Market-Based Economics
On Napier platform, anyone (curators) have the flexibility to define the economics around their PT and YT assets. This provides room for customization, allowing individuals and projects building with Napier to unlock flexible and expansive use cases.
Curator-Set Fee Model
The curator-set fee model is expected to establish a new standard for yield tokenization within DeFi.
Curators can freely choose from various fee types, set percentages, earn fee revenue, and assign attributes that best suit their PT and YT assets as follows:
Issuance fee is a fixed percentage fee applied to underlying assets when minting new PT and YT.
Redemption fee is a fixed percentage fee applied to underlying assets when converting or redeeming a PT and YT back into their underlying assets.
Performance fee (before marurity) is a dynamic percentage fee from all yield accrued (including points) by all YT in existence. For example, a 10% Performance fee (before marurity) on a 3% APY translates to approximately a 0.3% fee on the notional amount.
Performance fee (after marurity) is a dynamic percentage fee from all yield accrued (including points) by all yields from the YBTs of matured unredeemed PTs. For example, a 10% Performance fee (after marurity) on a 3% APY translates to approximately a 0.3% fee on the notional amount.
Fees related to PT and YT should be set by considering various complex factors, including the underlying yield-bearing assets, the asset characteristics of PT and YT, and the market environment, for example, in cases such as:
Fees should be set according to the volatility of the underlying yield-bearing assets.
Dynamic fees based on interest rate volatility ensure fair pricing.
PT/YT assets nearing maturity should have lower fees due to reduced interest rate fluctuations.
Fees can be adjusted based on maturity length; longer maturities justify higher fees due to higher interest rates.
Imposing penalties on PT/YT after maturity can encourage rollovers to the next period.
The flexibility of fee settings allows the supply and demand of the current market environment to be more accurately reflected according to the assets, leading to the creation of more efficient markets.
Curators earn fees from the PT and YT assets they curate
Napier provides an open design space for the individuals and projects built on top of it, and this applies to the economic structure as well. For example, this allows us to:
Earn revenue from on-chain risk curation businesses.
Promote decentralization of the front end.
Use advanced features and gamification to drive mass adoption of on-chain wealth management, justifying higher fees.
Execute growth strategies for the underlying yield-bearing assets.
Create scalable incentive structures. Providing incentives leads to increased earnings and balances the financials for each pool.
Set benchmark rates and create and distribute related oracles.
Leverage existing distribution channels for promotional sales.
There are even more possibilities for use-cases. Join our Discord and get in touch with us!
Fee Switch (Fee Distribution Ratio)
Fee Switch (Fee Distribution Ratio) determines how all fees generated on the Napier Protocol are distributed between users and curators. This ratio is set and adjusted through Napier DAO governance.
The Fee Distribution Ratio must be carefully calibrated, considering factors such as Napier’s growth, the number of curators, and the number of markets.
Until the Napier DAO is established, the default ratio during the bootstrap period is Curator: User = 100% : 0%. The Napier Point distribution ratio is set at Curator: User = 20% : 80%.
How to Collect Fees
If you are a curator and would like to learn more about how fees work, you can refer to the following article:
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