The stability fee is 2% per year for all active safes. This supposedly pays for rate setting, rai twap oracle updates, OSM and other automation contracts.
Let us assume that LUSD is RAI’s main and closest competitor for arguments sake. They achieve over $500MM in TVL generating $30MM protocol revenue in less than 2 years with a 0.5% one-time borrow fee (this borrow fee is slightly variable depending on volume but 0.5% is the base and what most users would pay).
Should we assume that the opportunity cost of ‘true’ decentralisation from the ETH/USD chainlink oracle that Liquity piggybacks on for their protocol is >1.5%? Perhaps that is the actual cost, but I think there should be an indepth DAO lead investigation into the possible scenarios of reducing the stabiliity fee.
Outcomes of the investigation would be as follows:
- Current runway of 2% stability fee for complete automation at current TVL
- Projected new TVL upon reduction of fee at various levels, and the runway of those cases
- Recommendations on scaling down stability fee whether that be over many months, immediate, or not recommended
- Analysis of current protocol costs to see if they can be reduced (such as slower oracle updates, etc) and their effect on protocol runway
- Investigation of various alternative ways to generate protocol revenue to mitigate reduction of stability fee