[bisq-network/proposals] Have a clearly defined process for how Burning man trades BTC from donation and trade fee addresses for BSQ (Issue #367)

Thu Mar 3 18:15:56 CET 2022

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

References: 

[Donation Address Owner - Bisq Wiki](https://bisq.wiki/Donation_Address_Owner)
[Donation Address Owner - Role](https://github.com/bisq-network/roles/issues/80)
[Arbitration; Donation Address Owner - Bisq Wiki](https://bisq.wiki/Arbitration#Donation_Address_Owner)

## Background

The Donation Address Owner, AKA Burning Man, provided an essential role for Bisq. One of their roles is to buy BSQ using the funds they have received in the following BTC wallets:

- Trade Fees: [38bZBj5peYS3Husdz7AH3gEUiUbYRD951t](https://mempool.space/address/38bZBj5peYS3Husdz7AH3gEUiUbYRD951t)
- Donation Address (funds sent to arbitration): [34VLFgtFKAtwTdZ5rengTT2g2zC99sWQLC](https://mempool.space/address/34VLFgtFKAtwTdZ5rengTT2g2zC99sWQLC)

Traditionally Burning Man has been buying BSQ on Sundays. Recently they have proposed they will be limiting to their buys to BSQ Swap offers.

Therefore, if Bisq traders or contributors want to sell some BSQ Sunday is a good time to sell.

The BTC sent to the above addresses is usually 1-2 BTC a month so Burning Man trades make up a significant percentage of the BSQ/BTC market volume (eg February 2022 had a BSQ/BTC volume of 4 BTC).

## Problem

About 12 months ago @refund-agent2 started to [buy BTC from burningman with 30 day average](https://github.com/bisq-network/proposals/issues/294), as opposed to buying it on the open market. At the same time Bisq also began to [only partially reimburse high volume trades](https://github.com/bisq-network/proposals/issues/296).

The two actions above slightly changed the dynamic of how Burning Man bought BSQ.  The following is my assumption from reading the issues so would be good for @burningman3 to confirm the process.

Previously to the two proposals Burning Man bought BSQ with BTC from the Trade Fee and Donation Address on the open market
Since the two proposals Burning Man buys BSQ with BTC from the Trade Fee Address on the open market, and then trades with Refund Agent and partially reimbursed traders using funds from the Donation Address.

This change of dynamic has resulted in a build up of funds in the Donation Address. Funds build up in the donation address for a few reasons:

- @refund-agent2 charges arbitration fee (effectively does not give traders a full refund, this leaves funds available in the donation address as he is asking for less in reimbursement)
- Some traders that have been partially refunded might not contact Burning Man for a refund.

Currently funds in the Donation Address are just over 4 BTC. Whilst this is not an issue in itself, I think it would be good to put in place a process for how funds are spent to stop the build up of BTC in the donation address. This decreases the risk to the DAO.

Taking into account the above and commenting on the current situation I think the build up of BTC in the donation address has caused a decrease in BSQ volume. The current amount of BSQ in the donation address would purchase 148,754 BSQ at todays 30 day average price. To put that into perspective the total contributor requests since September 2021 have been 146,732 BSQ. The amount of BTC in the donation address therefore represents about 5 cycles worth of contributor compensation requests. 

Anecdotally contributors have expressed concerns that they are finding it increasingly difficult to sell their BSQ. This is despite putting up their offers on a Sunday. I think the fact the Burning Man has been trading with the funds from Trade Fees and not the Donation Address is a significant contributor to this.

## Outcome

Burning Man to use funds from both addresses to:

- Trade directly with @refund-agent2 shortly following their reimbursement request
- Trade directly with traders that have been partially reimbursed following their reimbursement request
- Use all remaining (unallocated for the above) funds to buy BSQ on the open market

## Considerations

Burning Man is providing a service for the DAO. Therefore, I think the DAO should have some input as to if they do or do not want to have some parameters of what prices Burning Man should trade BSQ for.

My thoughts are BSQ is should only be bought by Burning Man when they can achieve a BSQ/BTC price equal to or less than the 30 day weighted average. I have also considered if it would be appropriate for Burning Man to **make** offers to buy BSQ when they are unable to achieve Taking offers to buy BTC for the price above. I believe this would have a positive impact for the DAO, essentially ensuring the maximum amount of BSQ can be bought as possible. 

The alternative would be for Burning Man to buy BSQ/BTC at price less than or equal to a given percentage over the 30 day weighted average. This would be less beneficial for the DAO, but more beneficial to users that wanted to sell BSQ for higher prices.

Of course another alternative would be a more Laissez-faire approach as just let Burning Man do as they see fit.

## Solution

DAO to decide on a clear process for how Burning man trades BTC from donation and trade fee addresses for BSQ.

DAO to decide on it they do or do not want BTC building up in Donation Address.

Any process decided upon should be communicated in the wiki for all stakeholders.

I think the wiki could do with an update and would be happy to update it and include the outcome of this proposal, and also the related recent proposal [have a clearly defined process for how users with accepted DAO reimbursement requests can trade with Burningman](https://github.com/bisq-network/proposals/issues/366).

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