Protocol Fees
To build the right incentives, certain fees are in place. Every user should be aware of the fees they might need to pay, as these may be deducted at certain points.
Fees
Pool fee
Fixed fee paid to the pool when interacting with it
1.5 ADA (Paid to the pool with supply token)
Protocol fee
% of interest paid to the DAO when repaying the loan
1% When UR is <15% 1.5% When UR is between 15% and 45% 2% When UR is >45%
Liquidation fee
Fee paid by borrower at a time of liquidation
2.5% of collateral
Swap fee
Fee accounted when converting values using price feed
0.3% of value
Pool fee
To optimize protocol usage, a pool fee can be added. The fee is a fixed value (e.g., 1.5 ADA) denominated in pool tokens and must be paid directly to the pool. This fee is incurred for every type of pool interaction:
Deposit
Withdraw
Borrow
Repay
Liquidate
Protocol fee
A protocol fee is collected in a predefined wallet for each pool. The fee is paid as a percentage of the total interest. This percentage can vary based on the utilization rate; a higher utilization rate could result in a different percentage fee. The UI provider decides which pools to accept.
Example
Utilization Rate (UR): 20%
Protocol Fee if UR is between 15% and 45%: 5%
Loan Interest: 17.5 ADA
Cardano's native minimum ADA requirement to send is approximately 1 ADA if the fee is in ADA, or approximately 1.2 ADA plus the fee if the asset is a native asset.
Liquidation fee
To incentivize liquidators, a liquidation fee is paid when a loan is liquidated. The fee is a percentage of the collateral value
Example:
Loan: 100 ADA
Collateral: 120 ADA
Interest: 2 ADA
Liquidation Fee: 2.5%
Upon liquidation, the liquidator will receive: Liquidation fee = 120 * 2.5% = 3 ADA
After liquidation, the borrower would receive: 120 ADA - 100 - 2 - 3 = 15 ADA
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