Introducing Taker Fees to the Osmosis DEX

In the past, spot exchanges have utilized two types of fees: maker and taker fees.

This has allowed them to benefit from the activity on the platform.

Osmosis will be introducing taker fees to the Osmosis DEX, emphasizing the importance of capturing volume relative to TVL. 🧵 pic.twitter.com/c9GWKLELbl

— Osmosis 🧪 (@osmosiszone) June 19, 2023

1/ Historically, Osmosis has been measured by the amount of liquidity deposited via it's various liquidity pools versus the volume generated.

Liquidity providers earned rewards both in the form of incentives and swap fees.

This model has been key for bootstrapping liquidity. pic.twitter.com/igjOnZFrAF

— Osmosis 🧪 (@osmosiszone) June 19, 2023

2/ However, change is on the horizon with the introduction of several upgrades, including:

- Supercharged Liquidity: This brings unparalleled efficiency to liquidity providers.
- OSMO 2.0: Updated tokenomics.

And now, we have the introduction of taker fees.

— Osmosis 🧪 (@osmosiszone) June 19, 2023

3/ What exactly are taker fees? 🤔

Taker fees are the fees incurred when making a swap and are reflected on the displayed swap fees.

It's important to note that taker fees differ from maker fees, which are the fees charged to liquidity providers.

— Osmosis 🧪 (@osmosiszone) June 19, 2023

4/ Why introduce taker fees?

As we prepare for the migration to supercharged liquidity, which should have a positive impact on the amount of fees generated relative to the liquidity depth.

Osmosis will need a usage-based way to secure the network and fund the Community pool. https://t.co/VzL58tTB0E

— Osmosis 🧪 (@osmosiszone) June 19, 2023

5/ The Proposal:

A taker fee for swaps will be introduced with a flat rate based on the input value, regardless of the underlying pool's LP swap fee (to be renamed as spread factor).

The suggested default rate for all pools is 0.15%. ( adjustable by governance) 🏛

— Osmosis 🧪 (@osmosiszone) June 19, 2023

6/ How beneficial could this have been if previously implemented?

According to @NumiaData, Osmosis has seen a total volume of $4.7 billion on Osmosis in the past year (post Terra).

This volume would have generated $7.13 million over the last 12 months in taker fees. https://t.co/Djb6XvSRZJ

— Osmosis 🧪 (@osmosiszone) June 19, 2023

7/ By implementing a taker fee, the overall swap fee for existing pools effectively increases.

As concentrated liquidity and order books become more prevalent, it is projected that swap fees for most pools will be lower than the current rates.

— Osmosis 🧪 (@osmosiszone) June 19, 2023

8/ Introducing Flexibility to Osmosis:

Osmosis could introduce programs in the future to enable users to decrease trading fees, for example:
- VIP programs
- Discounts based on $OSMO staked
- Referral systems
- Fee rebates

Bringing us closer to competing with CEXs

— Osmosis 🧪 (@osmosiszone) June 19, 2023

9/ The introduction of taker fees had overwhelming support from the Osmosis community.

74% of whom voted in favor of this proposal. pic.twitter.com/PFDla2NMiO

— Osmosis 🧪 (@osmosiszone) June 19, 2023