Thread by @FukubeiF

@Cephii1 @danku_r @lejimmy @tundra_v1 @SpecProtocol @terra_money

Outstanding performance by $SPEC recently, with good reasons

Decent TVL, Impressive buybacks and decent protocol fee distributed to SPEC stakers in UST, New vaults being constantly shipped: Not surprised that $SPEC is now receiving limelights

In contrast, digging more into $SPEC's success and fundementals, I feel there's a party that is soley paying the price for $SPEC's success without benefiting from it.

Let's start from displayed APY on @SpecProtocol's frontend. For bLUNA-LUNA @astroport_fi LP autocompounder, the most popular vault amongst @SpecProtocol, the displayed APY is 14.57% at the time of writing.

There's something a little off from the start: Trade APR 0.6%

To start, trade yields for @astroport_fi's LP tokens are APY by nature (The rewards are automatically collected in the Liquidity Pool that you partially own, which is represented by the LP tokens that you hold)

So auto-compounding on trade yield, does not make sense to start

Let's double check whether @SpecProtocol included auto-compounding effect of trade yield in their displayed APY, which would have falsely over-estimated their APY.

Daily autocompounding 10.78%+0.6% results 12.05%, matching @SpecProtocol's displayed auto-compound APY

10.78% APR to APY is 11.38% and since trade yield is already APY, the toal APY is actually 11.98%

Pretty small difference, but the situation gets worse from here

It seems as if @SpecProtocol's totally ignores any protocol fees they charge whilst calculating expected APY. There is no sign of fee deduction on their APY calculations.

So how much does @SpecProtocol charges their vault users?

It's quite misleadlingly phrased in their docs; they claim to charge 0.1% deposit fee, 8% 'Performance fees.

docs.spec.finance/protocol/fees

To clarify, they charge 8% on all collected rewards. So if your LP tokens yields 10 Luna, (10% APR, deposited 100 Luna), they will charge 0.8 Luna as fee.

I wouldnt personally consider this fee format as 'perfomance fee' tbh

What does this mean for overall APY?

Going back to our example, bLuna-Luna vault, has 10.78% APR.

@SpecProtocol's fee applied: 9.9176% APR
= 10.42% APY

Adding trading fee 0.6% & SPEC incentive 0.17%, the actual final APY is 11.19%

Notice the original yield (not-autocompounding) was 10.78% APR + 0.6% APY, which is min APR 11.38%

So in other words; even with $SPEC incentives, you are better off not auto-compounding at all

Ofc, there's a convinence factor that is not being factored in, but I think the majority of the @SpecProtocol users believes that they are using more capital efficient solution by using @SpecProtocol 's vaults.

Such phenomenom of @SpecProtocol's actual APY being lowered than original APR is true for any vaults yielding lower or similar to bLuna-Luna vault atm:

- nLuna, nETH vaults based on @NexusProtocol
- mIAU-UST, mETH-UST vaults based on @mirror_protocol
- stLuna-Luna vault based on @LidoFinance

For nLuna & nETH vaults, users will be far better off using @NexusProtocol's native autocompounder, which does not charge any fee atm

I feel this is wrong in quite few levels because:

- I feel that many believe @SpecProtocol is charging small fee, which is absolutely not true
- Spec's Displayed APY is a total lie; it's not a miscalculation, it's literally a false information

to be continued on next thread

- Over-estimated APY attracted more users to @SpecProtocol (5x TVL of @ApolloDAO)
- more sell pressure on the tokens that the protocol @SpecProtocol is based on (@astroport_fi, @mirror_protocol, @NexusProtocol, @LidoFinance
- without providing net benefit to the ecosystem

As @SpecProtocol has been a strong team, delivering the products fast for Terra ecosystem, I hope and want to believe this was not ill-intended action by @SpecProtocol.

However, I believe the current status is not acceptable; so definitely need to be discussed

TLDR; If you are LP provider, reconsider using @SpecProtocol.

@SpecProtocol really should change their displayed APY so that it reflects fee

@wolf_of_defi @CryptoHarry_ @Shigeo808 @TheRyanLion @TheMoonMidas @Speicherx @SumoLuna @WestieCapital