Fees
Last updated
Last updated
Fees are charged to users to support the longterm sustainability and growth of the protocol. Some of these are one-time fees to open a new position on Stack to borrow $MORE. Other fees, like the interest rate, are charged on an ongoing basis.
Liquidation Fee: Percentage of collateral the borrower looses when liquidated, split between the liquidator and the protocol.
Borrow Opening Fee: One time percentage fee charged by the protocol on the amount of $MORE borrowed when positions are opened.
Borrow APR: The annualized rate that your debt will increase by each year. Borrow APR is charged in $MORE and will accrue to your position. If you forget to pay down your interest, the amount of $MORE owed could push the position beyond the MCR resulting in liquidation.
Dynamic Opening Fee: In leveraged positions, this is an additional fee added to the transaction to account for the difference between $MORE minted against $1 of collateral and the actual price of $MORE when it’s swapped for more of the underlying asset during the leverage transaction.
Below is a breakdown of how these fees are distributed within the ecosystem:
Stack controls the interest rates of the protocol. We employ a dynamic interest rate adjustment mechanism, using interest rates to control the $MORE money supply, helping to ensure the stability and health of our lending environment
When $MORE is below the peg, it indicates a potential market downturn or increased risk. In response, our system slightly increases the borrowing interest rate. This adjustment is not meant to penalize borrowers but to encourage financial prudence and maintain the system's stability. Conversely, when $MORE is above peg, suggesting a strong market, we lower the interest rate. This decrease is designed to incentivize borrowing, enabling users to capitalize on favorable market conditions. The adjustments are calculated using a formula that ensures changes are gradual and predictable, preventing abrupt shifts that could affect borrowing strategies. This system ensures that our platform remains robust against market volatilities, providing a stable and reliable environment for all users.
Interest rate adjustments are made automatically every 12 hours, reflecting the latest market conditions, balancing the needs of borrowers with the platform's health, for a fair and sustainable borrowing environment.
Stack utilizes a sigmoid function—a type of logistic function that maps a wide range of input values to a smooth curve between two boundary values. This curve is pivotal in calculating the adjustment, as it allows for a responsive yet tempered change in rates based on the deviation of the current $MORE price from the preferred price.
The adjustment process involves both additive and multiplicative components, where the sigmoid function's output determines the degree of adjustment. Multiplicative adjustments are capped at a 20% increase or decrease, providing a proportional response to significant market movements. On the other hand, additive adjustments offer a flat rate change, with a maximum of 1% for prices below the preferred and 0.1% for prices above, directly modifying the interest rate in smaller, more precise increments.
The steepness of the sigmoid curve—and thus the sensitivity of the rate adjustment—is differentiated for scenarios where the token price is above or below the preferred price, ensuring that the rate adjustment is more pronounced when the price deviates significantly from the preferred value. This mathematical approach ensures a balanced, nuanced response to market conditions, promoting stability and fairness in the lending environment.
