Margin fees

A margin in Lend & Borrow service refers to the difference between the interest earned on the loan and the interest paid for the deposit. 50% of the margin is taken as a 'margin fee' and evenly distributed between the protocol and the reserve. Currently, the reserve margin fee is stored in a smart contract, but this may change in the future as updates are made to improve the transparency of asset transfers. The fee will eventually be transferred to a wallet operated by the Foundation.

Liquidation fee

The liquidation fee in Lend&Borrow is the cost of paying the platform a portion of the revenue generated when the liquidator purchases the lender's collateral assets at a discounted price. The liquidator can repay up to 50% of the lender's loaned assets during the liquidation process and can purchase collateral assets at a 10% discount for the amount repaid. This means that the liquidator will be able to repay the lender's loan assets and earn a 10% return on that consideration. The liquidator will acquire a portion of the lender's collateral assets, of which 3% will be paid to the platform in liquidation fees.

For example, suppose a user has $80 worth of collateral assets liquidated. Liquidators can repay loan assets up to $40 and the protocol allows them to earn $4 by purchasing the same collateral assets at a 10% discount. The total assets obtained by the liquidator from the purchase of the lender's collateral assets is $44, and the liquidator will pay $1.32, which is 3% of $44, in clearing fees.