[BIP-45] Protocol Sustainability

Proposed: Adjust Platform Fees

Objective: Establish a fee structure which increases platform revenue to provide for the sustainability and growth of Beefy.

Introduction:

Beefy has come a long way since first deployed in September 2020 on Binance Smart Chain. The team has improved in every aspect: decentralization, security, user experience, partnerships, advanced vaults, and more. With all the development that took place, only the fee structure has gone untouched and has fallen out of sync with market dynamics.

Beefy’s current baseline fee structure is 4.5% with the following split:

• 3.0% is distributed back to $BIFI stakers
• 0.5% is allocated to the Beefy treasury
• 0.5% is awarded to the vault strategist
• 0.5% is awarded to the one calling the harvest function

This fee structure was arbitrarily decided by the founders almost two years back. The bull market and grant funding allowed for development of the Beefy product without having to consider adjustments to the fee structure. The recent downturn has reduced Beefy’s inflow to a point where operational expenses must be paid for from the treasury.

Today, Beefy has better information about its product, vaults, and competition and looks to make adjustments to the fee structure as a way to eliminate the operational deficit, to establish a strong treasury that can survive the current bear market, and to allow Beefy to build for the next bull run.

A core value of Beefy is to “build for longevity”. The team is continuously working to build Beefy into a product that is durable and resilient enough to thrive in all varieties of market conditions. Recent new improvements to the app, presenting more informative data about your deposits, new strategies developed to bring new sources of revenue, validators providing alternative revenue sources while also giving Beefy the capabilities to build liquid staking products on top of them have been just a few of the changes made to reflect Beefy’s longevity goal.

Current Budget and Treasury:

The current treasury is greatly impacted by how Beefy’s fees are collected. Beefy collects fees in a blockchain's native token. The continuous downtrend has meant that the income Beefy receives has been devalued by negative market forces. Therefore we propose that all treasury income should be received in stablecoins.

• Monthly Vault Fees Income: $14K
• Monthly Validator Income: $16K
• Monthly Expenditures: $123K plus misc.
• Deficit: $93K
• Impact on Treasury: Treasury Runway - 13 Months with no marketing spend.

Budget Reductions:

Since the market decline Core put a hold on nearly all expenditures. Core will also be proposing a reduction in salaries to start in August.

• Core Salary Reductions by 20%.
• All future marketing expenditures have been paused.
• All support for BIFI liquidity pools have been paused.

Proposed Fee Structure Changes:

1. 9.5% Max Fee - All newly deployed vaults will have a maximum fee of 9.5% with 64% going to the treasury and 36% going to BIFI Stakers (the fee-batch split).
2. The existing top 20-50 high-earning vaults will be upgraded to the 9.5% fee structure with a 64/36 fee-batch split. This would happen with a two-week notice. Beefy will also provide announcements prior to upgrading, including a blog post and announcements in Discord, Twitter and Telegram. 4.5% Fee - Legacy Vault Fee: Remaining vaults would continue with their current 4.5% fee structure.
3. Core has the ability to decrease fees or adjust the fee-batch split at its discretion.
4. All treasury inflows will be made in stablecoin moving forward, not chain-native coin.

Fee-Batch Context:

Currently, 0.5% is taken from the harvest and given to the listed strategist directly. Depending on the blockchain, 0.05% to 0.5% is given to the harvest caller. The remaining balance is sent to the Fee Batch.

Current Fee-Batch Split:

• 14% for Treasury (0.49%)
• 86% for Earnings Pool (3.01%)

Proposed Fee-Batch Split:

• 64% for Treasury (4.5%: 2.24% | 9.5%: 5.44%)
• 36% for Earnings Pool (4.5%: 1.26% | 9.5%: 3.06%)

With this new split, all vaults will generate more revenue to the treasury. If in the future an excess of treasury inflow comes about (beyond required expenses), the split can be reevaluated to better align stakeholder interests.