> For the complete documentation index, see [llms.txt](https://docs.secured.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.secured.finance/usdfc-stablecoin/core-mechanics/protocol-fees.md).

# 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.

| Fee                     | When                      | Calculation                        | Range                          | Paid in                      |
| ----------------------- | ------------------------- | ---------------------------------- | ------------------------------ | ---------------------------- |
| 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**](/usdfc-stablecoin/core-mechanics/mint-and-borrow.md#base-rate-explanation), 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**](/usdfc-stablecoin/core-mechanics/recovery-mode.md); the 20 USDFC Liquidation Reserve is not a fee (you don't repay it on close — see [The Trove System](/usdfc-stablecoin/core-mechanics/the-trove-system.md#debt-calculations)).

## Where the fees go

All fees are sent to the protocol's **Fee Reserve** — the `ProtocolTokenStaking` contract (address on the [Contracts and Security](/usdfc-stablecoin/deployed-contracts.md) 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](/usdfc-stablecoin/core-mechanics/mint-and-borrow.md) — the borrowing fee in context
* [Redemption](/usdfc-stablecoin/core-mechanics/redemption.md) — the redemption fee in context