BSIP-0002

bsip-0002.md

@@ -0,0 +1,81 @@
+    BSIP: 0002
+    Title: Refund Create Order Fees on Cancel
+    Authors: Daniel Larimer <dan@cryptonomex.com>
+             Fabian Schuh <Fabian@BitShares.org>
+    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.