bsips/bsip-0002.md

    BSIP: 0002
    Title: Refund Create Order Fees on Cancel
    Authors: Daniel Larimer <dan@cryptonomex.com>
             Fabian Schuh <Fabian@BitShares.eu>
    Status: Draft
    Type: Protocol
    Created: 2015-12-16
    Discussion: <https://github.com/cryptonomex/graphene/issues/445>
                <https://bitsharestalk.org/index.php/topic,20107.0.html>
    Worker: 1.14.7

# Abstract

To make the BitShares decentralized exchanges more similar to other exchanges
there should be no fee for creating orders that do not get filled.
Unfortunately, to prevent abuse, a minimum fee is still necessary.

# Specifications

This proposal will charge the minimum order fee at the time the order is
created. It will be refunded if the order is canceled before any part of the
order is filled. A small fee will be charged to cancel orders. This order
cancellation fee will be just enough to prevent spam (equivalent of a fraction
of a Dollar cent).

If the fee is paid in something other than BTS, it will be converted to BTS via
the fee pool at the time the order is placed. If the order is canceled, BTS will
be refunded to the user's account.

Recommended Order Creation Fee: $0.20 for normal users $0.04 for LTM Recommended
Order Cancelation Fee: $0.01 for normal users, $0.002 for LTM

As a result, the minimum market fees for normal users will be less than those of 
centralized exchanges for orders greater than $100. For lifetime members, orders
above $20 will be cheaper than the 0.2% fee charged by normal exchanges.

# Discussion

## Fees payed in BTS

Paying fees in BTS is the cheapest way to pay fees because the
core-exchange-rate for UIA usually charge a slight premium to handle market
risk. This means that the next order you place will use the BTS to pay the fee
rather than the user asset. Think about it as getting a refund in "store
credit". If you place an order, cancel an order and then decide you don't want
to do any more business with BitShares then you will have to sell the BTS (which
will require placing an order) or "transferring".

Stated another way, for trading bots it doesn't matter that the refund is in a
different asset. For users it doesn't matter either. It will only impact those
who attempt to flood with a lot of orders, then cancel all of them. They will
end up converting their UIA to BTS at poor exchange rates and then having to
sell the BTS.

Bottom line, we presume someone placing an order will eventually want it filled.
By refunding them in BTS they can eventually get it filled and end up with 0
BTS.

## Discouraging of Makers when not Refunding Partially Filled Orders

A concern is that the rule may encourage taker but discourage maker, as if an
order is partly filled, the creation fee will not be refunded, and obviously
taker can be more easily to make sure his order is fully, not partly filled.

## Anti-Spam considerations

Furthermore, a fee has to be charged for anti-spam. Orders create objects which
must be kept in memory which imposes a resource cost on every node on the
network (plus more cost for storage / bandwidth for the transaction). Cancelling
an order frees up memory, which can be viewed as a negative resource cost,
represented by the refunded fee.

Ultimately, this reflects a tension between the economic value of liquidity
(market makers should be encouraged because a bigger book is better) and its
cost (every order consumes memory). If we make the fee equal to cost, someone
deciding whether to place an order can determine whether the cost exceeds the
value, and the tension is resolved in a decentralized market-based way.

# Copyright

This document is placed in the public domain.