SDP Fee Structure
We’re excited to bring you a major update regarding Project TXA: the fee structure for Settlement Data Providers (SDPs) to earn rewards has been finalized. Here are the specifics:
Users of the hDEX will deposit cryptocurrency into a non-custodial smart contract to use throughout the duration of their trading. Every time they make a trade, they will generate a fee for processing their actions. When the user is ready to withdraw their cryptocurrency that they had deposited into the non-custodial smart contract – or withdraw the cryptocurrency that they made by savvy trading – they will pay their fees out of the cryptocurrency that is being withdrawn.
Put another way: if a user deposits 1.25 ETH into a non-custodial smart contract, makes several trades, and then goes to withdraw 0.85 ETH from that non-custodial smart contract, the fees that they have generated will be paid out of the 0.85 ETH being withdrawn.
Currently, the fee rate that SDPs will earn is 0.1%. This means that, of the entire value of transactions processed by an SDP, 0.1% of that will be paid to them. If users across the hDEX generate $20 million in transactions in a given time period (very common for even a slow day on a small exchange), SDPs will generate $20,000 in fees.
Let’s get more detailed than this, and let’s use some real numbers to put this into perspective.
At the time of this writing, the #85 ranked cryptocurrency exchange saw $1.16 billion in trading volume over the past 24 hours. If one were to imagine that an hDEX could achieve at least rank #85 (which is not hard to imagine, given the revolutionary nature of the hDEX framework), then this example would see an hDEX with a 24-hour trading volume of $1.16 billion. In this scenario, SDPs would receive $1.16 million in fee payouts in just one day.
Expand that out over several days, weeks, months, and years, and you get the idea.
Naturally, the next questions would be: how many SDPs can process a transaction? If there are two SDPs, do all of them share the fee rewards? If there are two thousand SDPs, are the rewards split between all of them?
Only the SDPs who participate in a given settlement will receive a fee payout. Becoming an SDP involves staking two cryptocurrencies (TXA and the other side of the transaction being settled), and being selected to process a given transaction is dependent on an algorithm that examines the amount that an SDP has staked, and the value of the transaction being processed. SDPs that stake higher amounts will be eligible to process higher value transactions, and SDPs that stake lower amounts will be eligible to process lower value transactions. The algorithm will randomly select a given number of SDPs who stake enough to process a given transaction, and the fee rewards will be paid out to only those SDPs who participated in the transaction.
Here’s the recap:
- SDPs will earn 0.1% of the transactions that they helped process
- Becoming an SDP will require that you stake two cryptocurrencies
- The SDPs selected to process a transaction will be chosen based on the value of the transaction and the amount of tokens staked by an SDP
- When considering realistic 24-hour trading volume of other exchanges, it is easy to see how much an SDP could earn per day
This is a big moment for Project TXA that marks a giant leap towards the launch of Project TXA’s hybrid decentralized exchange (hDEX) framework out of open alpha! Currently, the SDP Fee Structure will continue to exist in the Open Alpha environment as we test and refine it. In the future, once the hDEX leaves open alpha, users can apply to become SDPs to begin earning fees while providing transaction processing services for hDEXs, like Tacen Exchange.