Fees and Revenue

The protocol's revenue sources include Trading fees(Mint/Redeem xPOSITION fee, Rebalance fee, Liquidation fee, Redeem fee), Funding fees (charged during fxUSD depeg), and LSD yields from Basetokens.

Trading Fees

Mint/Redeem xPOSITION fees

• Mint/Redeem xPOSITION Fee is set as 0.1% in default

• Fee on Minting of xPOSITION is floating by multiplying the default number 0.1% with a Ratio, for each Step = 5%(Step is a Parameter which can be changed in future governance voting) increase in AAVE V3 USDC Interest Rate, Ratio increased by 1:

Step	AAVE V3 USDC Interest Interval	Ratio
5%	0% - 10%	1.00
	10% - 15%	2.00
	15% - 20%	3.00
	20% - 25%	4.00
	25% - 30%	5.00
	...	...

• Rebalance fee = Rebalance Bounty*10%, Rebalance Bounty=Rebalance amount*Rebalance penalty, Rebalance penalty is set to default as 2.5%

• Liquidation fee = Liquidation Bounty*10%, Liquidation Bounty=Liquidation amount*Liquidation penalty, Liquidation penalty TBD

• Redeem fee = Redeem amount*0.5%

Funding Fees

• When fxUSD is pegged, no funding fee is charged

• During fxUSD depegs, a funding fee is charged on each transaction. The peg status is determined by checking whether the EMA price of fxUSD/USDC in the secondary market deviates from the threshold, which is set to 0.5% by default.

• The funding rate is calculated as: interest_funding = interest_usdc_aave × Ratio_funding, where Ratio_funding is an exchangeable parameter (default value is 1) and interest_usdc_aave is the AAVE rate recorded at the last transaction.

  The funding fee formula is: Funding fee = n × interest_funding × Period, where n is the amount of LSD held in the user's position, Period = current time - last time, with last time being the previous charge time and current time being the current charge time.

Revenue Distribution

• Trading Fees: By default, 70% is allocated to the fxUSD Stability Pool (V2).

• Funding Fees: By default, 100% is allocated to the fxUSD Stability Pool (V2).

• LSD Yields: By default, 100% is allocated to the fxUSD Stability Pool (V2).

The above allocations can be adjusted through governance.