I agree that a performance fee is preferable, but a fee on exit may be avoided if the vault token is sold/traded – such as through the vault/USDC pool that Curve is contemplating.
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How is this not a money grab?
My staked YFI rewards continue to go up, so it would seem more funding is not necessary at this time. Most of the discussion in and supporting this proposal is centered around profiting the YFI token holder. It is mentioned that half the profit would go toward devs, but I do not see much discussion why that is necessary at this time. The discussion supporting this proposal is centered around maximizing YFI rewards.
Equating YFI governance to hedge funds and the current (dying) financial system seems bizarre to me. I do not share the view of that correlation at all. Yearn.finance does not have the overhead or regulatory costs that traditional funds have. Competition and intellectual property are also totally different. Users ability to change programs is totally different. So why is their fee (tax) structure relevant?
Yearn.finance is subject to so many clones of the project. Besides being the first mover, a big advantage yearn.finance has is the extremely low risk factor. If we start adding unnecessary fees, what is to stop a clone being created with lower fees / less risk?
Profit rates at this level will not last forever. Next year, we may be struggling to maintain 6% apr. Why would users say with yearn.finance when there is a guaranteed loss? Will YFI stakers be as quick to vote to remove fees as they are to implement fees?
Again …
I do not see discussions of why addition fees are necessary. What I see are discussions of ways we can “get away with” taking user assets.
It’s clearly not in the original spirit of yearn.finance. There are many posts on this. My understanding is yearn.finance was set up to give users near zero risk with the potential to maximize profit. Here we are proposing guaranteed loss with the potential to maximize profit. And the reason for this is to profit the YFI holder. The YFI governance token was never intended to maximize the profit for itself. To me, this proposal comes across as being 180 degrees against its original intent. So, not what yearn.finance was intended for and not what YFI was intended for.
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I agree with this.
Let’s not change the core principles yearn.finance was built on. Providing additional options for new projects, without changing current projects, is not a bad idea.
If a dev needs upfront funding from a user, not a percent of profit, that can be up to the dev and user to agree upon.
I would suggest funding for YFI governance come from the profit only. This would allow governance to remain objective.
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Yup, agreed.
This discussion we have now should be about how to bring more value to the platform, and not more value to tokenholders.
Otherwise, we risk getting Goodharted.
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There are still stakeholders in this, despite it not being a traditional company. I guess we will have to wait for the exit fees to decline and/or be circumvented entirely by Curve and others for perception to change on this issue.
I agree that we should be looking to bring value to the platform as well. We must do that in a way that gives the platform capital to operate, innovate, grow, and bring other valuable products and services to the user. We also should continue to provide long term growth for YFI holders if we expect longevity for this project. It is not unreasonable to collect a small performance fee on profits attributable to the strategy. And we should be able to do that continue to bring value to the platform.
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Noted.
I think you generally have reasonable thoughts on governance, and I don’t really disagree with you here. I think your recommendation to focus on one easy to understand fee is a good idea, and having it be on profits may be easier for people to stomach than a flat fee.
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Thanks all for the feedback, this has been invaluable to my understanding.
I now agree that in the spirit of vaults never returning more capital that is deposited, I believe a performance fee (if anything) is more warranted. Even though I think a notional management fee of 0.5% lets say (could be lower…) on high yielding strategies might even result in less fees for holders.
When I initially thought vault I was thinking of a v2 of vault which I have now learned are not vaults and potentially more akin to yIndex. Given the additional complexity of indexes and that value deposited may be less than value contributed (since you have exposure to market movements across multiple assets), then a management fee may be more necessary and simpler to understand.
Whilst I in principle agree with some of the sentiment to have no fees for any of this, fees I see as a necessary part to attract the best products, the best strategists, continue to fund the treasury, accrue value to YFI holders to incentivize governance, etc. This in turn will help attract significant value to YFI vaults/indexes and partially help yearn become what I think a lot of us hope it can become. Not suggesting this has to be an eye-gouging 2/40 like some traditional houses, but something notional.
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Everyone should take a look at this great article with a detailed section discussing what the different fee scenarios look like for the platform, along with P/E and DCF models where you can fill in your own assumptions. Reading this now has me thinking we should keep the 0.5% withdrawal fee to incentivize retention and add a 5-10% performance fee.
I’m just a pleb trying to find a steady source of passive income. I have staked a portion of my YFI fraction into the governance contract as a trial. I’m in it for the long haul so whatever the solution is to incentivize YFI holders who have staked, I’m all for it. Gas fees are high so more management fees, please dont apply this to holders who have staked.
I’ve mentioned in another discussion, to be a holder of YFI should be seen as impressive and rare. Most of the holders who have not sold believe in this vision of Andre’s. Everyday the ranking seems to be dropping and the volume/movement less. Hopefully good governance solutions can be put in place, a solution to attract and incentivize holders who have staked, reduction in gas fees so rewards are not chewed up and most importantly a decision on burning those keys needs to be made etc.
Today YFI is sitting at # 24 in the ranking…hopefully it doesn’t drop further.
If the withdrawal fee applied to all withdrawals and was not avoidable through trading of the valut token, I would agree. But most withdrawals come without the fee because they are being taken from the buffer not yet deployed in the vault strategy. Even if that were fixed somehow, you can cash out by selling the vault token on Uniswap or, potentially soon, on Curve (through the vault and USDC pool they are contemplating).
Because most will not pay this, it should be removed. Doing so will simplify the fee structure and reduce mental load or excuses not to use the vault – without a significant reduction in fee revenue.
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Agreed we need to close the loophole. My thinking in keeping withdrawal fee was mostly based on the cash flow analysis but you are right that the analysis is flawed if users are now circumventing those fees. I would be in favor of getting rid of the withdrawal fee and moving to solely a 5-10% (I prefer 10) performance fee on profits (“found money”) for simplicity and to make sure rightfully-earned fees cannot be dodged. This will be better long term as the space matures and position churning slows (and withdrawal fees along with it). People need to remember that a portion of these fees will go back into the ETH ecosystem as Gitcoin grants (and maybe insurance fund if YIP passes), so any money made benefits ETH and not just YFI owners.
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2% is unreasonably high for Vaults imo. We shouldn’t be looking to replicate structures that exist in the traditional world just because. What’s the rationale for a strategy having a management fee?
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Against.
I am aware that 2% mgmt fee + 20% carry is the norm. But this has always been too much.
Let’s be better than Wall Street instead of re-creating it. I am perfectly aware I am voting against my own interests as a YFi holder – but I actually think that on a longer timeline, I’m voting FOR my interests – I’ll make more if this does better for everyone.
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@jkol and @markjeffrey Agree with you and others here that a 2% management fee is too much. What are your thoughts on a performance fee on profits attributable to the strategy? 5%-10% has been suggested, including by @Dankmonty
Performance fee paid on profits to the strategy makes sense. There is a disadvantage in switching from the current harvest fee to a true performance fee, in that the harvest fee does not consider any high watermarks.
Would you explain what you mean by this disadvantage? I’m also not sure what you mean by harvest not considering high watermarks. It seems considering everything would be an advantage.
Should’ve clarified that it would be a disadvantage from a fees collected standpoint, but is advantageous to strategy depositors. Harvest fees are charged regardless of the overall performance of a strategy, whereas a true performance fee is subject to high watermark. If I deposit 100 DAI into a strategy, and for whatever reason my share of the strategy is now worth 50 DAI, the current harvest fee would still be applied despite the strategy being down, but a performance fee would not be charged until my share is worth over 100 DAI again.
We don’t run in to the high watermark problem with current vaults, but it could happen in future strategies where the principal invested is at higher risk.
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Good points. I didn’t realize the current subsidized gas fees effectively function more like an AUM fee than a performance fee. I’m curious about the core team’s take on these harvest fees vs performance fees vs AUM and whether or not they feel it needs changes or is structured to provide long term growth for both YFI holders and users as it is now. The yUSD being sent to gov stakers is already declining from about $7 per day to $6 per day and SnowSwap and Curve haven’t circumvented yet. With that said, ETH vaults aren’t open, so maybe we just need more assets.
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If we want to eliminate the withdrawal fee, I’m all for that, especially since it seems that it will soon be irrelevant with the Curve pools and other options like SnowSwap.
Perhaps we could simply add the 0.5% withdrawal fee onto the current performance fee of 5% on strategy-generated revenue? So now it would be 5.5% strategy performance fee? Or do we want to increase this even higher?
I think we could potentially just not increase the 5% fee at all, but if we are going to change it I think pairing it with removing the withdrawal fee makes a lot of sense from a PR/psychology standpoint.
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