Platform Fees
The two main categories of fees on the platform are swap fees and management fees. Below, you find further details regarding these fees.
Management Fee
We charge a competitive 1.5% annual management fee on assets under management, similar to traditional ETF providers.
As explained in the "How is Inflation Calculated" section below, the index token's inflation is the variable that generates the management fee. Over time, the selling of the underlying assets following burning by the team will gradually decrease the pool of underlying assets. Users aren't required to take any action to cover this management fee, and the value of the index token precisely mirrors market dynamics, open for arbitration by anyone, anytime.
Swap Fee
Bridge Fee: We apply a 1% fee on top of the cross-chain dex transactions using the LiFi widget.
Fiat On/Off Ramp Fee: We apply a 1% fee to fiat on/off ramp transactions, available through our card payments integration.
How is Inflation Calculated?
Fees are paid in the token being minted, with new units of this token sent to the FeeReceiver.
Inflation occurs when index tokens are minted, burned, or explicitly called by the owner of the smart contracts. In all cases, the FeeReceiver (smart contract) does not decide how many tokens are minted. Rather, the smart contract calculates the amount to be minted based on the time since the last mint. The quantity of tokens sent to the FeeReceiver is determined by compounding a daily inflation rate a number of times equivalent to the number of days that have passed since the last inflation event.
The inflation is calculated daily using the following formula:
𝑖 = Fractional management fee (1.5% = 0.015) r = Index token inflation rate per second "feeRatePerDayScaled" indicates the daily inflation rate, while "_mintToFeeReceiver" determines the quantity of the index token allocated to the protocol. Consequently, the protocol can burn the token to reclaim the underlying assets.
The above image is taken directly from our smart contract code:
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