Can we run a pilot for this? Suppose we charge 5% of profits for a set period (e.g. 4 weeks).
If Yearn doesn’t lose a significant amount of AUM and gas costs don’t decrease we keep this structure. After this period we vote again if we want to go back to where we’re now.
That way I think most people would agree, including me (and we gain momentum for the YFI price with less long-term risk).
And one more thought, that I failed to address before:
I think it’s great to reward strategy creators, but this is not what is being discussed here.
I own YFI and I staked it in ygov until a few days ago, I moved it and I will move it back soon because it makes sense to be staked, but I don’t see the point of wanting more that what we already get which is plenty
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Thank you for the transparency
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agree! with this… thanks
Since you write multiple post, I will answer on this one. First of all the 500k is for managing all the yearn ecosystem. Salary, Marketing, etc.
It cost 25k to the team to run the strategy yesterday, so where do we take the money for this? In our pocket?
So I hear you loud and clear, 
we need to get 5% to be able to make sense to stake YFI in the governance and at the same time cover the cost of the strategy.
And if you are loud and clear, than vote loud and clear when the vote is up 
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Thank you!
I think here there is an issue. The request is for performance fees.
Costs are a totally different matter. I shared it before. A cost is a cost and it should be deducted, that’s how a business works. plain and simple.
But let’s not justify taking more money in the name of covering costs. let’s just deduct the costs as they are. Did it cost $25k yesterday? take that out of the profit distributed to vaults. done.
But don’t apply an arbitrary 5% fee on all profits which will be surely much greater than any cost incurred.
I think we are mixing things up and I don’t believe this is useful.
Do you want to cover costs, great, we should do it! i am up for it.
Do we want to increase a bit the performance fees? I think this is different and should be discussed separately
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Yearn is providing immense value for people who use the vaults.
Holders and governance should get a fee, 5% is good, it’s not too much.
You are free to put your assets on another platform if you’re not happy with this one.
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It may not be called a hedge fund nominally, but at its core it shares a key similarity: both are using pooled capital to generate returns, which are derived from specialized and technical knowledge of the market and constantly changing opportunities.
A component of the vaults is automated, once it is coded, but strategies are constantly being implemented, altered, or evaluated making it a much more active management than an ETF.
The difference between 1% and 5% is not an egregious price gouging amount. Vaults are yielding 50-100% APY, given those rates end users aren’t going to leave over a 4% difference in fees. As ROIs change everything can be re-evaluated.
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Isn’t this the status quo? 5% when harvested and 0.5% withdrawal.
Link to banteg explaining this:
Costs are a totally different matter. I shared it before. A cost is a cost and it should be deducted, that’s how a business works. plain and simple.
But let’s not justify taking more money in the name of covering costs. let’s just deduct the costs as they are. Did it cost $25k yesterday? take that out of the profit distributed to vaults. done.
Exactly, maybe the strategies should also factor in gas costs in the future. This way all the costs are accounted for.
IMO, costs are costs and performance fee is performance fee, the two should always be separate. It makes no sense to calculate a “performance fee” when costs aren’t even deducted from the performance yet. Let alone using said “performance fee” to cover costs.
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I’m in.
Down the road, it would be great to see different fee structures offered on different vaults.
If someone can run a vault with a strategy comparable to Izzy Englander or Jim Simmons, why shouldn’t they be able to get away with charging more than 0.5/5?
This is win/win and will incentivize an idea meritocracy on Yearn. We want the best strategies run by the best investors!
Totally against. Harming yVault users in favour of YFI stakers should never be a strategy by yearn.
We’ll just explain the performance fee better as it’s way easier to sell and exactly nobody would question the logic behind pooling money for txns saves so and so much gas, so we’ll charge 5% of what this is saving you, and which still makes the gas cost to you as user negligible.
Now the pitch we’ll take 5% away from your profits, that’s a different thing entirely.
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To give context to the discussion, harvested profits have accounted for 96% of total profits for the yUSD vault since its inception. The 5% fee on harvested profits only has amounted to over 4.8% on total profits so far. Thus the numerical impact of this change would not be significant.
I think the current fee structure is prone to confuse newcomers and is not clearly documented. I’m for this proposal.
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I’ve been running some back-of-the-envelope numbers, based on the yCRV/yDAI/yUSDC Vault data from https://explore.duneanalytics.com/public/dashboards/g0bGfgloeXBd9C18jpBjdXi5KkQjR7IXYqFRUnHk and some pretty agressive assumptions on AUM growth, which frankly has been exponential. Only spent a few hours on this so it’s definitely not perfect and probably wrong in many ways. If it’s too wrong I’ll just remove the post. I’ve excluded gas costs from this analysis since that is being solved in another great proposal.
My main conclusions are:
- YFI’s potential is extraordinary but we need to make sure it doesn’t lose momentum. Our priority should be to continue growing AUM as much as possible with great products that attract and retain users. Let’s focus on building. The payout increases exponentially as AUM increases.
- Charging a % of profits is not that great. We need a very high % to make a difference. This example assumes charging 5% of profits at 50% APY which seems high but somewhat sustainable.
- Charging a small percentage of deposits (0.25%) would truly be differential and help a lot with cash flow right now, which is when we need it to grow and build Yearn to its maximum. Also with high APY lots of new capital is coming in.
- Users seem to withdraw and deposit a lot. In DeFi capital moves fast!
If there´s interest happy to elaborate / explore more.
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I understand that the performance fee doesn’t make all that much of a difference but am still 100% in support of this proposal to simplify fee structure (I like adding your 0.25% on deposits idea in addition to this). 5% of profits made on a first mover service like this is not greedy at all and like others said, most thought they were paying this already. Either way, it looks like this 5% performance vs subsidized gas charge not a big difference, according to @TheSouthSeaCompany (current 4.8% vs proposed 5%). As things stabilize and if APY stays high, I’d argue in favor of a small management fee on all deposits like you said above. I do not see people leaving the established first mover to go to shitty forked pools with no innovation or real team compared to this group.
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I honestly have issues comprehending some of the comments.
The difference in revenue is not significant.
And yet we are going to phrase this thing in a way that spells out ‘take away from your profit’.
Then the argument that the performance fee isn’t well explained, well we’re in the process of providing documents and explanations for everything and believe you me it’s orders of magnitude easier selling the performance fee than the fee on top of customers profits.
Also not in favor of the deposit fee (as that will drive away some- me for instance-).
We’re in the phase of building a customerbase and adding products. Right now we’re not operating at a loss, I don’t think it’s the right time for this at all.
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Lmfao. I actually used to think that 5% of profits were being paid.
I’m for this. 200% support 
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You would really be driven away from earning 50% APR by a 25bp fee? Seems silly to me, personally.
As for the 5% profits, seems to me most people are of the mind that what is being proposed is already in place.
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I agree with the spirit of the proposal. I think a key competitive edge going forward is incentivizing the best strategizers to work on yearn. Although I have some concerns about the implementation as discussed.
The main thing that jumped out at me is the adverse effects this could have socially. If you make the yETH vault creator take a perennial 5% of profits, if there is 1 billion dollars in there earning 5% per year, the creator gets $2.5m per year in perpetuity. Im not against that per se but I fear the competition to be chosen for a particularly valuabale strategy will be fierce, and potentially be unhealthy. It could even have ramifications for governance as this will be an extremely valuable thing to decide on.
I acknowledge the importance of incentivizing the best strategists but think there could be a better way to do it that aligns incentives and isn’t disproportionate.
Off the top of my head, you could take a % and buy YFI and have it vest to them. Perhaps with a cap.
You could also put a minimum floor on the strategy compensation for less popular vaults to incentivize people to work on a diverse set of projects and have fairer compensation.
On the same topic, I would be happy to have the protocol devs have a reward too, particularly denominated in YFI.
I think getting the balance right is important.
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Yes I would, and I know several people that operate this way, you keep your funds mainly in a safe place (for which the yVault is perfect) and when you see a good trading opportunity you take some of them out do the trade and optimistically re-enter into the vault with additional profits. This would give yearn a higher TVL by these traders and since the deposit fee is entirely arbitrary we would actually make more return since they’d be using the vault as the place to keep their funds which - let’s try and be positive - always incrementing profits. Now if you tell me that I have to pay a % each time i’m going to redeposit my funds I’m probably going to fire up my calculator and do some calculus on how this will affect my overall profit and if it might not be better to just keep everything in DAI / ETH or whatever other option I’d consider. To me it’s just not necessary and those things will very likely drive people away. The performance fee is just perfect because it is taking a little bit from a huge saving for the individual investor that still remains orders of magnitude cheaper than if he’d be doing the transaction with his funds alone and not pooled together. The withdrawal fee is easy to explain and in several vaults doesn’t even apply because of the buffer.
To your second point, well then why don’t we phrase it in a way that is easy to sell.
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