Today an important vote passed with a large majority. Soon we will switch from a performance fee and a withdrawal fee, to just a performance fee. An exciting but also slightly scary change, it will change some things within the protocol.
Our revenue is less predictable and TVL is less of an important metric.
Withdrawal fees have a direct correlation with TVL, more TVL always means more fees. In our new situation it’s less correlated, if our TVL doubles but all strategies are 50% less profitable we will have gained nothing. We will be more depended on market conditions and profitable strategies.
More flexibility for users
Capital in crypto is very fluid and opportunistic, it likes to shop around for the best rates. A withdrawal fee is a clear barrier for that kind of behaviour. Without the fee capital will come faster, but also leave sooner if something better presents itself.
We can unleash the power of Pickle incentives
With the withdrawal fees users needed a certain time to “break-even”, and some felt held hostage because of that. To avoid bad blood, we needed to be very careful with removing rewards. In the new situation we aren’t constraint anymore, we can be more aggressive with adding and removing rewards.
And that last point brings me to a (in my opinion) underutilized part of our protocol.
As time passes, more protocols with similar goals will enter the market. Not only base layer yield aggregators (e.g. Yearn, Harvest), also aggregators that will be build on top of the base layer (e.g. Yaxis, Barnbridge?). The whole yield farming craze introduced some interesting dynamics, protocol inflating their own token to reward LP’s for bringing their assets. Often Hyperinflationary at the beginning, making it very attractive to farm. The next step is making it sustainable, most fail there and die. Pickle didn’t, so it might be a good moment to take the next step in utilizing the rewards.
Right now we are using Pickle rewards to prop up our APY’s in the hope it makes it more attractive for capital to come to Pickle. The next step (imo) would be to consciously pick a goal we want to achieve and align our rewards accordingly.
For example, a new strategy appears that’s highly profitable. All yield protocols want as much of that pie as possible. So do we, and we can entice them by aggressively rewarding pickle to that strategy and outcompete all competition. I can imagine a future where we have a whole library of strategies, but only reward a couple of them. Only the ones that are most aligned with our goals at that moment, be it profitability or bringing something to a peg.
The strength of our DAO is not only coming up with innovative strategies, but also being able to pull the right levers to attract the capital to us. Trying to be competitive in too many assets/strategies won’t be very effective, pick(l)ing the right ones will. We could for example have a weekly or bi-weekly vote that determinate what assets should get priority(for reasons we determine) , putting it in a strict format will give users peace of mind. Change doesn’t necessarily mean uncertainty if you bake it into the protocol.
One big counter-argument for such a system would be “the park and forget” model. I personally think the space is not ready for something like that. Capital is too opportunistic, and the majority will leave in a blink of an eye if they thought it would be beneficial for them to park their assets somewhere else. When the market becomes less fluid and more loyal we could implement structures that appeal to a more “park and forget” crowd. This will hopefully be something that starts happening in the coming months, but right now it won’t work (imo).
Long story, and many points need to be worked out a lot more.
I’d be very interested in hearing different opinions or additions/improvements.