Can B&C do asymmetric maker/taker fees?

[Nagalim]

This has been talked about in the BTS community, the ability to waive fees for market makers as opposed to takers. On B&C especially, where just placing the order costs a fee, giving makers the bare protocol minimum (just enough BKC to cover the blockchain space) while forcing takers to pay a much larger fee to cover dividends could be a viable liquidity-generating strategy.

[dysconnect]

Identifying market makers is definitely tricky in a decentralized system. As a start, when a node mines a block it can decide to mark the low asks and high bids included in the block. Then, for example, if a very low ask order is placed without a matching bid order, it is considered a market maker, and the fee is waived.

[Nagalim]

Well, so most of the time the maker and taker won’t be in the same block, so the fee will be known ahead of time. However, you bring up a good point about about what happens when a matching buy and sell order are included in the same block when there aren’t any other orders on the books. Clearly, the people placing the orders think they are market makers, and so are sending under the low fee. Do we need to implement some kind of replace-by-fee mechanism, or do we just give both of them the low maker fee?

[masterOfDisaster]

I think the answer to the question is different in different phases of BCE’s life cycle.

Especially in the early days it will be important to bring volume to the exchange.
This can be supported by low fees. Is differentiating between makers and takers important in that phase or would overall low fees do?

Once there are enough users and enough volume, the fees can be raised.
In that phase I consider support for makers by lower fees important to avoid choking off the trading.

If my assessment is right, supporting makers with low fees is important or at least valuable, but might not be required from the start.

[dysconnect]

There would be competition when BCE has enough volume, so the fee isn’t known beforehand. You’re right that an unpredictable fee is kind of tricky to implement in practice; as a start, perhaps all agents should send in the normal fee by default but the fees are refunded by the network periodically when applicable, with records that can be seen on the blockchain. A more centralized solution is that market makers just get custodian grants from BCE, assuming there’s a genuine incentive for BCE to do so.