Fee sharing distribution and Performance fee update

[Biaf]

Good morning guys!

The discussion has heated up pretty fast. Let’s try to find a common and shared view about the two topics discussed here before voting:

1. Increase the current performance fee on PYTs (from 10% to 15%)
2. Update the fees distribution policy

Increase the current performance fee on PYTs

For point 1, the main concern raised was

@Salome

I am not convinced of this proposal as it cuts profits of our users and will make the idle protocol less attractive to yield farm. Additionally the loss in TVL (performance fees) should be considered due to users who might leave to invest in other protocols.

As mentioned by @William the average APY for PYTs is way higher than the one for Best yield, hence we could expect that the change does not influence too much the yields generated. In addition, as it results from my summary analysis of fees charged by competitors, this change would only align us more to the market standard. We are not proposing anything extreme in the DeFi space.

The fee update on PYTs moves along with other changes affecting this strategy. @Davide, for example, here is proposing an update of the APY split mechanism to all existing PYTs. The new AYS method should allow an easier onboarding of new capital.

Given, the original analysis and the additional comments, I am personally 100% in favour of this change. I think is a strategic move to let DAO’s treasury be healthier. It’s important to remember that fees on the BY strategy are captured only when capitals are redeemed, while on the PYTs side we could count on fees collected at every harvest creating a more stable flow of revenues.

Update the fees distribution policy

The majority of the discussion relied on point 2, i.e. the update of the fees distribution policy.

Being an Idle DAO member and staker, I share part of the concerns here.
I do understand the point that changing the conditions when a lock is in place is not ideal.

Nonetheless, I do think we should definitely rethink the fee distribution rates. Sooner or later, the locking periods in place will end and it’s smart to start now a change. In the current state, the policy is basically crippling the possibility to create a sustainable treasury in the long run. I’m not speaking for a personal return as a League contributor, but instead with a strategic view as a DAO member.

As some DAO members pointed out, the League’s framework has some frictions that should be addressed.

@Salome

My concern is mainly that the proposed solution will help short term but does not fix the current issues long term. We need to explore additional opportunities to remain sustainable.

@Teo is drafting the new M3 proposal that will be the best place to discuss the accountability issues raised.

@Teo

Bring the Leagues feedback (accountability & others) to the “Leagues M3 post”. We always discuss achievements, priorities, goal setting, and new structures in this post every mandate, and we will be doing that for this mandate as well.

This proposal instead was intended to try to give some oxygen to the Leagues’ funds in the short run. For this reason, I see the fee distribution change as a temporary measure (1 or 2 mandates) to address partially the issues arisen during this bear market. This change hence can be subject in the future to a new vote to modify again the weights.

I think we can all agree on decreasing the amount of fees routed to the Rebalancer

@Biaf

Rebalancer from 30% to 15% - The rebalancer contract is responsible to cover for gas costs related to the harvests and the rebalances of our product suite. It has a minimum threshold of 1 ETH. Currently, it holds 5 ETH. Idle Leagues will set up a monitoring system and in the case that funds go below the minimum threshold they will promptly top up the balance.

The number of fees budgeted to sustain the Rebalancer was set up too high. A cut on its share shouldn’t affect negatively the capability of the Idle protocol to sustain the maintenance costs of its strategies. This change alone would move the current Treasury share from 20% to 35%.

I would instead leave to a vote a possible reduction of the fees routed to stakers to be shared instead with the Treasury. Treasury that for the time being has been mainly used to fund Leagues, but that is at the disposal of every DAO member.

As a closing remark and for a matter of transparency, I would like to point out that starting from 2021, Idle stakers received roughly ~$225k worth of rewards (considering the $ value at emission), equal to ~123k $IDLE tokens. In the same period, Leagues were funded with around $150k in stablecoins.

Next steps

I’m keen to hear your feedback on these three points:

1. Opinion on the performance fee increase for PYTs (10% → 15%)
2. Opinion on the change of the share of fees distributed to the Rebalancer (30% → 15%)
3. Additional ideas on how you would change the current distribution policy if you have any. If not, we will just vote on it.

Please let’s add comments only revolving around these three points. Your inputs will help in setting up a snapshot that can effectively measure and showcase the DAO sentiment on these updates. You can find a draft below.

Snapshot

Question: Do you agree to update the current fees distribution policy?

Answers:

• Agree with the change in the Rebalancer distribution (30% → 15%) and Stakers distribution (50% → 35%)
• Agree with the change in the Rebalancer distribution (30% → 15%) and Stakers distribution (50% → 25%)
• Disagree with every change and keep the distribution policy as it is