Effective Monday Dec. 13 at 9:00 a.m. (UTC), the fee to withdraw bNEO from the NeoBurger smart contract will be adjusted to 0.001 GAS per NEO, a reduction of 90%. NeoBurger is designed to optimize a NEO holder’s voting rewards, and also provides a method of fractionalizing the non-divisible token.
Users can deposit NEO tokens to the NeoBurger smart contract address to receive an equivalent amount of bNEO tokens, which are divisible to 8 decimal places. The smart contract uses deposited NEO to vote for Neo Council candidates according to automated and optimized strategies that maximize GAS rewards. These rewards can then be claimed by bNEO owners. At the time of writing, the NeoBurger address is managing over 800,000 NEO and yielding an APR of 14.74%.
Users can claim their share of GAS generated by the contract by sending any amount of bNEO to the contract address. To redeem bNEO tokens back into the original NEO token, a user must send the corresponding GAS withdrawal fee to the contract address. This fee is currently 0.01 GAS per NEO, scheduled to be reduced by 90%.
Withdrawal fees are necessary to prevent gaming of the smart contract rewards. Every several hours, the contract calls a harvest operation to claim the GAS rewards for bNEO holders during that period. These rewards are allocated according to the amount of bNEO a user has in proportion to all bNEO. Without the fee, in theory a user could deposit a large amount of NEO to the contract address moments before the harvest, withdrawing their tokens moments afterwards. Although they participated for only a few short seconds, this would-be bad actor could claim a large percentage of the GAS generated by all bNEO over the harvest period.
To prevent this possibility, NeoBurger developed a mathematical model of the profitability of this approach. Harvested GAS rewards need to remain less than NEO deposited times a withdrawal fee factor in order to prevent gaming of the rewards. Thus, as the GAS rewards and amount of NEO under management vary, the withdrawal fee is adjusted accordingly.
Due to the significant increase in the number of NEO managed by the contract since its launch, the first adjustment is set to take place, decreasing the fee by 90%. Of the GAS fees paid to the contract, 99% are distributed to bNEO holders, with the remaining 1% sent to the NeoBurger treasury to sustain development of the project.
Written by Ryan Hasselbeck