This proposal aims to revise the current fees to optimize for our performance and introduce a new fee structure to optimize for maximum developer and protocol retention.
The Rari Protocol is optimizing for the wrong things, in this case, withdrawals. Additionally, it doesn’t allocate earnings properly. Lastly, it doesn’t set us up for long-term success. For reference, Yearn (a similar yield aggregator) charges fees on a 2/20 basis with their V2 vaults.
This proposal aims to solve the aforementioned issues.
Stable Pool: 9.5% profits + 0.5% withdrawal
Yield Pool: 9.5% profits + 0.5% withdrawal
ETH Pool: 9.5% profits
Stable Pool: 17.5% profits
Yield Pool: 12.5% profits + time-based withdrawal
Withdrawal fee: 2% at 0 hours → 1% at 1 week → 0.5% at 1 month → 0% after another month
The withdrawal fee is required to prevent arbitrage within this pool since it is composed of various stablecoins which may have minor price fluctuations
ETH Pool: 17.5% of profits
This removes the withdrawal fee from the stable pool, further aligning us with our users. The reason for the increase in fees across the board is to offset the lost earnings from a withdrawal fee. Additionally, even with these numbers it places us in a competitive state to similar yield aggregation products.
As mentioned, I believe that we are not allocating earnings properly. Below, I propose a new plan for how we should be allocating them:
Old fee structure:
50% Rari charity
50% Buyback and burn
Proposed fee structure:
45% Smart treasury (if that proposal passes (or a derivative of it), if not, community treasury)
15% Community treasury
33.33% Developer who created strategy
Fee share is halved each $1m earned (taking value of fees at the time of payment) until fee share equals 8.16%. The remainder is forwarded to the Community Treasury.
6.66% Staking (if that proposal passes (or a derivative of it), if not, to the developer)
If either staking or smart treasury proposal pass or a derivative of them are later added, they will be implemented into the fees as part of this proposal.
The smart treasury serves a similar function as the buyback and burn with the major difference being that it accrues value for the ecosystem instead of offering a useless burn. Furthermore, I introduce a new method that will enable stakers to earn a piece of the fees. This is outlined in the Staking Mechanism proposal. This will ensure protocol retention amongst our users.
Most importantly, there is a large portion being given to the developer who creates the strategy as this will help attract the best talent into the protocol, as we are rewarding them the best compensation. This will create a strong ecosystem around the Rari Protocol that can be later monetized with RIP-6 and the Incubation program.
This sets us up for long term success by deploying capital efficiently and ensuring we attract the best developers to our side.