I agree we should drop the withdrawal fee. I have been advocating for that for a while. My point is that if we are trying to “replace” the lost withdrawal fees, they may not have been very high to begin with.
Today there is a 5% fee on the vault’s contribution to profit, but perhaps without adequately taking into account gas fees. If we fix the gas fee issue and remove the withdrawal fees, we potentially could still see fees go up – without increasing the 5%.
Yeah it’s still unclear whether or not the profits are still being calculated prior to gas costs. I know there was a vote but not sure if it’s been implemented yet.
If hodlers could get a decent return in governance staking with just the 5% harvest performance fee (after gas is paid), I would be OK with that. The problem with harvest fees is they aren’t really clear to users (or us in calculating cash flow for valuation).
I think withdrawal fees were significant, but only during the beginning when everyone was swapping assets pretty much daily between veggie farms and yvaults while on the sidelines. That frenzy of withdrawals and deposits is obviously not going to be the case at all going forward.
Agreed. I don’t think everyone here really understood how fees were calculated, so once it is clear we can to do a better job explaining to users. Returns to YFI stakers has been around 7%-11%, which may not be sufficient if there are other options for YFI. If fees are perceived to be too high, we could see competitors step in. Also, many in governance want to see fair fees and to avoid rent seeking.
Are you of the opinion that as things scale, that governance staking incentives as they are now (minus the withdrawal fee), are strong enough to keep YFI tokens in governance and voting in the protocol’s long term interest? We do have to keep in mind that the AUM will be much higher once yETH vault is open again. It could just be a matter of scale and we are only at the beginning here, but I am not so sure. It looks like we may need to wait for the team to finish whatever they are doing with governance before we can sort this out.
I think gov earnings will go up once the yETH vault opens back up, but there was also a great proposal about creating a governance YFI vault. If holders were interested in passing this and updating it to be the default method for staking in governance, I think we would see a LOT of YFI that is currently outside of governance flow in. Definitely an interesting proposal to think over!
I am optimistic that as additional vaults and other services are offered and as things grow, that the protocol will be healthy and YFI voters will vote in the long term interests of the protocol. But it is certainly not guaranteed. YFI holders also have incentives (from yields higher than offered by governance staking) to use their YFI outside of governance, and some of those uses increase the risk of an attack or catastrophic failure. All else equal, we will reach an equilibrium where YFI stakers leave for other options until the rewards distributed among a smaller group of holders keeps them from leaving.
Thanks for pointing this out. Looks like very little downside (assuming MKR is trustworthy, I guess) where hodlers would basically be getting a DAI strategy return+current fees. I like it a lot! Makes fees much less of an issue.
Did anything come out of this proposal?
To align the interests of the protocol (and YFI stakers) and vault depositors, there should be a simple % of profit fee. No withdrawal fee nonsense and subsidized gas fee that hardly anyone understands.
X% fee on profit = “If you make money, the protocol makes money.”
I agree that nobody understands the fee structure and a 5% performance fee is fair. Having said that, I think that we should impose time-weighted staking in order to incentivize a longer-time horizon from stakeholders. For example, if you hold for 30 days you can withdraw for free but if you want to withdraw early then you are penalized with a withdrawal fee. Also, if YFI is added to Maker for minting DAI then I think we can use the fees generated from the vaults to market buy YFI and deposit it into a Maker CDP in order to maximize ROI of the yYFI vault. This would prevent shorting of YFI and set a price floor by locking up more and more YFI every time the yYFI vault buys and deposits YFI into Maker. Yearn governance should be where the highest return on your invested capital should be to encourage active participation in governance and to bring stability to the price of YFI. I believe this would bring all YFI back to where it belongs.
For hedge funds it is 20% of all profits and 2% of AUM.
We could even go with that.
It incentivises everyone.
It looks professional not trying to get ahead on price. But to get ahead on excellence.
Higher return to $YFI holders, proper salaries and bonuses to devs.
We just need to outcompete everyone else. I think we can - and this would incentivise it.