From 23de8ba4e2a77c9ecf723123678bc694f92a7a0b Mon Sep 17 00:00:00 2001 From: alexwaltz <92048497+alexwaltz@users.noreply.github.com> Date: Thu, 19 Jan 2023 22:46:37 +0000 Subject: [PATCH] Update fees.md --- docs/market/fees.md | 36 +++++++++++++++++++++++++++++++++--- 1 file changed, 33 insertions(+), 3 deletions(-) diff --git a/docs/market/fees.md b/docs/market/fees.md index f6354de..5ef058e 100644 --- a/docs/market/fees.md +++ b/docs/market/fees.md @@ -61,7 +61,7 @@ transaction is more expensive than a [simple spend][ss]. ## Earning Maker Fees As mentioned above, you can use the [Earn][earn] tab to earn maker fees -yourself.[^fn-home-mining] Simply choose an offer type, select how many fees you would like to earn, and press "Start Earning!" +yourself. Simply choose an offer type, select how many fees you would like to earn, and press "Start Earning!" Make sure to check the [orderbook][orderbook] to compare your offer with current market rates. If your offer isn't competetive, nobody will take you up on it and @@ -69,14 +69,44 @@ you will earn zero sats. [orderbook]: orderbook.md -[^fn-home-mining]: You can also mine yourself to earn mining fees, but that's outside of the scope of Jam. We refer the curious reader to [econoalchemist's home mining guide](https://archive.ph/TLIay) instead. - [:octicons-arrow-right-24: FAQ: How much can I earn?][faq-earn] [:octicons-arrow-right-24: Orderbook][orderbook] [faq-earn]: /FAQ/#how-much-can-i-earn +## Real life vs. Theory + +The Market Makers put up their coins in a hot wallet to be offered for liquidity, which means they face the following inconveniences: +- they are exposed to the risk of getting their coins stolen +- they incur an opportunity cost because they could be using these bitcoins to do something else with them. This is further amplified if additional coins are locked in a [Fidelity Bond][Fidelity Bond] + +It only seems fair that they get paid for all those inconvenience. +So how come the profits are minuscule? + +With the market dynamics described above, even since the early days, its been observed that makers make very little profit from offering liquidity. +This does not mean the market is "broken" it just reflects the reality of the situation. +There is much more supply than demand for CoinJoins. + +This whole thing is a market and it does what markets do well, price in all the relevant information/risks/costs. + +Another fact to consider is that the Bitcoin network itself has a cost to use - Bitcoin transaction fees. + +Even though most of the times fees seem to be very low, when constructing a CoinJoin the transaction gets big(each input/outputs adds extra data to the transaction). +Because of this factor, CoinJoins will start up starting with a pretty big baseline fee which is taken by the miners, so not that much left for the makers. + +We can summaries the trade-off between a maker and a taker like so: +- Makers: get kinda-free long term fairly good mixing +- Takers: non-free short term better mixing + +As a taker, you get to pick the exact amounts you want to mix, and as such you will not be left with any [Doxxic Change][Doxxic Change]. +Plus, you get to pick who you mix with, so you know the makers, not the other way around, giving a slight privacy advantage. + +Worth clarifying that the quality of a CoinJoin is the same for a maker or take, the small advantages/disadvantages are peripheral and have to do with what happens after the CoinJoin. + +[Doxxic Change]: /glossary/#doxxic-change +[Fidelity Bond]: /glossary/#fidelity-bond + ## Fee Conversion All fees are denominated in [sats][sats]. Use one of the tools below to convert them to fiat: