After some discussion, a reduction to the withdrawal fee rather than elimination was deemed preferable in the short-term since a complete elimination could cause smart-contract risk and/or an engineering burden.
Here are some reasons why our withdrawal fee structure should be changed:
(A) preliminary polling shows the vast majority of vesper Discord community members prefer it to be changed.
87% (20/23 respondents) preferred 0.1% or zero withdrawal fee.
(One respondents selected both options of 0.1 and zero so is only counted once).
(B) Much larger competitors (by number of holders, mcap, and TVL) either have 0.1% or no withdrawal fee.
Yearn: 0 withdrawal fee
badger: 0.1% withdrawal fee
harvest: 0 withdrawal fee
Our withdrawal fee should match theirs to stay competitive as we try to increase metrics that are adversely affected by a withdrawal fee.
(C) Anecdotally, in speaking with users Sake and Someonesomeone, they both mentioned not making six figure deposits thay they otherwise would have made due to the high withdrawal fee. It’s reasonable to assume this mentality extends beyond just them.
(D) Theoretically a lower withdrawal fee will correlate with higher TVL than there otherwise would have been. This is due to freer flow of capital and not needing weeks (or years depending on which pool you’re in) to recoup the withdrawal fee. It also makes our platform more composable with other projects (some with $1 billion TVL+ like Alchemix who have their funds parked in Yearn). Or the nine-figures Celsius withdrew and parked in Badger DAO. A withdrawal fee is barrier to entry that causes pause for many who consider entry (and ultimately some don’t).
(E) Lisa Tan in her economic analysis said that the withdrawal fee is not a sustainable source of revenue and that the market prefers a performance fee model (about 20%) and the switch should eventually be made (and time should be given to make that switch).
(F) The Vesper community has an appetite for impactful and aggressive changes to the platform. A substantive change to our fee structure checks this box.
During the first few months of our project launch, when emissions were heavy, this fee helped us benefit from depositors who were only here to farm us before leaving our pools. Now that our emissions are much more mature, the farmers have taken their harvests elsewhere. It’s time for us to evolve our platform.
Open to discussion and criticisms.
Most common criticisms:
There is a lack of data to make an informed change to the withdrawal fee.
Protocol revenue will drop short term as 93% of revenue historically came from the 0.6% withdrawal fee.
No guarantee that this change attracts TVL (TVL may leave now that the barrier to leave is lower).
There is little or no evidence that the withdrawal fee keeps other projects from composing with us.
some platforms with 0 withdrawal fees and lower performance fees (idle finance) has lower TVL than us currently and Curve $20B+ in TVL charts with fees of 0.4% on LP trading positions (though this counter point was argued not to be an apples to apples comparison).
How about a tiered withdrawal fee that decreases over time? Withdrawal fee goes to zero if funds held 1 year or longer. Would provide an incentive to lock longer.
Thank you very much - well done. But I also like the comment “How about a graduated withdrawal fee that decreases over time?”. The withdrawal fee drops to zero if funds are held 1 year or longer. That would provide an incentive to hold longer. "
Maybe it’s a combination of increasing interest rates over time and decreasing fees over time to create a really nice double effect…!
This double effect is then superior to the competition.
I have to refer back to the fact that the competition already has their withdrawal fee set at 0.1% or zero. The market leader, Yearn, has zero. They’re beating us by a longshot on every metric (tvl, users, market cap). The withdrawal fee inhibits these metrics we’re trying to bring up. We’re not at liberty to set our withdrawal fee, the market does that. We’re in a hyper-competitive space. We need every advantage we can get. So to start off on even footing with much bigger players than us is the starting line.
I like the idea of getting some kind of benefit the longer you keep your deposits in the pools! but using the withdrawal fee isn’t the way to go about it (in my opinion).
Without any insight in the books I dont know if it is sustainable to abolish the withdrawal fee at this point. But yes i deposited ETH once and lost money after withdrawing it haf a year later because of gas and the withdrawal fee, that was a really bad user experience. Never used Vesper again after that.
I’m in favor of reducing the withdrawal fee, but I think a reducing to .1% is too large of a change without more data driving the decision.
The Vesper team has not yet updated like-pool transfers with 0 withdrawal fee, which should be a top priority so users can move to better performing Aggressive pools.
Suggest halving the withdrawal fee to .3% for 3 months and assessing the impact it has on revenue and TVL. After that time frame, the community could make a longer term decision to revert to .6, keep at .3, or reduce further.
Including a portion of past comments from @LisaJYTan … note the revenue loss we would see with withdrawal fee reducing to .1%.
"H2: can we just reduce the withdrawal fee to 0%?
We found that 93% of protocol fees have come from withdrawals rather than yield.
This indicates that the withdrawal fee should not be dropped too drastically in order to retain enough revenue to cover the operations/marketing budget requirements. That’s why we need to keep the withdrawal fee. Now, what about the intra pool transfers? We noted that 3.6% of capital and 10.2% of users are withdrawing and depositing to a new pool in the same day - this is based on same wallet address within a 24h period. It is reasonable to deduce the behaviours of users this way, to understand the “intra-pool” transfer.
Lowered withdrawal fee for pool swaps should increase retention to the ecosystem, withdrawal fees currently disincentivize switching pools. That’s why we need to maintain those numbers - both from quantitative and qualitative perspective.
A higher expectation of the portion of users paying full withdrawal fees does improve revenue projections. With greater buffer for hitting operations budget target, there is more room for lowering pool transfer fee (after seeing real impact of this change at 0.3%)."
Agree with this point: “The Vesper team has not yet updated like-pool transfers with 0 withdrawal fee, which should be a top priority so users can move to better performing Aggressive pools.”
We shouldn’t be charging anything to switch pools - thats nuts. We want to retain people in the ecosystem.
My view is that the withdrawal fee should be eliminated entirely. We can’t be competitive with it. Ive also gone elsewhere because of this and yet I’m holding copious amounts of vsp and vvsp (Im a supporter).
Instead, drive protocol revenue from the yield as a small tax - If one stays in the pool for longer, this tax reduces: but don’t call it a tax: call it increased APY for longer term staking.
Regarding the quote: “We found that 93% of protocol fees have come from withdrawals rather than yield.” - of course, because we’ve seen a consistent erosion in TVL over the past 6 or more months - there have been tons of withdrawals and less money to raise yield with!
If our protocol is built on withdrawal fees or else we can’t cover operations then that is a fundamental flaw. We’ve essentially built a model that NEEDS people to withdraw? Please tell me this isn’t true.
We can keep building and building but with this fundamental withdrawal fee flaw, unless the devs come up with some sort of game changer, we won’t be utilised enough.
How do you address the fact that our competitors already have lower fees?
Yearn (market leader) - zero.
Badger - 0.1%
Harvest - zero.
Ribbon - just switched to zero.
Now that emissions are way down, why would we expect giant amounts of TVL to be parked in Vesper as opposed to someplace else where you don’t have to wait weeks (or years) to make back your principal?
I understand the concerns about loss of revenue but we’re way past that point. We went from $1.6 billion in TVL to $150 million and dropping. Keeping our fee structure higher than alternative platforms (which are already at an advantage in all the metrics we want to improve that are adversely affected by a withdrawal fee) seems counterproductive.
If we were a monopoly on the DeFi yield market then we could easily set our withdrawal fee to whatever maximizes capital inflow. But we’re not a monopoly and in we’re in a hyper competitive space where depositors are seeking the highest yield with the most platform safety. We can still collect this revenue by switching to a performance fee. We have analysis showing that this is what the market prefers.
The one thing we do have as a USP is protocol safety (lets forget about rari) - the devs at vesper are some of the best in the business and I know Jeff takes testing very seriously - this bodes well, we just need to be more competitive on fees.
Product safety is indeed one of our major selling points. One thing to keep in mind: DeFi protocols are beginning to consider insurance coverage on deposits.
If depositors have peace of mind that their deposits are insured, our competitive advantage in platform safety will significantly erode and make fee competitiveness even more important.
I would like to see the withdrawl fee decreased to .1% immediately. I am a full supporter of Vesper, and I still can’t justify depositing more funds dt the .6% fee. TVL growth is the only way out of this predicamnet, and we need to move quickly.
I would like to see no withdrawal fee. But I am willing to vote for 0.1 or 0.2 % if that can be implemented faster. Withdrawal fees right now is a friction for new users to deposit based on random comments from people. I wonder what percent of users are not depositing right now because of this. Do we have data on how many people click on the deposit and then never sign the transaction ? If we know a dropoff rate, we can try to guess potential impact. For eg, if 90% of the people who click on the deposit end up depositing, then we potentially only have 10% more users to gain. However, if only 10% of the users click through to deposit, then there is a much bigger room of users to go after.
It looks like vesper team is worried that TVL will drop significantly after reduction in withdrawal fee. This is a likely outcome. A significant TVL did leave the ecosystem after VSP rewards no longer made sense for them. If we lose TVL, then I think this is a bitter pill to take. Vesper should be able to retain TVL based on APY + Security alone.
“Just voted [ on .1%] but wanted to clarify because i previously (months ago) rallied not to decrease because it would impact revenue, however it is clear now status quo is not attracting TVL so we need to do something different. I voted for . 1 but i could revisit zero if we aren’t seeing a change. Also i assume performance fees are being adjusted (or no?)”
Basically, slashing the withdrawal fee shouldn’t kill us as long as it does indeed bring in new TVL (expectedly into the high APY aggressive pools). I think a 0.15% or 0.2% withdrawal fee might be a better compromise though.
I can confirm that I was avoiding vesper all together because of the predatory withdraw fees!
Defi is about free movement of capital, and vesper right now is strongly against that spirit.
I have significant amount of BTC stuck in the conservative pool since I participated in the beginning lured by the good APY which since then fell to 1% and right now i have to hold them over half year just to make up for the withdraw fee.
I’m effectively losing money, not earning.
I haven’t dumped single VSP in the process and was loyal to the protocol, but the protocol is costing me hugely in missed opportunities.
Badger had it’s TVL explode shortly after reducing the withdraw fee to 0.1%
And I storngly believe it will have even greater effect with 0% withdraw fee.
Take whatever you need from the money you make me, but don’t touch my principal! Simple as that.
I’m also one of the people holding off using Vesper because of the predatory withdraw fees.
