Summary:
The recent Fee Boost paper proposes a mechanism for optimising dynamic fee rates through a Harberger tax market mechanism, by enabling agents to rent the right to set fee rates and receive admin fee revenue. Pangea is requesting grant support for a study that converts the Fee Boost concept from theory to hard numbers.
The study has three key objectives:
- Quantify the fee revenue being left on the table by not implementing ‘smart’ fees
- Evaluate the profitability of Fee Boost for searchers, LPs, and the DAO
- Provide tooling for researchers to conduct their own investigations
Motivation:
The study’s value is three-fold:
- Using a real-life example it will evaluate the potential impact of Fee Boost on DAO revenues and LP profitability
- Empirical analysis of Fee Boost will provide useful feedback to optimise future implementations, enabling better governance decision making for the DAO
- Researchers interested in conducting further investigations will benefit from the backtesting tools developed to support this research
Specification:
Using the 3pool as a case study, we will replay USDC-USDT swaps alongside equivalent Uniswap V3 trades, then re-price those flows under a range of hypothetical fees to see how volume and fee revenue would be impacted, assuming trades always route to best execution (excluding gas costs). As the fee floor and ceiling and the fee change delay are manually controlled, we will re-run the simulation under a range of different constraints to also determine the impact of changing these and find optimal values. The outcome will be an estimate of the fees 3pool could have earned given an optimal dynamic rate, a schedule of the optimal fee rate, and an estimate of the maximum tax a rational Fee Boost agent may be willing to pay for the opportunity and the impact of this on both LP and DAO income.
We aim to deliver the following within 6-10 weeks from this grant being received:
- A technical report presenting findings and recommendations
- An interactive dashboard that allows the community to experiment with fee rates and see how this impacts volume and revenue
- An open repository containing all cleaned data and simulation code for community audit and reuse
To support this research, we are requesting:
- $15k grant to cover costs
- Promotion of the research
- Consideration for future research and services partnerships
About us:
Pangea is the permissionless coordination layer for AI and blockchain infrastructure, delivering sovereign, anti-fragile systems through our trustless network of coordinated node operators. Our streaming-first architecture, custom indexing capabilities, and rigorous backtesting tools for analyzing on-chain market dynamics, combined with our deep expertise in DeFi mechanisms and data science, position us uniquely to conduct this Fee Boost research for Curve.