New fee structures

Let’s discuss how we can optimize our fee structure. An optimal fee structure will . . .

  • Incentivize sticky TVL
  • Be perceived as fair (no “gotcha” fees)
  • incentivize holding vVSP
  • incentivize lockup periods
  • simple
  • consistent
  • bring the best long run protocol revenue
  • competitive with other protocols
  • max composability
  • give the user flexibility / choice
  • allow the highest advertised APY rates
  • be the depositors most preferred fee type

What other goals should it achieve?

My idea is a 25% base performance fee (to match the earn pools) with a 10% maximum discount tier (by locking it for a year or other amount of time). Somehow vvsp weight could tie into this too.

So if you have a pool earning 6% apy you would by default earn 4.5% apy (includes 25% performance fee) unless you choose the one year lockup option (now you earn 5.4% apy with a 10% performance fee).

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Advantages of 25% performance fee on grow pools with 10% max discount tier (max discount tier is reached by time lock and/or vvsp weight)

  • one type of fee (simple)
  • high advertised apy rate (w discount tier)
  • incentivizes sticky tvl
  • incentivizes optimal apy strategies
  • no “gotcha” fees w mgmt or withdrawal
  • performance fee most preferred type among depositors
  • consistent with earn fee model
  • consistent with “401k of defi” lockup option
  • max composability

Hey Mudokan, thanks for putting this together. I’m going to compile some of the elements team-side so it’s here for everyone to easily reference - rather than fragmented across discord messages.

  1. Everything seems to suggest that withdrawal fees are no longer the way to go. Additionally, we already went down ~90% in TVL - we made our keep from withdrawals already. We shouldn’t expect similar revenue metrics into the future.
  2. Generally speaking, it’s difficult to lower-then-raise costs to the user. Withdrawal fee removal is best done in tandem with new fee structure.
  3. A major consideration in the fee structure overhaul should be what the implementation costs look like. If new fee structure requires new pools, that means new code created by the engineers, new audits on that code, ample market testing in Beta… This is a process that takes months. We should do our best to situate the fee structure in a way where if extensive costs are required that it’s perfect and we don’t have to do it all over again.

Taking that into consideration…

Fee structures that are already permissable in current framework is ideal. Right now, we can use any combination of deposit, withdraw, and rebalance fees (rebalance = performance). We should also favor elements that can be added on rather than in replacement of existing framework.

Engineering did some research and interestingly… Yearn’s mgmt fee is actually accounted as in the same capacity as the performance fee. Whenever rebalance happens, they pull a set amount over time in addition to performance to get a management fee, unless the fee exceeds the yield earned, then all yield earned goes back to Yearn.

Current understandings suggest that we could fairly easily employ a similar framework by upgrading our rebalance function - no pool upgrades required. We could also make it more equitable than Yearn: 1% versus 2%, capped at 50% of yield versus 100% of yield (maybe we enforce a hard minimum APY of x% with no mgmt fees taken below the minimum APY).

I’m working to compile a comparison of our current fee structure and different mgmt, performance fees at different APYs and TVLs - how that translates to expected revenue and user earnings. That can help to inform an optimal base mgmt/performance fee structure. This also lets us handle Earn pools on equal footing to Grow.

IMO - this should be our basis for developing a more productive, composable, equitable, and predictable fee structure.

Then we can focus on what-else we can add on. I like the notion of a lockup of funds for reduction in fees. Everything I’ve outlined above is per-pool, and since vToken positions are fungible, we can’t do that outright, but I think we could treat such an option as a vVSP-style vault with long lockup. Perhaps you need to lock up TVL alongside vVSP to achieve the boost? Perhaps locking up TVL and/or vVSP gives additional VSP rewards or additional weight in voting on VSP awards?

On the flipside, there is meaningful discussion to be had on what happens to those fees once they are turned into revenue. I like the idea of setting revenue aside to purchase coverage on behalf of Vesper users (though need to understand scope - Nexus right now is OUT because they provide coverage per-pool, not per-protocol). What else?

Separately, we should talk about the road to implementing this stuff. If the first implementation ends at transfer over to mgmt fee, that still takes some amount of time to develop the logic and battletest. I think it would be a good idea to formalize a cadence - we know that zero fee pool xfers are coming. We could situate a timeline of T-0: intra-pool xfer fee waived. T+14(?): Conservative withdraw fees reduced to 0.1%. T+?? withdrawal fees replaced altogether with mgmt fee.

There’s been talks that we should try to standardize fees as much as possible. So I like the idea of mgmt fee capped on performance. (with base APY enforced). That way we can still more or less keep a scaling fee that grabs more value from higher APY pools without crippling lower APY.


It should be 0% withdraw, 0% management and 20% performance.

Take your fair share from the profit you make me, but dont touch my principal. This is not TradiFI!


Thank you for the detailed write-up @greenjeff! I support moving to a performance fee model and am agnostic on a management fee as long as it is 1% as you outline or less. I think the fees taken should never be greater than 50% of interest earned.

I think the best value I can add to Vesper DAO comes from my non-crypto experience. I have a degree in Political Science and have specific experience developing governance models for community groups. I’ve also had a career as a marketing consultant for major global brands (primarily fintech, travel, and retail verticals), with specific focus on Loyalty marketing. I’ve borrowed from lots of community discussion in discord and what I’ve seen work well elsewhere in DeFi to piece together a governance and loyalty model for vVSP holders.

Vote Locking

I’m strongly in favor of a vote locking model for vVSP. To address the composability issue, could an NFT mint on Polygon (or some other L2) work? The NFT could hold properties of lock length and vVSP share and be used to procure other Vesper platform benefits up to the end of the lock period. NFT will represent share of voting escrow vVSP (vevVSP).

Vote Delegation

With this model, Vesper should also allow delegation of voting rights. Perhaps delegates who have greater than 1% (or .5%?) of the voting power are given access to more privileged workings of the DAO, sign NDAs, can propose VIPs, and can chair committees. A model where delegates have some real power to wield will bridge the chasm we currently see between the anons and the doxxed team. Anons get a low-effort way to be involved and feel they are heard through delegation of voting rights. Vesper core team gets the benefits of a hype factory without needing to field every ‘wen x?’. Anons aligned with a particular feature request or governance proposal would be most effective organizing behind a delegate of their choice to push their cause.

Loyalty Program

Below is a sketch of a possible future vVSP benefit model. The overarching concept is to build out a Vesper ‘Loyalty’ program and in doing so merge the interests of vVSP holders with interests of Vesper pool depositors.

Andromeda Tier

  • vVSP vote-locked for 4 years
  • 1 vVSP = 4 vevVSP (4x voting power)
  • performance fee discounted 50% on pool deposits up to 10x vVSP value at time of lock
  • coverage (“insurance”) on Vesper pools free up to 10x vVSP value at time of lock
  • Gas fee subsidized for 4 claim transactions each month (minimum 100 vVSP balance required)
  • Access to beta features
  • Rare Unique Vespernaut NFT

Mars Tier

  • vVSP vote-locked for 2 years
  • 1 vVSP = 3 vevVSP (3x voting power)
  • performance fee discounted 50% on pool deposits up to 5x vVSP value at time of lock
  • coverage (“insurance”) on Vesper pools free up to 5x vVSP value at time of lock
  • Gas fee subsidized for 2 claim transactions each month (minimum 100 vVSP balance required)
  • Access to beta features
  • Unique Vespernaut NFT

Moon Tier

  • vVSP vote-locked for 6 months
  • 1 vVSP = 2 vevVSP (2x voting power)
  • performance fee discounted 50% on pool deposits up to 2.5x vVSP value at time of lock
  • coverage (“insurance”) on Vesper pools free up to 2.5x vVSP value at time of lock
  • Gas fee subsidized for 1 claim transaction each month (minimum 100 vVSP balance required)
  • Access to beta features
  • Generic Vespernaut NFT

This is just meant to be a framework/example of what this model could look like to get the creative juices flowing. What would you all add/remove/change? What technical barriers do you foresee?


I love this. Rewards for time and amount staked. This is the type of policy I have been waiting for to heavily use the platform. Brilliant!

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Thanks for the response, MrAdeline!

There’s two separate discussions: DAO Governance and long-term incentives. I’ll answer separately:

DAO Governance: I’ve spent a lot of time in the DAO space and have a pretty strong handle on what works and what doesn’t. I responded to questions regarding where Vesper looks from a DAO point of view recently here: Discord

I think it’s a great idea to introduce a framework for a general, vVSP elected working group - similar to the Sushi Samurais. This group would have representative(s) that coordinates with Vesper core team (mostly myself and Phil). This could be a framework that absorbs the community administration and expands participation.

Explicitly outlining roles is an important element here. Let’s call the group “Vesper Armada”. Vesper Armada should have an elected general who is responsible for budget allocation to members in the Armada, and is primary point of contact with team. The Armada would be responsible for community engagement, social media exposure, light growth work (bringing communities back to Vesper, podcast appearances, finding strategists to participate in Vesper) and could also have an opportunity for more candid two way communication on affairs that are important to the community. Perhaps there could be NDA elements that enable them to learn more about things like exchange listings, and while they couldn’t say what those details are, they could give the community a thumbs up that things are kosher.

The important element here includes a standardized framework for appointing members to the Armada and electing the General. It should be done in a way where the VSP holders are only responsible for electing the General they think fits the bill best. That General must report back to the community and if they aren’t doing a good job they can be replaced in the next go around. I think this is better than delegating, personally.

The existential question I have in response to the above is if the community is even fleshed out enough to elect a general and recruit an Armada. We may need to build a larger base first.

Now, incentives:

Some of this is doable, some is ??? NFT votelock positions are currently undiscovered territory but ve(3,3) will change this. I’m strongly in favor of votelocking vVSP to direct pool rewards to the pool(s) you are interested in. Coverage in an insurance pool, weight in a lottery, VSP boost.

mStable lets you lock their MTA alongside deposits. That might be a good way to employ votelocking and vVSP bonuses. You need 1/5 or 1/x the $$ value of your deposit in vVSP and you pick your lockup length. Perhaps rewards go to these lockups rather than the pools themselves (or some combination).

There is some trickiness around technical feasibility… Easy: create incentives that require no contract changes or extra activity. Lottery based on vVSP holdings. Insurance fund for vVSP holders. Some pool rewards are distributed based on VSP voting. votelocking contract is harder but doable. Locking pool tokens will require some extra work beyond that. Gas reimbursements, fee discount (not rebate) are most difficult.

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Thanks for the quick reply. I definitely agree that the Vesper community/DAO isn’t robust enough yet for some of what I suggested - just want to start driving in this direction.

On the General vs. delegate conversation, I have to respectfully disagree. I think DAOs have a very long way to go to build out scalable governance models. Here is why I believe a delegate model will be more effective.

  1. Decentralization - Multiple community delegates with fractional power better displays decentralization
  2. Community Engagement - In a delegate model, every community member will have an opportunity to align their voting rights closely with a delegate. Whereas a General could risk disenfranchising up to 49% of the community on a contentious issue.
  3. A General who needs 50%+1 vote would be motivated to cater to the majority interest and disregard minority views, whereas a group of delegates would be motivated to build myriad platforms that cater to every individual
  4. Use the tech! One of the central reasons my polisci brain is drawn to blockchain tech and DAOs is they enable much more efficient governance. The old way: have an election every 4 years to elect a representative that represents a simple majority of a population. The new way: every voter can change their delegation at any time to any representative. This provides a pathway for new ideas to rise quickly to prominence and quickly flushes out corrupt or ineffective actors. It motivates comprehensive representation and keeps representatives on their toes.
  5. Coalition/Consensus Building - a delegate model forces representatives to build bridges between different interest groups and find solutions that are workable for a majority on EVERY issue. A General would represent a majority in theory, but the General would have the power to make decisions without regard to the majority on specific issues.
  6. Corruption - centralizing power to an executive breeds corruption in every political model ever. It’s orders of magnitude easier to corrupt one person to a cause than it is a group of representatives. Add to that a never ending election - which is basically what a DAO delegate model looks like - and you get even greater protection.

Some food for thought (:slight_smile:


I would like to see some of the easier to implement VSP incentives being put to a vote asap. It’s time to get the ball rolling on that while platform users are still receiving/ set to receive VSP rewards.

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I am a big fan of Mr Adeline’s delegate model.

I really like the idea of a loyalty program and you’ve named some creative perks. My only critique is that 4 years is far too long to expect anyone to lock for maximum rewards.