Review of Beefy's Quarterly Report
Review of Beefy's Quarterly Report
The Q1 2023 Report from Beefy Finance is a beautiful piece of transparency.
Beefy Finance is a defi yield optimizer. If you are providing liquidity to a pool and earning rewards, you could stake those pool tokens into a beefy vault and have those rewards harvested and auto-compounded for you. In exchange for that service, the Beefy DAO takes a cut of the earnings.
I spent some time studying their codebase in late 2021 and was able to get answers to any questions I had from a core member on their Discord channel within the same day. They actively encourage community contributions and were quick to respond to code proposals that I submitted, like this one regarding how APY’s were calculated for lending protocol vaults. Their treasury page, here, is another example of how they keep their community informed of their operations. They are well respected throughout the defi community for technical expertise and transparency.
On April 18th, Beefy continued their transparency push and published their Q1 2023 report. The report is available here: https://beefy.com/articles/quarterly-report-q1-2023/ and highlights some major accomplishments of the team and financial updates. Note that none of these financials are audited, this is a report created by community members for community members. I encourage you to check out the sections on bribes and the optimism grant, which I left out of my notes because I think they require more context to be helpful.
Vault Income
”Most vaults have a performance fee structure, taking a percentage cut of all harvest rewards. This fee on profits is split up and distributed back to BIFI stakers, allocated to Beefy's treasury, sent to the strategist that developed the vault and sent to the one calling the vault's harvest function.” - Beefy Docs
For Q1 2023, Beefy had about $484,343 in treasury inflows from vault fees. Vault income estimates almost doubled month-over-month with $87k in January, $134k in February, and $263k in March.
Validator Income
Beefy runs validators for Fantom, Fuse, and Ethereum. Estimated total income from validator operations was $40,224, with Fantom contributing the lion’s share at $38,684. Fuse contributed $1540 and Ethereum contributed $551. Marking these earning is difficult and each validator operates differently, it is nice to see that they went through the effort. You can also check out the return on invested capital in their report, which may be interesting if you are looking at operating validators.
Market Making Income
Beefy works with a market making firm, System 9, to maintain liquidity for their BIFI token. They report income on their share of market making proceeds at $8,831.24, all of which were generated in January.
Contributor Funding
Contributor funding appears to be the largest expense, around $102k per month. Payments are made to moderators, core contributors, and other contributors and can be paid as recurring payments or ad hoc. $306,800 is the total cost for Q1 contributor funding.
Operational Costs
These costs have gone up over 3x since last quarter, from $30k to $103,396. This was driven by a rise across the board in what they pay to have their vaults harvested and compounded ($22k in Q4 ‘22 to $32k in Q1 ‘23), a jump in transaction gas costs for operations and development ($1,235 in Q4 ‘22 to $29,886 in Q1 ‘23), and an almost $25k increase in ‘other’. They further break down these costs by chain in their report.
Event Costs
The report includes $45,881 in event expenses, of which about $32k is for events that happen in Q2 (Consensus) and Q3 (ETHCC). I assume these are listed because the tickets and sponsorships were paid for in Q1. It is stated that “no expenses have yet been paid out” for the events, so I assume the per diems and travel costs will be in the following reports.
Disclaimer
We, Digital Opportunities Group, LLC, are not providing investment or other advice. Nothing that we post on Substack should be construed as personalized investment advice or a recommendation that you buy, sell, or hold any security or other investment or that you pursue any investment style or strategy.
Case studies may be included for informational purposes only and are provided as a general overview of our general investment process.
We have compiled our research in good faith and use reasonable efforts to include accurate and up-to-date information. In no event should we be responsible or liable for the correctness of any such research or for any damage or lost opportunities resulting from use of our data.
We are not responsible for the content of any third-party websites and we do not endorse the products, services, or investment recommendations described or offered in third-party social media posts and websites.
Nothing on Substack should be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product.
Disclaimer
We, Digital Opportunities Group, LLC, are not providing investment or other advice. Nothing that we post on Substack should be construed as personalized investment advice or a recommendation that you buy, sell, or hold any security or other investment or that you pursue any investment style or strategy.
Case studies may be included for informational purposes only and are provided as a general overview of our general investment process. We have compiled our research in good faith and use reasonable efforts to include accurate and up-to-date information. In no event should we be responsible or liable for the correctness of any such research or for any damage or lost opportunities resulting from use of our data.
We are not responsible for the content of any third-party websites and we do not endorse the products, services, or investment recommendations described or offered in third-party social media posts and websites.
Nothing we post on Substack should be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product.