being dealt with, the burning man prioritizes contributors
  - The burning man communicates how much is left to spread, for example lets say 1 BTC
  - Contributors, according to their compensation requests, get granted a share of BTC revenue
  - a BSQ price is given (like the one we already have, but not for USD but for BTC) (lets say 0.00005 BTC/BSQ)
  - they have to put up a sell offer matching their share
  | Contributor | BSQ requested [BSQ] | % of overall BSQ requested | Sell offer [BSQ] |
  | ---:| ---:| ---:| ---:|
  | 1 | 6000 | 20% | 0.20 BTC = 4000 |
  | 2 | 6000 | 20% | 0.20 BTC = 4000 |
  | 3 | 4500 | 15% | 0.15 BTC = 3000 |
  | 4 | 6000 | 20% | 0.20 BTC = 4000 |
  | 5 | 7500 | 25% | 0.25 BTC = 5000 |

  - they have to communicate their node address in a trusted chat (ie. keybase)
  - the burning man buys their offers
- if something is left after that (because revenue has been bigger than compensation requests)
  - either follow the current procedure and take best sell offers
  - save up and create some buffer for future expenses (attack refund, compensation, ...)
## Discussion
- the pressure on Bisq price might drop, as contributors do not have to underbid traders to get at least some part of the revenue (especially, as the burning man is the most valuable BSQ buyer, at least ATM)
- contributors are still free to sell their remaining BSQ on the market
- traders participating in the market do not get a part of Bisq revenue, the revenue belongs to the contributors

# Notes
kinda matches the suggestion of @chimp1984 in https://github.com/bisq-network/proposals/issues/205
> Can be used later as well for other use cases. E.g. to pay part of core contributors compensation requests (directly in BTC, BSQ request gets reduced). This would remove one part of the required trust into the burning man. He would then only receive the funds from arbitration cases. But also that could be done with that model once the arbitration cases go down.

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