💰Fees
Last updated
Last updated
Zona charges three types of fees: (1) trading fees, (2) funding fees, and (3) liquidation fees.
Trading fees are paid by traders when opening or closing a leveraged position. The current trading fee is set at 0.05% of the total notional trading volume, but this is subject to further change based on the needs of the protocol and our users.
The trading fee is split as follows:
60% is accrued by Zona liquidity providers.
10% is accrued by the Zona protocol's insurance fund, which will be used as a backstop to protect liquidity providers in the case of bad debt.
30% is accrued by the Zona protocol's development fund.
2.1 What are funding fees?
Funding fees are paid by traders on the dominant side of a market to the other side.
For example, for a given market, assuming there is $10M in long open interest (OI) and $5M in short OI, the traders holding long positions must pay traders holding short positions. This fee is calculated on a daily basis, and is settled when traders close their position.
2.2 What is the purpose of funding fees?
The purpose of funding fees is to encourage the balancing of OI between longs and shorts of a given market, thereby limiting the exposure of liquidity providers toward a specific direction.
For example, suppose the majority of traders are long on the Tokyo index and the index goes up. In that case, liquidity providers stand to lose a significant portion of their deposited funds. Funding fees help to prevent large liquidity provider losses from happening.
2.3 How can traders benefit from funding fees?
Funding fees aren't just a mechanism to protect liquidity providers - traders can also use funding fees to their benefit while hedging.
For example, assume a trader owns property in Seoul (off-chain long exposure), and that the long OI is larger than the short OI for Seoul on Zona (meaning that longs will pay funding fees to shorts). The trader can then short the Seoul market on Zona, resulting in a delta-neutral position (off-chain long exposure and on-chain short exposure) while collecting funding fees.
Liquidation fees are paid by traders during the liquidation of their leveraged position (when the margin used to open a position falls under the collateral threshold). 90% of liquidation fees are kept by the keeper bots that perform the liquidation, and the remaining 10% goes to the Zona insurance fund.
