Proposal: Revamping Fees

Ah ah !
The 0.5% fee is to earn money, not to prevent abuse.
Please be honest…

This fee doesn’t prevent abuse, it prevents deposit.

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Very good point. Withdrawal fee should not matter as a source of revenue for Yearn long-term.

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Any fee structure we decide on should also incentivize long term capital loyalty…for example there has been some loyal capital sticking with yearn even when we have seen temporary drop in returns…it would be cool to come up with lower free tiers for capital that has been in the vault for longer time…also give preference to these loyal vault users when it comes to capital constraint strategies of the future. We should reward loyalty…and as long as we can produce the best caliber of strategies out there…we win :slight_smile:

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One disadvantage of a time-weighted fee structure is that it significantly complicates the secondary market for Vault shares. I suppose if share tokens are transferred it could “reset” the time component/fees, but this does then create UX challenges (e.g. as a User I may reasonably expect to be able to move my positions between my wallets without incurring fee changes).

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Oh good point. I wasnt thinking about the secondary market. One thought…what if the redemption fee attributes are tied to the depositing addresses rather than the shares themselves?

Most buyers on the secondary market can assume the standard pricing structure…but if you are a loyal depsositer to the yearn vault then ur address gets a lower fee for redemption…upto the amount u originally deposited in the vault…

This mighteven incentivize the long term holders to become market makers on the secondary market…as they will be able to make a resonable “fee” arbing the difference between the secondary market and their special “loyalty rate”…this might create an ecosystem of funds that just supply funds into the vault long term and market make in the secondary market…

Just a thought :slight_smile: if the backend is too complicated for this maybe we dont do it…

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As was stated before by Andre, Yearn should strive that depositors never get back less than what they put in. For that reason a withdrawal fee doesn’t align incentives of the protocol and the depositors. If the withdrawal fee should stay, perhaps it could take this into account – i.e. the withdrawal fee doesn’t get charged, or gets charged proportionally to ensure the depositor doesn’t get back less than what they put in.

The same logic should apply in case of a potential AUM fee.

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I completely agree with the change :wink: :argentina: :argentina: :argentina:
the fee should incentive the loyalty.

That’s nonsense.
If your invest has 10% APY you have to wait 20 days before being breakeven and erasing the 0.5 fees. That’s ridiculous.

On discord Banteg asked for someone to model a hedge fund 2/20 fee. Another user modeled this out. So I am posting it here to continue to add to the discussion as to what is best for the long-term sustainability of Yearn. Namely, keeping/attracting the best code devs and strategy devs. We should also take into consideration that everything Yearn builds will be copied and pasted. So there is nothing proprietary about our protocol. As a result, by having a high fee our competitors will simply steal our strategies and customers. I am personally of the opinion that 1% AUM and 10% performance fee is ideal.

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That’s ridiculous.

Ridiculous compared to what ? 10% is already a (more than) very decent return compared to tradFi !

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you have to wait 20 days before being breakeven : that is ridiculous, not the 10% APY :wink:

love this because it rewards liquidity that remains in yEarn. why not knock the performance fee to 0 and only have a withdrawal fee as described?

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 :wink: 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).
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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.

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