Understanding how fees operate in the crypto landscape is crucial to fully participate in Decentralized Finance (DeFi), and transparency allows for quick user comprehension.
Behind the Fee Scene
In a move that will satisfy investor curiosity, Beefy Finance has given a transparent breakdown of its fees. The Binance Smart Chain(BSC))-based yield aggregator decided to take a transparent route breaking down its fees in its fifth Bulletin. According to the yield aggregator, they understand that fees take away from the proceeds users obtain in their yields and that is why they charge the least amount of fees possible. Beefy Finance is comparing the fee structure of yield optimizers to that of traditional finance. Aside from Beefy Finance, another BSC-based yield aggregator in Autofarm also made a compilation of its fees and returns. Let’s dive into how these fees are different from standard financial institutional fees, and potential benefits derived from these differences.
How Do Yield Optimizer Fees Differ From Traditional Finance?
For every transaction carried out, whether in the traditional finance system or the cryptoverse, a fee is incurred. In the traditional finance sphere, transaction costs are expenses incurred when buying or selling a good or service. They represent the labor required to bring the goods or service to the user and include brokers’ commissions and spreads. These transaction costs result in the creation of industries that focus on nothing more but facilitating exchanges, thereby tripling costs for the added middlemen. However, with yield optimizers like Beefy Finance or Autofarm, transaction fees collected are utilized for various purposes, including community engagement, salary payment for the team, hiring for external audits, community engagement and marketing.
Yield optimizers are decentralized protocols or smart contracts programmed to automatically seek the highest available yields across multiple supported platforms, and then farm, harvest, reinvest the harvest and automatically compound the earnings. When a user provides liquidity into a pool, they earn a share of the trading fees and liquidity provider fees. But what differentiates how Beefy or Autofarm assign those fees and present them from other optimizers and traditional finance?
Beefy Finance Fee Data
The answer is transparency. For instance, Beefy charges a 0.1% withdrawal fee on all vaults with the charges placed on the total amount you withdraw, but all other fees are included in their APY calculation. There is also a 3.0% performance fee on all vaults which gets distributed among BIFI holders in the BIFI Maxi pool. Aside from these fees, there are also the blockchain fees that go to blockchain operators. 0.5% of the fees are allocated to the Beefy Finance Treasury, 0.5% is awarded to the Vault Strategist and another 0.5% to the one calling the harvest function. 0.1% is assigned on deposit or withdrawal fees to protect each vault from bad actors. By laying out how the fees are dispersed, the company makes investors feel more secure with paying the fees for the service.
In comparison with traditional finance vehicles, users can get yields at a 14.46% APY with fees factored in with Beefy finance. In other words, $1M invested with Beefy Finance at 14.46% APY yields $57, 492, 639 Million. Meanwhile $1M invested with traditional finance for 30 years at 8% with a 3% management fee fields $4.32 Million.
Autofarm Fee Data
Now let’s take a look at Autofarm. Their fee break down according to the team includes the following:
This fee covers the gas cost for the optimized auto-compounding. On BSC, the controller fees cost 0.2% while it costs 0.008% on HECO.
Platform Fee (Treasury)
This fee covers all the varied purposes of the aggregator including running costs. On BSC, platform fees cover just the treasury and cost 0.5% on the other hand, HECO platform fees cover treasury + revenue sharing which cost 0.3% + 1.5% = 1.8%
Vault Fee ($AUTO Buyback & burn)
A percentage of the profit that is taken to buy back $AUTO tokens to be burnt. The tokens burnt will reduce the max supply of $AUTO forever and all $AUTO holders & liquidity providers will benefit. According to Beefy Finance, “The buyback burn rate is as specified in the dropdown of each vault. Currently, all regular vaults have a vault fee of 1.5%, and non-$AUTO earning vaults have a vault fee of 3.0%.”
Vault Fee (Reward $AUTO Stakers)
This Vault fee is only applicable to HECO as the BSC-HECO bridge has not been built and will likely be up in a Month. Vaults from the HECO cross-chain will be used to reward $AUTO stakers who stake their $AUTO tokens on single token vaults on the BSC network and it costs 1.5%.
Deposit fees on HECO and BSC cost the same – a one-off fee less than <0.1% on initial capital.
Withdrawal fees on both HECO and BSC cost 0%.
Source : bsc.news
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