[bisq-network/proposals] Create financial reserves and fix a resource leak (#216)

Florian Reimair notifications at github.com
Tue Apr 28 09:09:15 UTC 2020

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

- there is a leak in Bisq that can cause Bisq revenue (created by trading fees payed in BTC) to not reach contributors
- fix it by stopping public trade events
- this supersedes https://github.com/bisq-network/proposals/issues/207

# Nomenclature

- **contributor** someone who spends her time and resources to evolve Bisq and the DAO. Examples are developers, support staff, marketing staff, team leads, first-timers, ...
- **speculative trader** someone who uses Bisq as an exchange. Pays her trading fees but does not add direct value to the Bisq software or the Bisq DAO.

# Problem Statement

There is a resource leak in Bisq that can cause Bisq revenue to not reach contributors. In detail, the issue affects the part of Bisq revenue that is created by trading fees which are payed in BTC. These fees go to Bisqs donation address and are later used to burn BSQ.

## Leak description

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 0,...6 BTC/BSQ.
- A contributor, Bob, takes the offer.
- Alice put up a sell offer over 1k BSQ for a price of 0,...9 BTC/BSQ.
- The burning man takes the offer.

As a result, the Bisq revenue is spread like
- Bob, the contributor, gets 0,...6 BTC
- Alice, the trader gets 0,...3 BTC
- from Bisq revenue generated by BTC trading fees.

## Leak effects
The leak is not new, however, as more and more speculative traders join the BSQ market, its effects become more apparent and severe. Effects are
- Bisq revenue goes to speculative traders instead of contributors
- contributors receive less USD compensation
- Bisq might start loosing contributors
- if that happens, Bisq is dead

# Proposal

- stop doing trading events
- leave profit (if there is any) at Bisqs donation address
- use the profit to refund the refund agent (nothing changed)
- if there is anything left, keep it at Bisqs donation address
  - for future use in refunding the refund agent (we had multiple trading events in the past where not even the refund agent could be fully refunded)
  - for future use as source for compensating victims of incoming attacks

##### How does that address the problem?

Well, if the donation address does not participate in the free market, revenue cannot go to contributors but neither can it go to speculative traders. Hence, there is no leak.

##### But then contributors cannot have it either!

Well, yes. However, following the recent (small!) security incident, a large part of Bisqs revenue is to be used to refund victims anyways. Eventually, there will be another incident with the needs of refunding the victims.

##### What if no new incident happens?

There are multiple options of course:
- keep it, create a "reserve" for next _insert time period here_
- distribute it among contributors somehow
- all of the above

##### What happens to the burning man?

The burning man role requires less efforts on scheduling and creating public trade events

##### What about https://github.com/bisq-network/proposals/issues/209

There has been this [40% number](https://github.com/bisq-network/proposals/issues/209#issuecomment-613289972). We can amend that by doing for example
-  we can have 10% reserves (this proposal), 40% refund, 50% contributors out of the total Bisq revenue
- we can have 80% of revenue created by trading fees payed in BTC routed to the victims of the recent incident and 20% to be kept in reserve.
- other options are possible as well

# Closing notes

This proposal is to communicate and hopefully agree on two basic things:
- create awareness of the resource leak
- introduce the concept of the need of "financial reserves" in order to keep Bisq alive. 

Implementation details should be discussed separately.

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