DAO & Curators' business model

Interest Fee (Revenue from Borrowing)

The Interest Fee is the primary revenue source for the protocol and curators. It is a percentage markup applied to the borrowing interest paid by users.

How It Works

Unlike some protocols where the protocol fee is subtracted from the yield paid to liquidity providers (a “rake”), Gearbox uses an additive model. The fee is added on top of the base interest rate.

• Base & Collateral-specific Rate The rate determined by the Interest Rate Model (IRM) plus any collateral-specific adjustments. This portion is paid entirely to Liquidity Providers.

• Interest Fee A percentage markup applied to the Base Rate. This portion is paid to the Market Curator and the Gearbox DAO.

Borrower Rate Formula

$$Rate_{Borrower} = (Rate_{Base} + Rate_{Collateral-specific}) \times (1 + Fee_{Interest})$$

Example Calculation

If market conditions dictate a base rate of 5%, and the Curator has configured an Interest Fee of 20%:

1. Liquidity Providers earn: 5.00%

2. Protocol markup: 5.00% x 20% = 1.00%

3. Borrower pays: 6.00%

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Revenue Split

By default, all collected Interest Fees are split:

• 50% → Market Curator

• 50% → Gearbox DAO

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Liquidation Economics (Revenue from Risk)

When a Credit Account becomes insolvent, it is liquidated. During liquidation, penalties are applied to the borrower for two purposes:

• Incentivizing liquidators

• Generating protocol revenue

Components

Component	Recipient	Purpose
Liquidation Premium	Liquidator	Incentive (“bounty”) for executing the liquidation
Liquidation Fee	DAO & Curator	Protocol revenue from the liquidation