[PIP-16] Revised Fee Structure

VOTE HERE

Note: Since this is a big and contentious change, we’ve decided to make this a 48 hour vote.

There has been a lot of talk regarding removal of the withdrawal fees. Many of the opinions are illustrated in this previous forum thread: Remove Withdrawal Fees

This proposal seeks to:

  1. Remove the withdrawal fee
  2. Raise the profit fee to 27.5%
    • 20% to the Treasury
    • 7.5% to the Dev Fund.

Keep in mind that any amount over the $500k Treasury cap will go towards Pickle stakers as per PIP-15.

The primary motivating factor for this proposal is that withdrawal fees are very unpopular and act as a psychological barrier for people who may want to enter the Pickle ecosystem.

6 Likes

Removal of withdrawal fee makes me feel quite comfortable to put money into pJar. I think this feeling not just happen on me.

Nowadays tech enterprises are transferring their lifetime software license model into subscribe fee structure, so looks like raising the profit fee is much more acceptable for degen newbies.

2 Likes

Withdrawal fees will restrict many people from entering. If income is derived from profits, it will attract more people to Pickle.

4 Likes

It will definitely attract more people, but it will also enable them to hop out as soon as they see something better. Double edged sword.

3 Likes

We should be more confident instead of worrying about losing TVL. If the loss of TVL is serious, it means that we are not good enough, and there is the possibility of further adjustment and improvement. If we are good enough, why should we worry about losing TVL?

1 Like

do not delay and hestitate anymore to remove the withdrawal fee, pickle has already very much missed opportunities due to the withdrawal fee, this is a fucking stupid entry barrier, noboday step into pickle even if so much TVL escape from harvest, do not waste a second to remove it, just post this proposal to snapshot to vote immediately, community will be wise enough to make it!!!

2 Likes

I’m not convinced that no withdrawal fee had a significant impact on Harvest success, TVL came for the very generous FARM emissions (subsidize by heavily diluting their holders). I’m not against removing the withdrawal fee, but I don’t think we should use Harvest’s example as an argument.

I feel like we are skipping a few steps. In the end, it comes down to revenue for the protocol. The protocol (holders) and the users will always have conflicting interests, the former wants to maximize its profits and the latter minimize its costs.

Key is finding an optimum where all parties are satisfied enough to participate in the process. Right now, I feel like we are groping in the dark because we are missing solid (visualized) data to base our discussion on.

Important questions to answers.

-When are we net positive? (in terms of TVL, emission, revenue…etc)
-How much income do we minimally need to sustain the protocol?
-How much needs to go to stakers to make it an asset worth holding?
-How much are people willing to pay for the services we provide?
-What are our competitors doing, and why?

If some excel wizards would like to help with crushing some numbers and scenarios, please be my guest!

10 Likes

I am fully in agreement with the proposal. Regarding timing, I think we shouldn’t forget the likely exit of a large amount of liquidity around Nov 17, related to the ending of the UNI farming campaign (unless they vote to extend it and use the same pools.)

3 Likes

short term farmer/staker will choose “no-widthrawal fee”
But for long term staker will choose “smaller performance fee”

Let’s assume 60% APY and 30% performance fee
Staker/farmer more than 10 days already have bigger “fee” than those 5% withdrawal fee

1 Like

I don’t think that is accurate. I believe FARM price was supported by lower emissions and lower circulating supply coupled with buyback/burn. See here for the numbers.

I support this idea because based on the numbers previously provided in the Discord announcement. It sounds like this performance fee model would be more profitable for holders than the current model - assuming TVL increases. This would be a significant change to the project though so it would be interesting to hear from folks who feel that significant changes should not be done. IE - “Why change if it isn’t broken” and “Wouldn’t changing make Pickle look like it has no clear direction?”

The fact that withdrawal fees don’t compound, while performance fees do compound, is a hugely important point. Performance fees balloon with increasing time & APY, so this is very lucrative for the PICKLE project and PICKLE stakers, but could make the PICKLE platform uncompetitive with other yield earning platforms who offer a lower performance fee, especially for depositors who understand compounding.

If we remove the withdrawal fee, that will remove any friction for people who want to “kick-the-tires” so to speak—which is fine from our perspective, I think, as their kicking the tires doesn’t impose any cost to us. And having a performance-fee only model, we can always adjust the fee downward to remain competitive in the marketplace.

If we do remove the withdrawal fee, I’d suggest maybe lowering the performance fee to 20%? At least in term of public narrative, that puts us on par with most hedge funds.

5 Likes

I am in support of this entirely.

There are subtleties, like why these exact numbers, and should we remove withdrawal fee entirely or reduce it to say 0.1%.

Overall, I think we shouldn’t get bogged down on overthinking it. These are reasonable numbers, similar to our competitors. There’s no evidence that I can see that we’ll lose TVL doing this. It’s good optics, much simpler to remove the withdrawal fee. Harvest and yearn have performance fees approximately equal to this, Harvest is 30%. So a resounding yes from me.

2 Likes

Thank you for doing some math on this, and for the long-term thinking, it is greatly appreciated.

In the second scenario, as long as you held/staked your PICKLE, you would only come out slightly behind, right? Total gain of $72,687.64 vs. $73,644.62?

In this case I agree that we should probably reduce the performance fee slightly, however, its important to note that the pJars we are using today will not likely be around for 3 years. I think we should acknowledge that most liquidity mining programs that pJars will use seem to exist between 2-8 weeks, and don’t last forever.

What I’m saying is that the 3 year case should only be considered likely if we can easily migrate funds between pJars without risk of slippage or withdrawal fee. If we turn the 3 year projection into a 60 day projection (or less, considering the UNI pJars didn’t exist for the entire liquidity mining program) the numbers look very unfavorable for withdrawal fees.

I also support removing the withdrawal fee in lieu of a larger performance fee (currently 4.5%).

Originally it was proposed as 27.5%, to be more competitive than other platforms.

While I agree with @dafacto point of simplicity for users and his idea of being super competitive with fees (he proposes 20%) I’d like to offer an alternative. I think a more dynamic solution would be best long term.

  1. A fee that adjusts according to APY. When users earn higher returns they are more likely to be ok with higher % fees. Consider a range (arbitrary numbers we need to test) of 20% - 30% which adjust according to the APY.

OR

  1. A fee that scales down over time (rewards users for investing longer term). @chen mentioned this idea in discord and could also work

My point of a dynamic fee structure is not to “complicate” things, while I understand it might have that effect. It’s to make our platform the most fair in DeFi and to have a fee structure that we don’t need to discuss again for a VERY long time, if ever. A fee structure which will grow with our platform and adjust accordingly. An elegant programatic solution.

As far as our users, we improve the UI to clearly show what the fee is. Example: we tell users “fee goes up when we make you more yield and goes down when we make you less yield” sounds simple enough for me.

5 Likes

I think removing the withdrawal fee is fine, so long as we recoup that fee somewhere else (as proposed).

Raising the profit fee to 27.5% also seems reasonable, given that pickle farms are receiving pickle emissions farmers could also opt to accumulate and stake their pickles to receive a portion of these fees.

However, the one thing I suggest we consider changing is to direct the entire 20% the fees to the treasury (rather than the proposed 10% to treasury + 10% to stakers split) and then simply continue to distribute any treasury excess over and above the $500k cap to stakers each week.

An important note regarding the higher fees – If we raise fees this will generate more profits for pickle stakers, this will have a positive impact on the pickle price and therefore also will increase our APYs. Consequently, yield farmers will also benefit from the increase in fees (good for TVL). If a capped supply/zero tail emission yield aggregators like yearn were to take a similar approach, raising their fees this would have a negative impact on yields for their investors (bad for TVL).

6 Likes

We are discussing removing withdrawal fees, because there’s plenty of evidence that there’s a problem, that withdrawal fees represent friction that may cause someone not to engage with our platform.

Is there any evidence that customers are unhappy about fixed fees? I’ve never seen any. So why are we even discussing a dynamic fee system?

If it’s to provide a benefit to the customer, that ultimately means it’s to provide a benefit to the Pickle platform. Businesses provide benefits to customers ultimately because it’s in their own self interest.

So does offering a dynamic fee structure to customers represent a benefit to the Pickle platform? Will it ultimately result in more revenue to Pickle than fixed fees?

If so, then I’m all for it.

But I would like to see a case made that dynamic fees are better for Pickle than fixed fees, and this means proposing a specific structure.

Fixed fees already encompasses the concept of “we make more when you make more”, since our fees are a percentage of their profits! What evidence do we have that a customer wouldn’t feel that’s good enough, or fair?

What specific dynamic structure is robust enough that a competitor can’t undercut it at the low end?

1 Like

I think removing the withdrawal fee is drastic and would invite large PnD whales and potential economic and arbitrage attacks, as it increases the surface vulnerability.

Reducing the withdrawal fee to perhaps .25% should be tried first, and then .1% would be my proposal.

Dynamic fees is an interesting option that we can entertain further down the road (I really like it actually). I’d like to keep the conversation on the original post (and small tweaks to it).

We won’t get EVERYTHING right with this PIP, but we at least need to head in somewhat the right direction. Let’s not get distracted everyone.

4 Likes

You know how I feel.

2 Likes

I like this and I’ve updated the first post to reflect this. If anyone else has any comments, please chime in. Otherwise we will move to a vote very soon.

4 Likes