I have been told that a withdrawal fee hurts composability with other protocols.
you have to wait 20 days before being breakeven* : that is ridiculous, not the 10% APY
Well, is it really ? Say you buy some real estate for rental income, how much would you pay in legal fees ? Surely much more than 20 days of rent In my example you would probably breakeven after a year or so
I believe people keep thinking about the XXX% APY from a few weeks ago as the yield reference but definitively it’s not - it was exceptional and not sustainable at all. Getting 10% APY with a 20 days holding period before breakeven is an excellent investment per se
Agree, we need new source of long-term revenue
There is quite some room compared to the competition.
Pickle is 27.5% performance fee
Harvest is 30% performance fee
Yearn is 5% performance fee
If you want my opinion, I’d go for a much higher strategist reward and no withdrawal fee. Something along the lines of
- 0% withdrawal fee,
- 10% performance fee
- 5% to strategist,
- 5% to treasury vault,
- 2% management fee (since strategy upkeep depends on stuff that’s not dependent on yield like personnel and gas costs).
I didn’t realize we were so much lower than our competition. I like the simplicity of @banteg’s suggestion of a flat 10% performance fee + 2% fee management fee.
I’m in favor of this!
- I thought the withdraw fee was to prevent certain exploits? If that’s fixed in v2 I’m all for removing it.
- A performance fee sounds like a good direction to move. My first instinct is that 50% to the strategist seems high, especially with a high AUM.
- Not sure about the management fee, I’d need more details. It may be more elegant to bundle it in with the performance fee.
I think the strategist should get 2.5% and 7.5% should go to the treasury vault. We are talking millions of dollars in AUM and ROI from passive income.
50% to the strategist seems perfectly appropriate. We really want to incentivize strategists. I really like this. I would add 2 tweaks (to be clear I’m fine with @banteg default proposal, but if you felt the below was helpful feel free to incorporate) :
- I would suggest would we pay some portion of the strategist fee in YFI (market bought). Let’s say 1.25% of the 5% of the strategist fee market buys YFI and pays the strategist in that currency. If they want to sell it upon receipt that’s fine, but it makes them opt-out. As a strategist we want them to be aligned with YFI long term and hopefully a long term stakeholder in the system.
- I would also suggest maybe a 30 day delay before the strategist funds are released to make sure there are no major glitches in the strategy. Strategist should not get paid if the strategy has a major defect. 30 day delay seems reasonable period to test out.
If we are going to pay 5% to the strategist then we should definitely pay them in YFI and have a vesting period to see that the strategy is sustainable/glitch-free. I just think 5% of 200 million is a lot and there will be multiple strategists.
Just remember for many strategists the receipt of the strategy fee is taxable income. In many jurisdictions that could be a 40-50% tax rate. Therefore 40-50% of the fee needs to be sold immediately just to pay taxes so 100% YFI doesn’t make sense. Then of the 50-60% after tax that they keep that shouldn’t be all YFI. I was thinking about half the after tax income in YFI and the rest in something else (stable etc.). I’m fine with a vesting schedule, but if you have a single strategist that’s killing it, but the other yearn strategist suck the good strategist is going to take a hit on his vesting YFI due to no fault of his/her own . This problem is common in many hedge funds is a cause of significant resentment. Therefore, you don’t want it to have a heavy vesting schedule. That’s why I proposed just pay them in the currency and if they want to opt-out of YFI they can do so. If someone wants to leave they can leave. We shouldn’t have an anchor around anyone. I think that’s also in line with the manifesto ethos. I just feel we should have some delay on when the payout starts to make sure no critical bugs appear at first and they aren’t dumping buggy code, taking a payout and running.
Pickle’s performance fee is only 4,5%
They are also looking into other models
The rewards are paid as vault shares in the current design. This keeps strategists aligned with their creations. The other part which goes to YFI stakers market buys YFI.
How will this work if v2 Vaults have 20 different strategies? Will they all get more of the same vault?
@banteg that’s totally fine and makes sense. Economically the same.
One thing to note is that harvest and pickle vaults are also funded through inflation.
Yes, shares in the Vault will be a claim on funds across all Strategies
I’d absolutely vote in favor of this if proposed. Eliminating withdrawal fee and adding more incentive for strategists is key to sustainability.
So, I’m in favour of a change, but not necessarily the above.
I would modify the above as follows:
- I propose that we eliminate the withdrawal fee.
- A simple performance fee be implemented on all activity. *
*This is to say, on each harvest, the performance fee is applied to those profits.
- In relation to Proposal: Rethinking Capital Allocation I would suggest we consider a performance fee of 10%. I will outline why in the linked thread.