This proposal seeks to engage the CRV community in a constructive discussion around the admin fee. My belief is that the admin fee can be raised from the 50% it is today to 75% or possibly even 100% and be a net benefit to the protocol.
This proposal is predicated on the fact that the majority of returns for Curve LPs comes from the Curve gauge, not the swap fees themselves. Looking across the pools page, for all pools that do not involve a lending component (i.e. excluding the compound/aave/yearn/ib pools) the ‘Base APY’ (APY due to swaps) is multiples times lower than the ‘Rewards APY’. Therefore, increasing the admin fee should have a negligible impact on the total APY for LPs. On the contrary, I believe that this change will actually increase APYs for LPs instead of decreasing them, more on that below.
The proposal really affects two parties in the Curve ecosystem: LPs and veCRV holders (traders are unaffected). My belief is that increasing the admin fee can be a net benefit to both of these parties.
Benefits for veCRV holders: Benefits here are obvious, the amount of weekly 3CRV fees that veCRV holders would be getting would increase. All else equal, this fee increase should increase the demand for veCRV. An increase in demand for veCRV would directly increase the price of CRV since CRV is needed to mint veCRV.
Benefits for LPs: As a consequence of the increased CRV price (due to increased returns for veCRV holders), APYs for pools that receive rewards from the CRV gauge should go up as well.
No technical details really, this is simply a proposal to change the Admin Fee
- Increases returns for veCRV holders.
- Increases price of CRV, which increases APY’s for LPs in pools receiving emissions from the CRV gauge.
- Increases demand for veCRV. If Rewards APY is the sole source of APY on pools, having veCRV will be even more necessary to participate in the gauge weight voting process.
- Shifts the balance of power within the Curve ecosystem even more towards veCRV holders. If admin fees were raised to 100%, pools would be fully at the mercy of veCRV gauge weight voting. If veCRV holders were to censor a pool via not voting for any gauge emissions on that pool, LPs would earn nothing. I believe there are many reasons why this is unrealistic Ultimately veCRV holders will vote in the best interest of the protocol, and projects can always fight back via locking more veCRV themselves and voting for their own pool.
- May complicate optics for Curve. Newer LPs may not understand why the protocol is keeping 75% or 100% of their swap fees. Although, I would argue that this optics issue may already exist with a 50% Admin Fee.