Proposing a Revised Fee Structure on Farming

Background

• With the implementation of EIP-4844, on-chain transaction costs have significantly decreased.

• Currently, the reinvestment service is maintained by the team. With a common vision of decentralization, there is an increasing demand for it to become permission-less.

• The current re-investment fee on Extra Finance is 5%. The fee structure comprises:

  • 2.5%: allocated to cover the costs associated with in-house bots that trigger auto-reinvestment, a function currently managed by the team.
  • 1.25%: directed towards the team/treasury.
  • 1.25%: distributed weekly to veEXTRA holders.

  This current 5% rate is competitive and moderate compared to similar services offered by mainstream protocols, which often charge around 10%:

  https://docs.beefy.finance/ecosystem/beefy-bulletins/beefy-finance-fees-breakdown

  https://docs.alpacafinance.org/our-protocol-1/global-parameters/leveraged-yield-farming-parameters#global-parameters

Proposed Fee Structure Changes

In line with our dedication to transparency, decentralization, and bolstering the protocol's resilience against unforeseen risks (Recently, on April 15th, 2024, the team covered a bad debt of 164 ETH during the liquidation of GB-WETH due to the GB accident: https://twitter.com/PeckShieldAlert/status/1779791627827270125), We propose a revised fee structure of 6.5% * pool_factor.

where 6.5% includes:

• 2% (previously 1.25%) allocated for distribution to veEXTRA holders on a weekly basis.
• 0.5% (previously 2.5%) earmarked for covering the operational costs of bots responsible for auto-reinvestment. Notably, the API for auto-reinvestment will be made permission-less, accompanied by comprehensive documentation outlining its usage.
• 3% (previously 3.75% in total) designated for the team/treasury.
• 1% allocated to the Rainy Day Fund, accruing alongside the initial 500,000 USDC provided by the team, to cover unforeseen protocol risks.

In most cases, the pool_factor remains constant at 1. However, it can increase under specific circumstances as determined through a governance procedure. These circumstances may include:

• A persistent lending shortage - we can then using the increased fee from farming side to incentivize related lending pools.
• The risk associated with a farming pool necessitates a fee increase.
• A farming pool is in exceptionally high demand.
• The APR of a farming pool is extremely high.

Through the introduction of this revised fee structure, we aim to establish a more transparent and equitable fee model. This promotes long-term sustainability for the protocol, and this initiative is designed to benefit veEXTRA holders and our entire community in the long run.

If there is any ideas, let's continue to discuss in the convos channel: https://discord.com/channels/1009330898967212063/1186597180010663986