First Degree Burns: Fee Collection and Conversion Details

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Wanchain

5 min readAug 5, 2024

Convert n’ Burn, Wanchain’s Bridge Fees, Discounts and Benefits system, was designed with two primary goals in mind: to offset the on-chain costs incurred by the Wanchain Bridge and to create value for the entire Wanchain ecosystem. It achieves both these goals by standardising fees on the Wanchain Bridge, converting the bulk to WAN coins, and redistributing the value throughout the entirety of the Wanchain ecosystem.

By aligning every component of the Wanchain ecosystem, including but not limited to Wanchain’s industry-leading cross-chain infrastructure, the Wanchain L1 blockchain, the WAN coin and the Wanchain community, Convert n’ Burn is a shining example of the kinds of synergies that form when the whole works in unison. This is what Wanchain’s Unification Era is all about. Unification ensures that every single member of the Wanchain community benefits from the success of the Wanchain Bridge. Convert n’ Burn officially went live on July 1st, 2024. It has already converted more than 700,000 WAN and burned more than 100,000 WAN.

Collect n’ Split

Wanchain’s cross-chain infrastructure continues to expand, currently supporting more than 30 EVM and non-EVM blockchains. Because so many networks are covered, bridge fees are collected in a variety of coins and tokens on the various chains. For example, the bridge might collect fees in BTC for BTC XFlows transactions originating on Bitcoin and ETH for ETH XFlows transactions originating on Arbitrum.

As bridge volume increases, more and more fees are collected. As fees are collected, they accumulate on each respective chain until they are flagged for conversion. On an ongoing basis, Convert n’ Burn converts these collected fees to WAN coin and automatically distributes them to 5 wallet addresses on the Wanchain L1 blockchain:

Wallet 1: Community Treasury 0x008F9e7398782D716C3c11c1E2b29D85d38ca970

This is the Community Treasury wallet. 40% of collected fees are converted to WAN and transferred to this address for management by the Wanchain community. This lays the foundation for greater community ownership.

Wallet 2: Ongoing Operations 0x5C58D5FC282cE287d812C37A85F0fc39776d5E90

This is the Ongoing Operations wallet. 30% of collected fees are transferred to this address. These are held as network coins and stablecoins to cover gas fees on multiple networks. This helps the long-term development of the Wanchain Bridge and related cross-chain infrastructure.

Wallet 3: Bridge Nodes & Delegators 0xf3AE69E850946063Efd3A1DAc8c463c077C79a0c

This is the Bridge Nodes & Delegators wallet. 10% of collected fees are converted to WAN and transferred to this address. Assets in this wallet are reserved to incentivise Wanchain Bridge Nodes and delegators.

Wallet 4: PoS Nodes & Delegators 0x7Fcc859a755579f91FAEAb3C53703600a985Bd3C

This is the PoS Nodes & Delegators wallet. 10% of collected fees are converted to WAN and transferred to this address. Assets in this wallet are reserved to incentivise Wanchain PoS Nodes and delegators.

Wallet 5: Burn 0x000000000000000000000000000000000000dead

This is the Burn address. 10% of collected fees are converted to WAN and transferred to this address. These assets are removed from circulation and can never be retrieved.

How Conversion Works

It goes without saying that Wanchain is a major advocate of decentralisation. And like everything that Wanchain designs, Convert n’ Burn is maximally decentralised. That being said, a bit of manual intervention is still required.

Convert n’ Burn’s standard flow of operations is as follows:

Approximately once a quarter, a review of collected fees is conducted. Any asset that has accumulated more than USD 1000 in value is flagged for conversion.
70% of the flagged network coins (used for gas fees), excluding BTC and ETH, are converted to USDT using major DEXs on each respective L1 blockchain. The remaining 30% are left as they are (i.e., 30% of collected BNB is left as BNB).
100% of the tokens, excluding USDC and USDT, are converted to USDT using major DEXs on each respective L1 blockchain.
All assets are bridged to the Wanchain L1 blockchain using the Wanchain Bridge.
100% of the bridged network coins, excluding BTC and ETH, are sent to Wallet 2 on the Wanchain L1 blockchain.
30% of the bridged BTC, ETH, USDC and USDT are sent to Wallet 2 on the Wanchain L1 blockchain.
The remaining assets, accounting for 70% of the flagged collected fees, are converted to WAN using a proprietary tool that swaps small amounts every few minutes on Wanswap. The conversion occurs gradually over 90 days to minimise slippage.

There are many advantages to this approach. First, converting assets to USDT using major DEXs on each respective L1 blockchain allows us to benefit from each ecosystem’s deepest liquidity pools. This means less slippage, leaving more assets to convert to WAN. Second, bridging everything to the Wanchain L1 prior to converting the assets to WAN coin both contributes to the bridge’s cross-chain volume and increases total liquidity on the Wanchain L1 blockchain itself. Finally, the bridged BTC, ETH, USDC and USDT simultaneously increase the total system liquidity of XFlows.

Odds and Ends

What about fees collected prior to the launch of Convert n’ Burn?

Prior to the official launch of Convert n’ Burn, the Wanchain team had spent several months experimenting with a variety of different fee models. This backlog of collected fees is all being converted according to the rules of Convert n’ Burn. All the conversions thus far — totaling more than 700,000 WAN — have been from this backlog. It is expected that it will take several more months before Convert n’ Burn has worked its way through the entire backlog.

Why aren’t fees converted to WAN in real-time?

The primary reason why the fee conversion is triggered on a quarterly basis rather than on a transaction-by-transaction basis is due to the realities of on-chain gas costs. If fees were collected from a cross-chain transaction and then immediately converted, the gas cost required to convert this fee to WAN might exceed the value of the collected fee itself. By allowing fees to accumulate prior to triggering a conversion, the on-chain costs are reduced drastically. By using the automatic conversion tool, there are always assets actively being converted to WAN.

The Unification Era

Convert n’ Burn serves as a perfect example of the synergistic benefits made possible through unification. It aligns Wanchain’s industry leading cross-chain infrastructure with the Wanchain L1 blockchain and the WAN coin, while creating value for the entire Wanchain ecosystem. Convert n’ Burn offsets the on-chain costs incurred by the Wanchain Bridge and establishes a sustainable mechanism to drive development in perpetuity. It also creates value for the entire Wanchain ecosystem by converting collected fees to WAN coins and returning them to the Wanchain community. By burning a portion of the converted WAN, Convert n’ Burn ensures that the entire Wanchain community reaps the rewards of our robust and integrated cross-chain infrastructure. This is what the unification era is all about.

About Wanchain

We are all connected — Wanchain, the Wide Area Network chain, is the world’s premier decentralised blockchain interoperability solution. Our mission is to drive blockchain adoption through interoperability by building fully decentralised bridges that connect the world’s many siloed blockchain networks. This cross-chain infrastructure empowers developers to build truly decentralised cross-chain applications to power the future of Web3.