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).