Yearn Finance proposes a restructuring of fees and rewards in the face of the decline of its TVL
Yearn Finance offers better fees for strategists.
Vaults are underperforming and liquidity is draining.
TVL is down 60% since early September, YFI / USD is down 75%.
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DeFi Yearn Finance’s protocol proposed changes to its fee and reward structure in an effort to attract better developers and strategists as liquidity on the platform continues to decline.
Yearn Finance works on the principle of seeking the best returns through constantly evolving strategy management, which saves the investor time and expense to carry out this research himself.
After its launch it was very successful, offering massive four-figure returns for some strategies that became unsustainable over time and needed to be changed.
The yETH vault is a good example of this, as it initially offered a higher than 100% annual return on ETH deposits, but collapsed to less than 0.5% when the strategy collapsed and that liquidity is out of the pool.
In his latest proposal, Yearn suggested that the strategist rewards were too low, recommending an increase to attract the best developers to the platform.
1 / Our goal is to attract and retain the best BitQT developers to work in the Yearn ecosystem.
Some developers have expressed concern that the strategist fee (0.5%) may not be enough to align long-term incentives.
More incentives for Yearn strategists
Strategists are currently receiving 0.5% of their strategy’s profits, but that may be less than what they spent, especially now that returns have fallen from their sky-high levels a few months ago.
The charge comes from the 0.5% withdrawal fee for liquidity providers leaving the vaults. The proposal added that underpaying strategists could cause them to seek short-term gains, and jump on safety or testing.
The V2 vaults, currently in development, will have multiple strategies per vault that share assets under management and offer more realistic returns. After testing different fee models, developer “Banteg” said a management fee would be better than the current withdrawal fee: “Today I learned that a 2% management fee would be four times less. expensive as a withdrawal fee of 0.5%. ”
However, it has been suggested that a 2% management fee would be detrimental to liquidity providers if the strategy no longer becomes viable and the vault starts to underperform, similar to the situation that developed with yETH chests.
Finding the balance between rewarding liquidity providers and strategists at the same time is clearly proving to be a challenge.
Actuality of the locked total value
The total value stuck in Yearn Finance has declined by around 60% since early September and is currently around $ 390 million according to DeFi Pulse .
Yearl Finance TVL – DeFi Pulse
Declining income has led DeFi farmers to seek returns on more equitable pastures, or even revert to Bitcoin , which outperforms almost all other digital assets at the moment.
Yearn’s native token, YFI , suffered a similar blow, falling about 75% from its all-time high in mid-September. Today, YFI is trading at just under $ 10,700, down 25% from last week.