PROP #5: Raise zSOL Stability Fee to 5.5% + Lower Deposit Fee to 0.1%

[aperire]

PROP #5: Raise zSOL Stability Fee to 5.5% + Lower Deposit Fee to 0.1%

Date: Jul.8th 2023

Author: Joohwan Lee

Status: Proposed

Summary

After proposal pass (immediate action)
zSOL stability fee to 5.5% APR
Deposit fee to 0.1% (initially 0.3%)

Motivation

LST APY on Solana has been rising high lately, where current rate is at
mSOL: 6.8% APY
bSOL: 7.41% APY
jitoSOL: 7.91% APY

This allows users to leverage staking yields up to (7.91 - 4) * 20 = 78.2% APY with jitoSOL.

Raw yield seems high, but without sufficient liquidity, it is meaning less.

By increasing the stability fee to 5.5% APR, SOL-zSOL LPs will earn 37.5% more yields, stabilizing the demand of leveraging and LPing.

Max leveraged staking positions would still earn (7.91 - 5.5) * 20 = 58.2% APY (jitoSOL), which is extremely profitable.

The stability fee rate would be adjusted based on the lowest yield LST (mSOL at the moment) to prevent outflow of existing positions.

Along with this, as rate hikes, deposit fee should be lowered to still encourage leveraged stakers.|

Actions

Raise stability fee to 5.5% APR
Lower deposit fee to 0.1%
Monitor mSOL APY and readjust stability fee based on it

Updated Actions: (Actions above are no longer valid)

Raise stability fee to 5.5% APR
Lower deposit fee to 0.1% => Keep deposit fee at 0.3%
Monitor mSOL APY and readjust stability fee based on it