SingularityDAO DynaSets — Performance and Management Fees
The performance and management fees for the DAM and DAO members explained
Greetings Singularitarians,
Today brings to a close our series of DynaSet Deep Dives. It has been really exciting for us as a team, to finally reveal the details of what we have been building, and how everything has come together. Of course we saved the best until last! DynaSet Performance and Management Fees. The information shared today is how DynaSets are currently configured to function during the beta period. The fee structure implemented should be considered a work in progress and feedback will definitely be considered, for within our own team as well as the community. Regarding that feedback however, we do request that it be reserved until the beta test concludes. Basing feedback on unrealised and arbitrary/hypothetical numbers has far less value to the growth of the project than feedback based on actual figures that we will only know at the conclusion of this beta phase.
Management Fees
Management Fees are incredibly important for the functioning of the platform, below is a list of just a few examples of current and predicted future costs that are being accounted for.
- Transaction Fees — Ethereum GAS fees for every trade transaction
- SingularityNET Marketplace AI Calls — Future iterations of the platform will need to purchase AGIX to pay for AI functionality hosted on the SingularityNET Platform
- NuNet Processing Fees — Future iterations of the platform will need to purchase NTX to pay operating costs for running all services in a decentralised manner
- AWS Service Costs — Until NuNet is fully operational, AWS will be used to run the SingularityDAO DynaSet backend functions
- Infura and other oracle related costs — Reliable, fast and up to date data is required for the DAM to operate and for the user to track DynaSet performance
Management fees for dynBTC and dynETH will be 1% Annualised.
Management fees for dynSING will be 2% annualised due to this DynaSet having multiple tokens with higher volatility which will mean a potentially much higher transaction rate and therefore far greater gas costs.
All management fees will be paid in full to the DAM and be paid only in ETH.
These fees are payable regardless of performance as they are required for the continued functioning of the DynaSet.
Performance Fees
A Performance Fee of 10% for both dynBTC and dynETH while dynSING will have a performance fee of 20%. The fees will be split between the DAM and DAO. These fees will only be paid if the DynaSet performs above the pre-defined Hurdle Rate.
A ‘hurdle rate’ is set based on the performance of the underlying asset. To use dynBTC as an example, if Bitcoin had gone up 10% over the given time period but the DynaSet had increased 15% the difference, or Alpha above the Hurdle Rate, would be 5%. Of that 5% we take a 10% fee split between DAO and DAM. If there had been no Alpha generated over that same time frame, performance fee would be 0.
The Hurdle Rate will be the composition of three criteria:
- Price indexes
- dynBTC and dynETH will be the return of BTC or ETH over the same period
- dynSING is for now based on the market cap weighted average of the underlying assets in the dynaset
- If return < 0%, there will be no performance fees
Performance Fee Split
For this Beta test, fees will be split 75/25. The DAM will receive 75% and DAO members will receive 25%.
We are currently still working on the exact delivery method of fees to the DAO, legal compliance of course being of utmost importance. One example which is currently under consideration is to take the 25% DAO member portion and use the underlying assets to purchase SDAO which would then be airdropped to SDAO holders. There are a number of other mechanisms under consideration and as soon as we have finalized the exact mechanic we will share the details with you.
The fees allocated to the DAM will be used by SingularityDAO to improve the project in a number of ways. Again, to share just a few examples:
- Replenishment of SDAO supplies for staking rewards
- Strategic investments in new and upcoming projects
- Platform development costs
- Increased marketing budget
- Addition to the aforementioned Management Fees, if ETH Gas proves to be extortionate
- Incentives and Rewards to increase platform adoption and community growth
Closing Thoughts
The above details are applicable only to the ongoing beta test and will be reassessed at the end of the beta based on results as well as community feedback. I stress again, we will listen to your feedback regarding all of the above details but request that you reserve judgement until after we see how this current version plays out. We strongly believe that the above structure is weighted in such a way that everyone will benefit, but should that prove to be incorrect, will most certainly endeavour to adjust things in a way that works for all involved. At SingularityDAO, our goals are very much aligned with those of our DAO members and we strive to create a DeFi protocol that will change all of our lives for the better.
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