CIP-04: Proposal to Raise CVX Harvest Fee from 20% to 30%

CLever Improvement Proposals
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Summary

Raise the fee for CVX harvest yields from 20% to 30%. The additional 10% above the original 20% fee will be sent directly to the furnace, increasing its burn rate. This will in turn increase the APR of furnace rebonding and should therefore incentivize users to pull clevCVX from the Curve LP to the furnace, balancing the LP for better CVX liquidity and a lower discount.

Motivation

As the Aladdin core team is continuously seeking ways to optimize the usage of all of our products, this proposal follows up on with the directives instituted in CIP-03: “Boosting CLever CVX Growth with Emission Reduction and Revenue Adjustment”. That proposal formulated a strategy to reduce CLEV emissions and utilize protocol earned revenue to support and incentivize liquidity within the clevCVX/CVX LP. Both of those objectives have been met and are working quite well towards stabilizing CLEV emissions and incentivizing the LP with sustainable CVX rewards.

Building on CIP-03, the team proposes adjusting the composition of the Curve LP. The Curve LP composition is heavily weighted toward clevCVX, which limits the size of swaps possible before slippage becomes a problem. The team’s proposed change leaves the clevCVX/CVX incentives unchanged while using the increased furnace burn rate to pull more clevCVX to the furnace, thus nudging the LP composition closer to par.

To address this item, the core team submits this proposal to the community to raise the vlCVX yield harvest fees from 20% to 30% and direct 100% of the fee increase directly to the furnace, thereby increasing the burn rate and incentivizing clevCVX to move from the LP to the furnace.

Proposal

Raising the CVX yield harvest fee from 20% to 30% will allow for several things to happen in the CLever system:

  1. Because of the larger fee, a smaller amount of clevCVX will be minted against the harvested CVX and sent back to the vlCVX holders. This reduces the amount of clevCVX introduced back into the CLever system.
  2. The 10% additional fee above the current 20% fee will send all of the additional harvested CVX directly to the furnace.
  3. The additional 10% CVX sent to the furnace, relative to the smaller amount of clevCVX introduced into the CLever system, will increase the effective rebond APR.
  4. The increased rebond APR is a result of the increased burn rate, thus decreasing the amount of time it takes for an amount clevCVX to become an equivalent amount of CVX.
  5. Because of the increased benefits for clevCVX depositors in the furnace, clevCVX will be incentivized to move from the LP and into the furnace. This will encourage a more balanced LP composition and decrease the discount between clevCVX and CVX, thus making for better swapping conditions (less slippage) between clevCVX and CVX.

For clarification, rebonding is “when you claim your available CVX from the furnace, then swap them for even more clevCVX (the discount shows how much extra you will get on Curve) and then deposit those clevTokens back in the furnace, so that you receive a bigger share of the ongoing harvest.” - from the CLever website FAQ

Aside: Regarding Clever’s Fee Structure

While this may sound like a large increase in fees for CLever, because the fees are only taken on harvest yields, the effective “borrowing” APR is competitive to other borrowing rates in other major defi money markets.

At a 20% harvest fee, effective APR = 20% fee on 24% vlCVX yield is 4.8%. With 50% LTV, that is equivalent to 9.6% borrowing APR.

At a 30% harvest fee, effective APR = 30% fee on 24% vlCVX yield is 7.2%. With 50% LTV, that is equivalent to 14.4% borrowing APR.

As CLever is still a relatively new protocol and the demand for the product is very high, it is important that the services offered are priced correctly and provide a beneficial use case for both CVX depositors to the protocol and clevCVX deposits directly to the furnace. This proposal aims to take another iterative step towards finding the “sweet spot” for both of those use cases.

Please note that this fee raise proposal is only for the CVX yields. FraxBP yield harvest fees will remain unchanged.

Polling Period

The polling process begins now and will end at 18:00 UTC on 22/01/2024. If Quorum is reached, a Snapshot Vote will be put up at 18:00 UTC on 23/01/2024.

Raise CVX Harvest Fee from 20% to 30%
  • For - The CVX harvest fee is raised from 20% to 30%
  • Against - Nothing
0 voters
2 Likes
2

Will it be a permanent change or it will be changed back once furnace rebonding APR reach to certain APR

3

It will be permanent unless another adjustment is deemed necessary.

4

Two quick questions/confirmations since I’m a skim first, read later kind of guy:

  1. None of the additional fee will go to veCLEV holders?

  2. How does this compare to pxCVX and uCVX fees? It’s been a while since I’ve looked.

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Hey llanero! Good questions…here’s your answers:

  1. None of the additional fee will go to veCLEV holders or the treasury (nor will any of the current fee structure for veCLEV or treasury change). It is all being sent as CVX to the furnace.

  2. Comparing CLever to pxCVX or uCVX is a bit of comparing apples to oranges. They are, of course, different products with different use cases. pxCVX or uCVX) is a great product for autocompounding your liquid vlCVX position, whereas clevCVX is a great way to get liquidation-free leverage on vlCVX yields. That said, pxCVX/uCVX does have an assortment of fees that users must realize as well.

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Support this

https://twitter.com/fourmoonsllc/status/1747704815743045834

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