Hello everyone.
I would like to discuss the potential benefits of lowering the Stability Fund Fees.
With the recent integration of ICON and Balanced, alongside the introduction of USDC from other blockchains, it has become more feasible to maintain the peg of bnUSD through arbitrage between Balanced and centralized exchanges (CeX).
Currently, the costs associated with these arbitrages, excluding gas and xCall fees, are as follows:
- When an asset is cheaper on Balanced, the arbitrage cost is 0.4%.
- When an asset is cheaper on a CeX, the arbitrage cost is 0.9%.
Examples:
AVAX Cheaper on Balanced (Total Cost: 0.4%)
- Buy AVAX on Balanced using bnUSD (0.3% fees)
- Sell AVAX on Binance for USDC (0.1% fees)
- Swap AVAX USDC to bnUSD using Stability Fund (no fees)
AVAX Cheaper on Binance (Total Cost: 0.9%)
- Buy AVAX on Binance using USDC (0.1% fees)
- Sell AVAX on Balanced for bnUSD (0.3% fees)
- Swap bnUSD for AVAX USDC using Stability Fund (0.5% fees)
Current Stability Fund Fees:
- USDC/hyTB → bnUSD: 0% fees
- bnUSD → USDC/hyTB: 0.5% fees
Proposal:
I propose lowering the Stability Fund fees for swapping bnUSD to USDC/hyTB to 0%. This adjustment would reduce the cost of arbitrage to 0.4% in both directions, significantly increasing arbitrage opportunities.
Benefits of Lowering Fees:
- Enhances the alignment of asset prices on Balanced with real market prices.
- Tightens the bnUSD peg to $1.
- Increases trading volume, thereby generating more fees from swaps (0.3% per swap).
Lowering these fees would foster a healthier arbitrage environment on Balanced, benefiting the entire ecosystem.
Please let us know what you think about this proposal. Your feedback is really important!