🧀Protocol Fees
What the protocol charges, when, and where it goes
The protocol charges exactly two fees — one when USDFC is minted, one when it is redeemed. There is no interest, no deposit or withdrawal fee, and no fee for adjusting collateral or repaying debt.
Borrowing (minting) fee
Each time USDFC is minted
(Base Rate + 0.5%) × minted amount
0.5% – 5% (capped)
USDFC (added to debt)
Redemption fee
Each redemption
(Base Rate + 0.5%) × FIL drawn
0.5% minimum, not capped at 5%
FIL (deducted from proceeds)
Both fees share the same Base Rate, which rises with redemption activity and decays with a 12-hour half-life — so in calm conditions both sit at the 0.5% floor. The borrowing fee is waived during Recovery Mode; the 20 USDFC Liquidation Reserve is not a fee (you don't repay it on close — see The Trove System).
Where the fees go
All fees are sent to the protocol's Fee Reserve — the ProtocolTokenStaking contract (address on the Contracts and Security page). Following the Token Generation Event (TGE), the accumulated reserve is intended to be distributed to Secured Finance token stakers — aligning the protocol's revenue with its long-term supporters. Timing and mechanism will be announced ahead of the TGE.
That distribution is a policy, not something the contract enforces today. Fees accrue as unallocated balances when no tokens are staked, and the contract owner can withdraw those balances through owner-only functions — including after staking begins. The contract does not itself guarantee custody until the TGE or any particular distribution.
Why the fee design looks like this
A floor, not zero: the 0.5% minimum is intended to make minting-and-dumping or redemption-cycling unprofitable at the margin, without meaningfully taxing normal use.
One-time, not ongoing: with no interest, the cost of a loan doesn't grow with its duration — USDFC is designed to be cheap to hold.
Base Rate coupling: fees rise automatically when the system is under redemption pressure and decay when it isn't (the borrowing fee within its 5% cap) — a stabilizer that needs no governance action.
Where next
Mint & Borrow — the borrowing fee in context
Redemption — the redemption fee in context
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