The pool would definitely still grow, but wouldn’t be as large as it could’ve been. It’s an opportunity cost.
I do see the point of people wanting to emulate current financial products, but I just disagree with why we should emulate them in the first place.
I’m more of an idealist myself, so when I see this project, I see ways in which this could be different from current products. If we’re trying to compete with current products, we shouldn’t be trying to emulate what made people avoid them.
I agree with you on that. I just think we can still accomplish those goals while providing more incentive/reward for long term hodlers/investors. It might not be a traditional financial product, but there are still stakeholders. We can profit a little bit while still be making all these investment opportunities way cheaper and accessible to everyone, which this would do (well, not much cheaper at 2%, but maybe at 10-50bp lol)
I prefer to talk about raising fees after we have established ourselves a bit more (like probably when everyone who’s heard of bitcoin has heard of us). Maybe I’ll change my opinions on that when we’ve grown. But it’s good to see that people agree yearn should be accessible to everyone!
Agreed on postponing the fees conversation until we get products fully rolled out. More fees are not something that has to or should happen right away. A much bigger pie with a thinner slice sounds better to me too. 
Instead of thinking about new fees, simply making the 0.5% withdrawal fee apply to all withdrawals, would make a lot more sense. Users expect to pay the full 0.5% withdrawal fee, but reality is that the majority of withdrawals pay no exit fee, in the current net-inflow / net-neutral deposit environment.
I haven’t done the exact calculations, but making this change would probably increase free cash flow of the protocol somewhere between 30-50%, at historic churn rates.
Curve is looking into a pool of Yearn vaults and one of the stated goals is to eliminate withdrawal fees:
This will also help users enter and exit pools without paying the 0.5% Yearn withdrawal fee.
The fees were already avoidable by trading the vault token, in Uniswap for example. This will make it easier to avoid the vault withdrawal fees and is somerhing we should consider.
The Curve proposal is here: CIP#16 - Add a new pool and gauge of yvault tokens (yVault yvDAI/yvUSDC/yvUSDT/yvTUSD/USDC) - Proposals - Curve.fi Governance
I posted separately about whether this suggests a vault of vaults to farm CRV, which will potentially be available on a Curve vault pool: Vault of Vaults?
100% agreed that the 1st step - before even discussing a potential fees scheme change - would be to make sure fees are paid ti the protocol.
Any input from @banteg maybe ?
If withdrawal fees are assumed to be circumventable and neglible anyway, perhaps the best thing is to remove them completely, to remove that mental barrier for new users?
Good idea. Fewer mental barriers and fewer questions about additional fees. If we can all settle on a single fee that is fair and easy to explain, that is in the interest of vault users and YFI holders alike.
Was just coming here to make same comment.
Yearn Finance is the premier player in the space and management fees are a good thing.
Premium products, premium branding, premium prices. Yearn is worth it.
Vanguard charges tiny fees on products that produce very little passive income.
Yields across TradFi are miniscule.
A 2% fee on a yCRV Vault making 75% APY is peanuts.
The issue is that Curve and other projects are already disrupting the withdrawal fee model.
A management fee is professional and appropriate.
What Yearn does is more akin to what a hedge fund does.
Hedge funds charge 2/20 or 1/10 perhaps nowadays, meaning 1% of AUM per year plus 10% of profits.
Yearn charging 0.2/2, which is 0.2% of Assets under Management and 2% of profits is tiny when yCRV strategy is yielding 75% right now.
I propose we do away with withdrawal fees and just charge 0.2/2.
We could even do a sliding fee structure where AUM/profit fees reduce if customers are willing to stake their assets for longer periods of time.
Agreed but I think simpler is better. Just one reasonable fee imo… Either performance, withdrawal or AUM, not all three.
Or we can do like the Gas Company, twenty small fees that add up to a massive one.
Management fees are potentially the easiest to understand and the most transparent. A simple x% on top of the value of a vault is very easily digestible for all. As @redarmanio said, tradfi fees are so low because they return relatively low value compared to markets (and they have hidden costs like account fees, one-off costs, transaction costs etc that are ‘variable’). No hidden fees and a simple AUM fee for providing automated allocation strategies and high yield opportunities to me seems very appropriate.
The benefit is that it also overcomes the withdrawal issues that @0xmt mentioned above. There will be no more discretion on whether or not to charge these fees since that is not where value will be captured. It will also overcome the secondary market trading of vault tokens which can circumnavigate fees and value capture for Yearn.
I also disagree with the sentiment that this is excluding the little guy here - the fee is ubiquitous across all holders, once a vault stope providing value above the fee, holders are free to move on.
A very small fee (~10 basis points) on total AUM is the way to go here. It’s the easiest to understand, doesn’t feel like a punishment for moving your money, and when this thing gets into the hundreds of billions in TVL that will mean hundreds of millions are pushed back to token holders. From there, holders can build a legit company, fund developers and interesting projects, and still keep plenty in profits without anyone who uses the system “feeling” the pain.
There’s a reason why Vanguard has gone from $100B to $6T+ in 10 years. This model works.
Lots of people here are saying they want yearn to be the next vanguard or hedge fund.
Here I am just wanting yearn to remain yearn.
Here’s what Andre said himself in a podcast:
if you provide a DAI, there is a chance you’re going to get 0% yield, but you’re never going to at least not get the DAI back you put in, that’s one of the core principles.
…
I want Yearn to be the one stop deposit and forget automated yield money manager.
Fees on AUM goes counter to this ethos of yearn.
Help me understand what happens now if someone deposits 1,000 DAI and it earn 0% yield. Don’t they need to pay 50 basis points to withdraw?
And that’s why I’m in favour of only taking fees from profits.
Right now many pay no withdrawal fee because the withdrawal comes out of a “buffer” before used in the strategy. In addition, you can trade vault tokens, on Uniswap for example, and not pay the withdrawal fee (although you would pay a fee to Uniswap and could have slippage). If Curve implements the vault pool that is up on a vote, that will make it even easier (and likely less expensive) to avoid the vault withdrawal fee.