How and where the protocol earns revenue
The way fees are collected now in Rodeo v1 is that they are deposited straight into the lending pool used for the position (assigned to address(0)) so they earn some of the lending APY until we withdraw.
These funds double as as "protocol reserves" which are used to counter act bad debt as much as possible.
That said, Rodeo currently earns fees in one of three ways:
- 1.Liquidation fee
- 2.Loan origination fee
- 3.Performance fee
If a user's position is liquidated, a percentage goes to a third-party liquidator (usually, a liquidation bot) that liquidated the account. The remainder of the fee goes to the Rodeo Protocol.
The current liquidation fee is 5% of the value of the liquidated position. Of that:
- 50% goes to the liquidator
- 50% goes to Rodeo
There is currently no loan origin fee for utilizing Rodeo leverage.
When a user withdraws or closes their position, 10% of any profit goes to the Rodeo Protocol.
A portion of the 10% protocol profit may be directed by Rodeo to incentivize the lending side. In the future, fees may be variable based on strategy to optimize yields, an update will be provided for each vault if this change occurs.
Note: Rodeo does not currently charge any fee on the APY spread between lent and borrowed assets.