Add a 0.1% issuance and 0.2% redemption fee to DPI units minted and redeemed via the exchange-issue/redeem-exchange feature.
- Grow revenues and revenue sources
- Capture some of value created by exchange-issue
- Adds more friction to the selling/redemption process (which we are significantly lubricating via redemption-exchange)
- Charge exiters more than entrants
The upcoming implementation and launch of exchange-issue represents an improvement for the prospects of larger purchasers gaining exposure to DPI.
Because they can now inherit the far deeper liquidity pools of the DPI constituents, users of exchange-issue will receive far less slippage than if they were to attempt a similarly sized trade of DPI on a secondary exchange.
Although they inherit higher gas costs via more transactions, in larger amounts, users are far more sensitive to slippage. Because the value proposition of making a buy (or sell) of DPI by utilizing the liquidity of components is so high, it is natural that the Coop would seek to capitalize on some of the value created.
For example, we can imagine that, if a buy of $1,000,000 would net the exchange-issuer 0.5-1% of ($5,000-10,000) savings vs a secondary liquidity pool, they would think nothing of paying $500 to $1000 for that service.
The key consideration against implementing creation and redemption fees were the costs it imparted on a key ecosystem participant, arbitraugers. Given the expected behavior of these individuals would be to continue using issue/redemption in their classic form, applying this fee to the exchange-issue users bypasses the need to tax arbers.
When exchange-issue (0.1%) or redeem-exchange (0.2%) is used, the system automatically takes a cut of minted or redeemed DPI units and directs them to the Index Coop treasury.
This model describes the annualized revenue potential at various DPI exchange-issue/redeem-exchange volumes