Thanks for the details! Is more quantitative data available to share (what TVL’s were assumed/expected, what % of fees from withdrawal vs yields, etc.)? I assume the “ML model” you reference is a machine learning model. What is the rationale for using a machine learning model? Are details on the model available (what datasets are used, how much of that is data specific to Vesper vs competitors vs more general financial data, what are the inputs/outputs of the model)?
[Proposal] "Change fee structure, treasury management, and revenue allocation" from Economics Design
Thanks for breakdown. I see there is a supplement to this proposal to support a 0% withdrawal fee for intra vesper pool of like kind… Great. Reference it here. Not sure if original proposal needs to be updated or the supplement overrides what is written…
https /github.com/vesperfi/doc/issues/36
Yes, vesper boosts are important until APY can stand by itself as competitive . e.g Terra anchor protocol 20% APY on stablecoin getting allot of attention but vesper’s DAI pool matches that including the VSP boosts… (maybe add airdrop to longer term VSP holders to avoid yield hunters dumping all VSP, maybe VUSD reflections on L2)
Aggressively harvesting VSP from the fees just to dump it back into the pools via VSP rewards doesn’t make any sense. It’s a closed loop – fees come out of the pool earnings in the first place. Reducing the fees in the first place would have the same effect.
In fact, it’s much less efficient to do it this way. Not only is a significant percentage of the earnings lost to trade slippage, gas, etc in this needless conversion, but then no matter how perfectly we try to allocate VSP rewards to incentivize participation we will be creating inefficiencies in the market that will be extracted by others. We’ll constantly be incentivizing people to allocate their money to pools that actually create less real yield for them and by extension less fees for VVSP holders.
Perhaps there’s a psychological argument to be made that people like bonus rewards. Did you come to that conclusion in your analysis? If so, can you elaborate more on how the data was collected? What pools, what comparative APYs? As far as I can remember, we’ve never run any test with two comparable pools, one with higher base APY and another with lower but VSP rewards.
Regarding the 93% fees from withdrawals: the data doesn’t lie but I don’t agree with the conclusion.
The reason we don’t have a higher TVL to earn our 15-20% from is because people don’t want to be underwater on an investment the moment they put their money in. In many of our conservative pools, a depositor is under water for months or years after depositing (excluding bonus VSP, which is not sustainable. See my other post…). How are we going to convince anyone to invest in that? (for example, conservative ETH currently pays 0.18%, you’d need to wait 3 years before withdrawing to see a profit in ETH, excluding the VSP rewards).
TVL has been bleeding away over the last 6 months, even as the value of the assets in the pools has risen dramatically. We’ve got just $400m left, and with our 0.6% withdrawal fee that represents just $2m. If we don’t attract new TVL, this project will die. And I believe we won’t attract it with the withdrawal fees as they are.
Our aggressive ETH pool is beating the pants off Yearn right now. But none of the $900m in ETH over there is coming over, because you’d have to leave it in the aggressive pool for >2 months just to break even.
I think the answer here is to cut withdrawal fees to 0% for transfers, 0.1% on conservative pools, 0.3% on Aggressive, increase performance fee to 20%, and bank on this approach attracting more TVL.
I don’t see there is need for any fees at all. What i would suggest is that founders and the whole team show us which wallets are their, so we can clearly see when they dumping us. You know, there is 35% tokens goes to the team, founders, advisors, partners… This % is not atractive for the big investors, a lot of questions and bad thoughts are in head because of that 35%. We can lower that effect with team and founders being fully transparent with their $vsp. Before “punishing” investors, who bought at 30,50,20$…. we should do that above
I’ll be voting no on this proposal. There are elements that are good, but there’s far too many things bundled into one proposal here. Suggestion on how to break them out:
- Treasury Diversification
- Performance fee increase to 20%
- Lower or eliminate pool-to-pool withdrawal fee
- Sapping VVSP rewards to pay for extended VSP pool rewards
For me I’d be YES on 1, 2 and 3.
4 creates perverse incentives for the ecosystem. It would tax the more profitable pools to incentivize participation in less profitable pools that don’t make the user OR Vesper as much money. Why on earth would we do that?
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Hey Kwood,
Curious to understand what you mean by
As a matter of fact, the fees model of using the fees earned to create VSP is something that has not changed. What we found out was the VSP rewards help to increase TVL in the space - as the past transactional data has shown!
More on the data -
We analysed the returns using just foreign tokens (Eg ETH) and with an addition of VSP as another variable and the outcome shows that VSP reward affects users behaviour in increasing TVL.
I hear you. For 4, it does not come into play until about 12-18 months later. So honestly, 4 is something that can always be changed. We are just preparing for a conservative case, where we need to extend the VSP pool rewards for a longer time.
In the past, VSP subsidy on pool rewards was funded by inflation. This is different, we’ll be harvesting 25% of the fees the protocol generates to fund VSP rewards. That means the bonus VSP rewards come out of the yield in the first place, and then are added back in as VSP rewards, which is kind of silly to start with.
But it gets worse. Unless the fees were perfectly proportionally reallocated, in practice what that means is harvesting yield from profitable pools to give it to unprofitable pools, which is exactly the opposite behavior we want to incent.
Is there a copy of these findings and the supporting data somewhere? I don’t understand what comparison was made here, it’s not like we ran A/B tests with and without VSP rewards, right?
Correction, I should have said more profitable pools to give it to less profitable pools here