Fees

This section explains how the protection fees are charged to the users.

Opening fee

The opening fee is a one-time payment done at the moment of purchasing the protection plan.

As this fee is calculated as a percentage of the total credit line extended to the user (promised_amount), it will be different for each user depending on the amount of this credit facility.

As of V1 of the product, the opening fee is charged in stablecoin (USDC) and the user has to transfer the corresponding fee amount to the protocol's wallet in order to activate the protection.

The opening fee is one of the main revenue streams for the protocol and for the liquidity providers.

According to experiments run by the simulations engine, the opening fee would be around 0.5% of the credit line amount.

Claim fee

The claim fee is a percentage of the disbursed amount to serve claims during the duration of the policy.

As this fee is calculated over a variable amount, the final amount depends on how many claims have been triggered during the duration of the policy.

The claim fee is charged to users, after a claim event has occurred and collateral has been deposited into their position, by directly increasing the borrowing position on the lending platform and redirecting those funds to the protocol.

This is done for accounting reasons in order to keep track of the liquidity used for servicing the claim and differentiate the fee amount for transparency with the LPs.

According to experiments run by the simulations engine, the claim fee would be around 1.5% of the credit line amount.

Revenue Sharing

Protocol revenue is shared between the protocol itself, the liquidity providers and the CT token holders.

The distribution of the revenue between each party is yet TBD and in the future will be set by governance.

The sharing of this revenue is handled by a component called the Revenue Splitter.

This component is a smart contract action and is to be invoked at the time of creation of a protection plan to set the allocation of revenue that is originated from loan protections.