Fee Structure
Understanding FIVA's Fee Mechanism
FIVA implements a carefully designed fee structure that aligns incentives among all ecosystem participants: Yield Token (YT) holders, Principal Token (PT) holders, liquidity providers, and the protocol itself. This fee system serves multiple purposes: generating sustainable revenue for protocol development, incentivizing liquidity provision, and ensuring fair value distribution.
The fee structure is designed to be transparent, predictable, and aligned with the value created within the ecosystem. By understanding how fees work in FIVA, users can make more informed decisions about their participation strategy.
Fee Categories and Distribution
FIVA's fee structure consists of two primary components:
1. Yield Performance Fee (5%)
What It Is: The yield performance fee represents a 5% share of all yield generated by the underlying assets that is captured by the protocol. This fee applies specifically to the yield component (YT) rather than the principal component (PT).
How It Works: When yield is generated by the underlying assets and distributed to YT holders, 5% of this yield is automatically directed to the protocol treasury. For example, if an underlying asset generates 10% APY, YT holders effectively receive 9.5% (after the 5% fee on yield is applied).
Why This Approach: This yield-based fee structure ensures that:
The protocol generates revenue only when actual value (yield) is created
The fee scales proportionally with the success of the platform
Principal Token holders are not affected by the fee, preserving their guaranteed return at maturity
The fee burden is shared across all yield beneficiaries proportionally to their returns
Important Considerations:
This fee applies only to newly generated yield, not to the principal amount
The fee is automatically calculated and deducted at the protocol level
The fee percentage (5%) is designed to balance revenue generation with competitive user returns
PT holders are completely unaffected by this fee as it applies only to the yield component
2. Trading Fees (0.2% Total)
What It Is: A 0.2% fee is applied to all trades executed through FIVA's specialized Automated Market Maker (AMM) pools. This fee is split between liquidity providers and the protocol.
How It's Distributed:
0.1% goes to liquidity providers (LPs) as a reward for supplying liquidity
0.1% goes to the protocol treasury to support ongoing development and operations
How It Works: When a user swaps tokens through any FIVA pool (such as exchanging PT for the underlying asset, or YT for another token), 0.2% of the trade value is collected as a fee. For example, on a 1,000 TON trade, a total fee of 2 TON would be collected, with 1 TON distributed to liquidity providers and 1 TON to the protocol.
Why This Approach: This dual-destination fee structure serves multiple purposes:
Incentivizes liquidity providers to supply capital to the pools
Generates consistent revenue for the protocol tied to usage and activity
Creates a fair balance between rewarding liquidity (essential for the ecosystem) and supporting protocol development
Establishes a sustainable economic model that can operate independently of token emissions
How Fees Compare to Traditional Financial Services
To put FIVA's fee structure in perspective, it's helpful to compare with traditional financial services:
Traditional Asset Management: Typically charges management fees (0.5-2% annually) plus performance fees (10-20% of returns)
Fixed Income Products: Often embed fees in the form of spreads or reduced yields (0.25-1%)
Trading Platforms: Charge per-trade fees or spreads (often 0.1-0.5% per trade)
FIVA's fee structure is designed to be competitive with or lower than traditional financial services while providing the unique benefits of decentralized finance: transparency, programmability, and direct market access.
Fee Considerations for Different Participants
Understanding how fees affect different participants can help users optimize their interaction with the protocol:
For YT Holders:
The 5% yield performance fee means you receive 95% of the generated yield
This fee is automatically accounted for in the yield you receive
Higher underlying yields mean the absolute fee amount is higher, but your net returns also scale proportionally
For PT Holders:
PT holders are not directly affected by the yield performance fee
You will still receive 100% of your principal at maturity
The only fees you might encounter are trading fees if you buy or sell PTs in the market before maturity
For Liquidity Providers:
You receive 0.1% of all trading volume that occurs in your pool
Higher trading activity directly translates to higher fee revenue
These fees can help offset potential impermanent loss and enhance overall returns
Fee accumulation is continuous as long as your liquidity remains in the pool
For Traders:
You pay 0.2% on each trade executed through FIVA pools
This fee is competitive with other DEXs in the TON ecosystem
The fee helps ensure liquidity is available for your trades by incentivizing liquidity providers
Fee Governance and Future Adjustments
While FIVA has established an initial fee structure designed to balance various ecosystem needs, it's important to understand that these parameters may evolve over time. The protocol embraces the principle that fee structures should adapt to changing market conditions, ecosystem growth, and community priorities.
Community-Driven Fee Governance
As FIVA grows and matures, decisions regarding fee adjustments may transition to a more decentralized governance model. This means:
Community Input: FIVA values feedback from all ecosystem participants about fee structures and their impact on different user categories. The protocol team actively monitors community sentiment regarding fees and their appropriateness.
Governance Mechanisms: In the future, formal governance mechanisms may be implemented that allow stakeholders to propose and vote on changes to fee parameters. This could include adjustments to the yield performance fee percentage, trading fee allocations, or the introduction of new fee categories.
Responsive Adjustments: The protocol may adjust fees in response to changing market conditions, competitive landscapes, or to better align incentives as the ecosystem evolves. For example, during periods focused on growth, fees might be adjusted to prioritize user acquisition, while later stages might emphasize sustainability.
Transparent Process: Any changes to the fee structure will be communicated well in advance, with clear explanations of the rationale and expected impact. This transparency ensures users can make informed decisions about their continued participation.
Conclusion
FIVA's fee structure is designed to create a sustainable ecosystem that benefits all participants while enabling the protocol to continually improve and expand. By charging fees proportional to value creation (yield) and ecosystem usage (trading), FIVA establishes an economic model that can support long-term growth without relying on unsustainable token emissions or external funding.
As with all aspects of the protocol, the fee structure has been carefully calibrated to balance multiple objectives: providing competitive returns to users, incentivizing essential liquidity provision, and generating sufficient revenue for ongoing development. This balanced approach helps ensure the long-term viability and success of the FIVA ecosystem.
Through thoughtful fee design and the ability to adapt this structure based on community feedback and governance decisions, FIVA demonstrates its commitment to building a protocol that serves the needs of all participants while maintaining economic sustainability for years to come.
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