Stability Fees

Overview

The Hoenn’s Fees are Risk Parameters designed to address imbalances in supply and demand for the uToken. They alter the incentives for vault owners to borrow or repay uTokens and can have a stabilizing effect on the soft-peg.

At a high level:

• Borrowers incur a stability fee on outstanding uToken debt.

• A liquidation surcharge is collected when liquidators use uTokens to repay vault debt.

Together, these fees support several critical functions:

• Risk mitigation: Building reserves to cover potential losses from under-collateralized positions

• Peg stability: Adjusting borrowing costs to help synthetic assets remain close to their target value during volatile market conditions

• Protocol sustainability: Accumulating surplus capital that can be used to strengthen and grow the Hoenn ecosystem

All applicable fees are transparently displayed on the protocol dashboard, per vault type.

Stability Fee

The stability fee operates as a continously compounding interest rate, applied per second to outstanding debt. As long as a user maintains an open borrowing position, the debt increases over time based on the current rate.

Liquidation Surcharge

When a vault is liquidated, a liquidation surcharge is applied. This fee is taken from the synthetic assets liquidators send to settle the vault’s debt.