Performance Fee 50% - Competitiveness of the protocoll

Disclaimer
I read the nexus docs quickly, but I didn’t see any explanation for the high fees the protocol makes. However, from what I understand, the fees are transferred to the Community Pool.
From here, I wrote this post trying to open a debate on the usefulness and purpose of the Community Pool and to make the platform more competitive in terms of yield and how this could increase and therefore make it more competitive.
I don’t consider myself an expert and these are just my personal reflections. I am open to learning more about how the protocol works, so I invite you to reply to this post (to correct my mistakes or simply express your opinion).
(the post is translated with google translate)

Problem


On May 1, 2022, the manual yield of the borrow on anchor at 61% LTV is around 14% and therefore considering the performance fee of 50% it is around 7%.
Currently there are many other alternatives to “Luna” annuities, sometimes very interesting and not too degen. However, nexus is unique in that it is able to grow the “Earth” ecosystem with automatic borrow at anchor. But we all know that the Yield Reserve is drying up fast given the deposit and borrow gap. Nexus, with his work, is able to make something simple and safe that becomes complicated to manage manually. This has positive effects on both Anchor and Nexus, Nexus attracts LUNA / ETH / AVAX on its protocol which in turn then ends up on Anchor, generating wealth.

What will happen soon? Anchor’s yield will decline and so will Nexus’s yield. This backfires as people will inevitably move their assets somewhere else, guaranteeing returns greater than 7%. In this way, a vicious circle is created that will reduce more and more assets from Nexus, therefore Anchor, the borrow will be reduced again, the Yield Reserve is reduced again, less yield, and so on.

Solutions
So we must necessarily increase the performance offered to users to keep the ecosystem alive in general, therefore thinking about general well-being.
The solutions I thought of are these:

  1. Reduce the protocol fees to 25%
    Having the fees at 25% is equivalent to having a return on the moon of about 10%. However, this will bring fewer assets to the community pool, even if substantially I believe that by reducing the cost of the service, it will bring new people who will then generate fees. This will increase the borrowing on Anchor, thus helping to keep the ecosystem alive.

  2. Increase the Buy pressure on the PSI token
    I don’t know how it could be done at the moment, but a way has to be found, as this would allow us to obtain even higher returns and therefore be more competitive.
    Can the Community Pool be used in any way?

I hope I am made to understand, I am waiting for your thoughts / questions / solutions.

On May 1, 2022, the manual yield of the borrow on anchor at 61% LTV is around 14% and therefore considering the performance fee of 50% it is around 7%

50% performance fee is applied on the difference between the nexus yield and the benchmark yield. Benchmark yield is the expected yield when the same strategy is done by manually; and assuming the market data, manual anchor borrow rate is near 58% of the max LTV; thus 46.4%; Nexus vault targets to be 80% of the max LTV. The fee is only applied to the yield that outperformed the benchmark.

ALso; if you borrow on anchor at 61% LTV:you expected yield is about 5.7%ish APR not including gas + trx fees; because Anchor borrow yield is -4.95% atm (you pay interest)

I defo agree in that we need another engine for Nexus to power the fee and value accumulation; hence we are building new products; like nexPrism, just about to launch. Please refer to our 2022 plans for more details about other products.

Anchor vaults is one of many products that Nexus will be providing, Nexus contributors are planning to deliver new products + new tokenomics model Psi to better capture the value of the new products once they are delivered; which we hope will positively impact Psi prices.

We would always love any idea from the community on potential products or strategies that Nexus could be built towards, in addition to the products that the contributors are working on.

Thank you so much. I’ve checked my calc and i saw few errors, I understand now.