I’m glad this generated a discussion! A couple of responses:
@andermolly great point about arbitrage - it hadn’t even entered my mind. This gives us more opportunities though! Correct me if I’m wrong, but arbitrageurs couldn’t arbitrage the gas pool when gas prices are high for the same reason that the gas price isn’t already stabilized from arbitrage - because making transactions would still cost them a fee (just not as much as using another DEX).
The role of gas prices in arbitrage is to limit possible margin. In that sense, gas price only determines the spread over which arbitrage is profitable, and thus the volume of arbitrage being undertaken. By stabilizing our transaction fee, we would actually be simultaneously stabilizing our arbitrage volume, as there would be a stable spread over which it is profitable.
You are right in that during periods of high gas prices we would have more arbitrage - but it would be more arbitrage than other DEXs, not more arbitrage than we would have during periods of lower gas prices. This means that during periods of high gas prices, WhiteSwap would actually have an advantage of more accurate swap prices! Although on the flip-side of this, it would have less accurate swap prices during periods of low gas prices.
On @powmyles suggestion - I don’t think making users mine gas tokens would be an ideal solution. This is because this whole idea is centered around simplifying transaction fees for non-technical users. I feel that users who would go to the lengths to mine gas tokens could just use regular gas tokens themselves to get better savings on gas prices than what we would provide.
Regarding @fablo’s response - here is what I envisioned with the commission. Say the average gas price over the last 7 days was 50 (random number). We could charge an equivalent of 52 (for a 1% commission), and assuming that our trades are evenly distributed over periods of low and high gas prices, and that the 7-day average gas price stays at 50, then that commission would be stable and increasing the size of the pool, the gains from which could be paid to liquidity providers.
Now the problem I see is that the assumptions of even trade distribution and long-term fixed average gas price are far from realistic. This is why I suggested a variable commission. For example; say you wanted the pool to remain at a size of 1,000,000 (random number), and you wanted to give liquidity providers 0.1% of gas fees. Then you could create some formula to charge slight more than 1% (say, 54 if the average price was 50) during periods of high gas prices and slightly less (say 50) during periods of low gas prices, in such a way that the pool decreases less during high gas prices and increases more during low gas prices and stays roughly around 1,000,000 over a given period of time, all while taking into account a guarantee of 0.1% commission to liquidity providers.
The problem with this idea is that the gas fee we charge would be dependent on our relative transaction volumes during periods of high and low gas prices. The idea relies on people who use WhiteSwap during periods of low gas price effectively subsidizing gas fees for those who use it during periods of high gas price. Theoretically, if WhiteSwap was only used during periods of higher-than-average gas prices, the variable gas fee we charge would just be the same as the regular gas price (plus a little more actually, to account for the 0.1% liquidity provider commission), so we wouldn’t be providing any service. Even if we didn’t have this extreme scenario, our gas fee would still not be as stabilized as we would like - particularly if WhiteSwap was being used through a DEX aggregator.
I’ve toyed with the idea of charging a variable gas fee for arbitrageurs while charging the average gas fee for regular users (thanks to @davehut’s response), but I’m not sure if this would achieve anything. It would effectively exchange the stabilization of arbitrage margin (and swap price accuracy) for stabilization of trading volumes, but I don’t think it would provide any stabilization to the pool.
Of course @longserena also has a point that it might cost more to execute than what we could gain from it.
In short, I’ve boiled it down in my head to the extraction of value (in the form of the liquidity provider commission) from gas price volatility. If DEX aggregators become the norm, then this extraction would render the platform obsolete if it wasn’t accompanied by an equal injection in the form of decreased swap fees. However, you could indeed still do this extraction/injection and give the platform a unique selling point to boost adoption and the value of WSE tokens - you just wouldn’t be making any extra money off trade fees/commissions for liquidity provision.
If aggregators don’t become the norm, then the fee stabilization would become more effective and valuable as more people start using WhiteSwap, and you could extract value from its utility.
Regardless, it could be a great marketing stunt.
Sorry for the long-windedness, I hope it all makes sense. Let me know if I’ve missed something or made a mistake somewhere.
