SDGP #38 : Harmonizing Fees among Lockers and Stake DAO Strategies

Authors : @chago0x @Tube

Objective

This proposal aims to harmonize all fees among Stake DAO Liquid Lockers and Strategies to improve readability and transparency for users.

The proposed structure is as follows:

Lockers: 15% performance fees on the native yield split as follows:

  • 10% Liquidity (VBM) if the ratio is below 10/90 (explained below)
  • 5% Treasury

For the PENDLE locker, any reward distributed in WETH by Pendle is considered a native reward (including voter rewards).

Mainnet strategies: 15.5-16% performance fees split as follow:

  • 5% sdTKN-gauge holders
  • 5% veSDT
  • 5% Treasury
  • 0.5%-1% Harvester fee to guarantee frequent harvest of the strategies

Sidechain strategies: 15% performance fees for the treasury

Background and Motivation

This proposal builds on SDGP #21, which aims to optimize and scale liquidity pools, particularly the sdCRV/CRV pool on Curve. By extending this approach to all lockers (sdTKN), this proposal aims to harmonize fees across the entire Stake DAO ecosystem, allowing for better resource facilitation and increased financial transparency.

Those fees only apply to a small part of the yield for the lockers, specifically the native yield. By design, the lockers also generate yield from vote incentives, which are not affected by this harmonization.

Lockers:

  • Liquidity Fees (VBM): a 10% fee on native yield (e.g., 3CRV for the CRV locker) will be allocated automatically (through Vote Bounty Manager contracts) to vote incentives on Votemarket for the corresponding liquidity pool (e.g., sdCRV/CRV) when liquidity is below the target ratio of 10/90.

  • Treasury Fees: A 5% fee will be allocated to the DAO treasury to support ongoing platform development, audits and operational costs.

Mainnet strategies:

  • sdTKN-gauge Holders: A 5% fee will be allocated to sdTKN-gauge holders, recognizing their engagement and contribution to the ecosystem.

  • veSDT: A 5% fee will be allocated to veSDT holders.

  • Treasury Fees: A 5% fee will be allocated to the DAO treasury to support ongoing platform development, audits and operational costs.

  • Harvester fee: 0.5%-1% to guarantee frequent harvest of the strategies

The 10/90 Ratio Explained

The 10/90 ratio is a target used to ensure a balanced and effective distribution of liquidity between sdTKN in the liquidity pool and sdTKN within the respective gauge. This ratio is crucial for maintaining the stability and efficiency of liquidity pools, ensuring minimum target liquidity for lockers.

Definition of the 10/90 Ratio:

  • 10% sdTKN in the Pool: this represents the portion of sdTKN tokens that should be within the sdTKN liquidity pool.

  • 90% sdTKN in the Gauge: This represents the portion of sdTKN tokens that should be within the sdTKN locker gauge.

Importance of the 10/90 Ratio:

  • Liquidity Stability: Ensures sufficient liquidity in the pool to facilitate smooth transactions and swaps mechanism while avoiding the incentivization of the liquidity pool if it becomes overloaded with sdTKN.

  • Optimized Rewards: The ratio helps optimize the distribution of rewards. By maintaining a balanced mix of sdTKN in the pool and the gauge, and because the sdTKN in the pool forfeits their yield, the rewards for sdTKN stakers are enhanced.

  • Sustainable Growth: By adhering to this ratio, the liquidity pool can grow sustainably, attracting more users and increasing overall liquidity as the locker scales.

  • Security: in the Liquid Locker model, the tokens locked in underlying project’s veTKN contracts cannot move anywhere, and are therefore not at risk. The only tokens at risk of a smart contract failure or hack are the ones in the liquidity pool. It is therefore important that the liquidity pool doesn’t become too big compared to the overall locker.

What happens when the ratio is over 10/90?:

When the amount of sdTKN in liquidity is above the 10% threshold, the fees are simply sent to the treasury. The treasury can always allocate them to deposit vote incentives if required or simply as normal treasury funds.

Implementation

Minimal developer time is needed to implement this proposal, and no additional treasury resources are required.

Proposal Specifications

Admins: veSDT holders
Community Feedback: Minimum 3 days
Voting Duration: 7 days

Voting Options

YAE
NAE

  • YAE
  • NAE

0 voters

4 Likes

Good idea, and probably moving from sdfrax3crv to sdt or stablecoin crvusd would be another simplification.

2 Likes

wETH would be even better?

1 Like

https://snapshot.org/#/stakedao.eth/proposal/0x60142d31cc9b0b675ffabe3406a8f9ff5cde162f36e098b0fb9f8113414d730f

1 Like