Interest and Fees
The Unstable Protocol uses a unique fee structure that differs from traditional lending platforms. Instead of ongoing interest charges, Unstable implements a one-time fee model that makes borrowing costs predictable.
Interest Model
Unstable charges interest on nUSD loans based on the specific vault and collateral type. The interest rate varies based on market conditions and protocol parameters.
Origination Fee
When you mint nUSD, you pay a one-time origination fee. This fee is calculated as a percentage of the borrowed amount and is deducted from the nUSD you receive.
The origination fee varies based on several factors:
Vault utilization: Higher utilization rates result in higher fees
Collateral type: Different collateral types may have different fee structures
Protocol parameters: The fee is adjusted based on market conditions
The fee structure is designed to:
Ensure protocol sustainability
Promote responsible borrowing
Balance supply and demand for different collateral types
Fee Calculation
The origination fee is calculated using the following formula:
Where the Fee Percentage is determined by:
Min Fee: The minimum fee percentage (in basis points) at 0% utilization
Max Fee: The maximum fee percentage (in basis points) at max utilization
Utilization: Current vault utilization (total borrowed / max supply)
Max Utilization: The utilization level at which the maximum fee applies
Redemption Fees
When redeeming nUSD for collateral, a redemption fee is applied. This fee varies based on:
Base fee: Minimum fee for redemption
Collateral ratio: Higher collateral ratios may result in higher fees
Provider share: Portion of the fee that goes to the redemption provider
Flash Loan Fees
The protocol also supports flash loans of nUSD with an associated fee. Flash loans allow you to borrow nUSD without collateral, as long as you repay the loan within the same transaction.
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