This proposal is intended to switch up the current 0/1/3/1/3 fee structure for the PUNK vault to 4/2/4/2/3
The result we’re aiming for is creating higher organic APRs for both liquidity and inventory providers. This preceeds the recent proposal to change all vaults.
Rationale
Since rolling out the second version of NFTX Protocol, we’ve recommended setting fees for new vaults at a 10/5/10/5/10 rate with the idea to optimize fees generated for liquidity & inventory providers. Since then, we noticed that these fees are too high, especially for vaults that have a high value like PUNK. This caused the vault to become less active and fee distribution drop.
To encourage more NFTs into the PUNK vault the mint fee was removed and the other fee’s on the vault lowered significantly from the default. Crypto Punks holders now have the opportunity to inventory stake with 0% fee and receive a full token back after 7 days lockup, it makes sense to change the fees to the new proposed standard of 4/2/4/2/3.
The NFTX DAO holds the most significant portion of PUNK liquidity which is also going to be staked on the vault to earn the DAO fees as well, so the updating of the fees to the new recommended standard will ensure existing LPs are still earning yield on their positions.
Effect
Opportunity
Increasing the fees for the PUNK vault will improve the fee distribution for existing inventory and liquidity providers, and bring it inline with the new recommended standards.
Risk
The additional mint fee will lower the sell price by 4% and potential lower the NFTX inventory in aggregators such as Genie and Gem.
The fees are fixed for a 30 days after changes.
As the use of aggregators is relatively new, we generally lack data to back up these recommendations. Changing fees can mostly be seen as an experiment until further vault usage data caused by integrations is available to us.
Specifications
If this proposal passes, we will switch the current PUNK vault fees to:
4/2/4/2/3% (Mints, Random Redeems, Targeted Redeems, Random Swaps, Targeted Swaps).
Funding request - No - Implementation Requires Funding
Passing Threshold: More than 50% must vote in agreement for the XIP to Pass. For changes to the NFTX contract, more than 70% must vote in agreement for the XIP to pass.
I’d like to propose a slight change to this new fee structure.
It’s becoming clear that aggregators are likely to drive larger and larger NFTX volumes. Our inventory will therefore be competing against the floor price of other platforms on these aggregators.
We can reduce our floor price and generate more visibility in aggregators by reducing the redeem (buy) fee. Decreasing the redeem fee will reduce yields for LPs and Inventory Providers (IPs), however this can be offset with an equal increase to the mint (sell) fee.
In the above proposal, we decrease the target redeem fee by 2 percentage points and increase the mint fee by 2 percentage points.
By reducing the redeem fee we have greater exposure in aggregators, and by increasing the sell fee we capitalize on the relatively more inelastic demand of instant sell liquidity.
I think this is a good suggestion and would assign my existing vault towards it.
The overall percentages/fees generated are going to remain the same of the staked users, it increases our exposure on aggregators, and I think if someone is going to liquidate it’s not going to matter if you’re paying an 8% or 10% fee (plus most people don’t even notice they’re payin that fee or more on Opensea sales).
I agree that if there is a fee increase to be made, it would make sense to be on the mint (sell) side as this could be bypassed if the seller was willing to stake it before they sell to take advantage of the 0% mint fee. Being “above the fold” on aggregator floor price listings should be a key metric for vault benchmarking, lowering fees on the buy side helps this.
Example A: Karl wants to sell his punk, but isn’t in a rush. He zaps into single side staking, waits for the unlock (earning yield in the process), and then claims his 1 PUNK and sells on Sushi. The protocol has benefited from increased inventory. Karl has benefited from no fee.
Example B: Susan wants to sell her punk, she is in a rush to add ETH collateral to her massively underwater margin longs. Susan accepts she needs to pay the premium for immediate liquidity. The protocol has benefitted with fees being paid. Susan has benefited from instant liquidity.
If we’re all in ageement on the new fees (minimum quorum was reached as I typed this anyway) then we can move this to Snapshot for the Punk fees and another for the new default fee structure for all vaults to follow the same approach.
