A phase of experimentation for Pickle Finance's current fee paradigm

After analyzing our current revenues, the overall crypto market conditions, and our competitors, discussions within the Pickle Team have led to the decision to experiment with different fee structures in order to remain competitive with the current landscape of L2s.

Tl;dr - We want to lower our fees on Metis from a 10% performance fee down to a 4.20% performance fee for an indefinite period of time. Depending on how this experimental fee model performs, we will reassess the rest of our fees against the current market conditions and our competitors.

Currently, Pickle Finance charges fees on a per-chain basis. For example, our fee on Ethereum mainnet and Polygon is a 20% performance fee while for newer chains such as Aurora and Metis, we charge a 10% performance fee.

Until now, we have been informally experimenting with different fee models to come to the best equilibrium possible regarding the fees we charge for the services that we provide. This forum post is meant to formalize our intention to enter a phase of fee experimentation to ascertain what path is best for Pickle Finance going forward.

So far, the team has discussed fee implementations gauged on factors such as how much gas we save our customers, the complexity of the strategies we deploy, and the quality of the overall user experience that we provide. While these discussions are still ongoing, the team has decided to begin down the path of testing out different ideas regarding our fees on a smaller scale to better understand what works and what doesn’t in the DeFi liquidity and investment management services niche that we occupy. We propose taking the first step of reducing our fees on the Metis chain from the current 10% performance fee down to a 4.20% performance fee for an indefinite period of experimentation.

This will give a chance for the Pickle team and community to collect more data, assess, and brainstorm how a lower fee structure plays out on a smaller scale before giving consideration to a more holistic revamping of our current fee paradigm.

The goal with this move is to increase our TVL sufficiently to make up for (and hopefully exceed) the revenue that we would forfeit by lowering our fees. As a business, it is important for us to continuously reexamine the overall price point that we charge for our services and whether the Pickle protocol and its community would be better served with different structures. Furthermore, as a result of recent events in the DeFi space, we are considering that TVL may be a more important metric for overall protocol success as opposed to profit margins, revenues being equal, when factors such as chain incentives and airdrops are brought into the equation. Just to give an idea, we have been considering whether we would be better served by lowering our fees in order to push for the Fantom chain incentives rather than maintaining larger profit-margins.

https://fantom.foundation/blog/fantom-incentive-program-how-to-apply/

With this being said, we invite the Pickle community and of the broader DeFi community alike to give feedback on this direction for Pickle Finance. Thank you for your time and consideration

~ Pickle Team

3 Likes

in the best case you want to be able to calculate the usefulness and profit per customer/user, if you want to handle this like a professional company you need to be able to see if a user deposits in multiple jars/ multiple networks, how much he deposits → what you can offer him in return if you want to be old fashioned, the abc - analysis stuff you learn in the university, the question is if you want to do this in the blockchain space or if you can do this in the blockchain space, people probably don’t like it if you do this stuff

point is that the more a user deposits/the more money he brings in the protocol, the more benefits he should experience

the major problem atm is the infrastructure/usability, people don’t know the difference between ptokens and LP tokens and can’t see how their deposited value increases. In my opinion the most important thing right now is a left bell curve/ easy to understand profit page right now, similar to trackavault.com from yearn. Users have to be able to see their profits and number has to go up. Maybe we can publish a bounty for a certain sum for someone to build something like this.

Agreed. Better UI/UX and analytics are some things that we are indeed working on and will hopefully be shipping soon. We hope that those improvements in conjunction with a more competitive fee structure will give Pickle the boost it needs to make the next leg up in the DeFi space.

Regarding giving more benefits to larger users, we are indeed giving such things consideration. Here is a preliminary idea we’ve been kicking around as a fee structure:

  • 4.2% performance fee for all basic jars.
  • 3% performance fee for any deposit greater than $10k
  • 2.75% performance fee for any deposit greater than $100k
  • 2.5% performance fee for any deposit greater than $1m
  • 2.25% performance fee for any deposit greater than $10m
  • 2% performance fee for any deposit greater than $100m
  • 1% performance fee for any deposit greater than $1B
  • Fees will be halved for every 10x thereafter (0.5% for $10B, 0.25% for $100B, 0.125% for $1T, etc.)

Of course this idea hasn’t been given all due technical considerations nor have the specific rates been thoroughly examined, but it is rather the overall concept of lessening friction for larger amounts of capital which is being discussed.

Feel free to propose any specific designs you would like to see as well.

1 Like

Something like a decreasing fee would be interesting, the longer the user stays in the farm/generates profit/overall profit, the lower the fee goes (until it reaches the profitable fee structure). Would be interesting if you can mint an NFT on a sidechain/L2 for lower costs and track the position.

This looks good.

As with every experiment, it’s good to set the objectives prospectively, and decide what metrics will be used to decide success/failure, and how a success and failure will be defined.
A lot of experiments keep drifting with shifting goalposts.

Pickle is currently not suitable for bigger depositors.
Adding gradual tiers will make it attractive to larger depositors and does not look like it will upset small users.

Make sure you revert the experiment if it doesn’t work particularly well. Personally I think offering a lot of free products and great reputation, and then charging high fees will be more profitable but this is just a theory which may well be very wrong.

My thought here is this will open up opportunity for a reverse-sybil attack where one protocol deposits large amounts into Pickle and then allows smaller depositers to pool together to get the lower fee overall (with their own cut). Maybe this isn’t a bad thing? It would be another layer of smart contract risk and trust.