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Protocol Fees

To stay self-sustainable, the protocol takes fees for different operations.
The fees explained below can also be improed or increased. For example, introducing fees in the other parts of the user lifecycle: on opening, closing, or some other action. Any of that is conceptually possible if decided by the DAO and implemented.

Liquidation Fee

If a Credit Account is liquidated, some percentage goes to a third-party liquidator who liquidated the account - and some percentage goes to Gearbox Protocol.
  • Current liquidation fee going to the liquidator: 4%
  • Current liquidation fee going to the protocol: 1.5%

APY Spread Fee: 50%

The protocol takes spread as a fee between the APY which lenders recieve and the fee & farmers pay for borrowing their assets. The exact value of this fee is calculated as following:
  • Each pool has it’s interest rate curve. This interest rate curve represents borrow APY that lenders receive as a function of pool’s utilization r(u). See details and formulas at dev docs.
  • Borrowers pay borrow APY to liquidity providers and pay spread fee to DAO spreadFee. That means effective borrow rate for borrowers is calculated as r(u)*(1+spreadFee). DAO receives r(u)*spreadFee.
All protocol fees go to governance and nothing is assumed for the core contributors or the foundation. The protocol is fully operated by a DAO community.