SCCP-183: Update Dynamic Fee Parameters

Simple Summary

This SCCP proposes the following changes to Dynamic Fees parameters:

• Decrease the exchangeDynamicFeeThreshold to 25 bp from 35 bp
• Increase the exchangeDynamicFeeRounds to 6 rounds from 3 rounds
• Increase the exchangeDynamicFeeWeightDecay to 0.95 from 0.6
• Lower the exchangeMaxDynamicFee to 1.5% from 5%

Abstract

The parameters being updated are as follows:

• exchangeDynamicFeeThreshold is the minimum change in price above which dynamic fees are levied. A larger threshold leads to lower dynamic fees.
• exchangeDynamicFeeRounds is the length of the look-back window. The shorter the lookback window, the less is persistent the impact of historical price volatiltiy on dynamic fees.
• exchangeDynamicFeeWeightDecay is the coefficient applied on dynamic fees from the previous round. The lower the decay factor, the faster dynamic fees revert back to zero.
• exchangeMaxDynamicFee is the maximum fee that could be levied in a transaction. If dynamic fee exceed this level transactions revert.

Motivation

The primary motivation is to lower the chance of oracle latency arbitrage without increasing the base fee on traders.

Copyright

Copyright and related rights waived via CC0.