Fees
Fees on Tren Finance can largely be divided into Minting Fees, and Performance Fees
Last updated
Fees on Tren Finance can largely be divided into Minting Fees, and Performance Fees
Last updated
A minting fee is a charge incurred when you borrow assets, in this case, XY, using your collateral in a TrenBox. This fee is typically a percentage of the borrowed amount and is applied to compensate the protocol for the lending service and the associated risks.
The minting fee, which is typically set at 1%, is charged at the time of borrowing. This means that when you create a new loan by borrowing XY against your collateral, the fee is calculated based on the amount you borrow and is added to your total debt. The specifics of the borrowing fee, such as its rate and how it is applied, can vary depending on the protocol's parameters and the specific collateral type used.
FlashMint offers infinite on-demand liquidity for arbitrage, refinancing, and other complex DeFi transactions. On Tren Finance, FlashMint is used to perform functions such as FlashRepay and FlashBorrow. Due to the flexibility and opportunities that this functionality offers, FlashMint fees are typically double the rate of regular Minting fees.
A performance fee is a periodic charge applied to the yield accrued by the collateral asset in your TrenBox. This fee is to compensate the protocol for overall yield and strategy optimization for the user's collateral asset (deposit), such as auto-compounding.
In this aspect, Tren Finance acts as a vault similar to Beefy or Yearn. Unlike minting fees, performance fees are only charged on the accrued yield. The specifics of the performance fee, such as its rate and how it is applied, can vary depending on the protocol's parameters and the specific collateral type used.
As Tren Finance offers 0% interest loans, a performance fee is charged to generate revenue and ensure that the protocol stays profitable. This is also why the protocol focuses on, and lists assets that are able to generate yield. If an asset were incapable of generating yield, then the asset's isolated module would need to charge an interest rate.
As mentioned, this is similar to how vaults on protocols like Beefy and Yearn work. These protocols only offer vaults for assets that can be used to generate yield. Tren Finance's collateral deposits essentially work in the same way. Once a user deposits a collateral asset onto Tren Finance, the user can use this collateral to borrow XY, which can be used in a multitude of different ways including gaining leverage. The ability to borrow against the collateral asset is unlike how vault protocols work, but the next part is.
On Tren Finance's end, the protocol takes the collateral asset and deploys the asset in the optimal yield strategy through Hooks. The yield continues to accrue, and includes the optionality of auto-compounding. Users can claim their accrued yield at any time. Once the user claims their accrued yield, a performance fee percentage is charged on the total accrued yield. The APY that is shown on the protocol already takes this performance fee into account. Functionalities such as auto-compounding cost the protocol gas fees, and so performance fees are also used to cover such fees for the protocol.
Protocol-originated revenues are fees that the protocol earns on its own, or through members of the Tren Finance team, and are not fees that are paid by, or generated from users. The most notable example of this is Protocol LP Revenue.
Revenue earned from XY and TREN (upon TGE) liquidity pools with liquidity that originates from Tren Finance. For example, if Tren Finance added 100K USD of liquidity to XY, then the LP fees generated would be considered protocol-originated revenue.
90% of all protocol revenue is directed towards TREN buybacks, while the other 10% of protocol revenue is directed towards the Treasury. TrenDAO (veTREN holders) decide how the TREN buybacks are allocated, which is explained in detail on the Gauges page. This process allows the TrenDAO to have a direct impact on the direction of the protocol.
