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Where do you pay money? How do you make money? |
- When you lend tokens, you earn lending interest
- When you borrow tokens, you pay borrowing interest
- When you're liquidated, there is a 5% penalty fee
- Today, marginfi takes no fee for itself other than to fill up asset insurance pools
marginfi allows users to deposit supported tokens into the protocol and earn yield on them. This is made possible by lenders on the platform who borrow these tokens and pay interest on them.
The deposit yield on marginfi is typically expressed in terms of APY (Annual Percentage Yield). Yield farming has become increasingly popular in DeFi, and marginfi is one of the lending protocols that allows users to earn yield on their deposited assets.
The APYs for lending each asset are typically exposed in marginfi web interfaces, and can be found in protocol configuration.
Deposits into marginfi's LIP program may be locked up depending on the LIP campaign they're deposited to, which is available to users in each LIP campaign configuration and can only be set when a campaign is initially created.
LIP lockup timelines cannot be adjusted after campaigns are created by anyone, including campaign creators.
It's important to note that LIP deposits cannot be used as collateral for borrowing.
Borrowing on marginfi incurs a fee. Fees are specific to each asset that marginfi supports, usually expressed in terms of APR (Annual Percentage Rate).
The APRs for borrowing each asset are typically exposed in marginfi web interfaces, and can be found in protocol configuration.
When borrowed trader positions fall below configured margin requirements, they are exposed to liquidation. Liquidations on marginfi are automatic and permissionless.
Liquidations are executed by third-party liquidators who provide this service for a return, and marginfi awards a fee for successful liquidations.
When borrowed positions fall below requirements and are liquidated, liquidated borrowers (or, liquidatees) pay a fee as a penalty.
Currently, liquidation penalties, liquidator fees, and insurance fund fees are fixed. However, liquidation penalties, liquidator fees, and insurance fund fees can be configured for each asset pool.
Today, fees for pools are set as follows (unless specified otherwise):
- Liquidatee penalty: 5% of the liquidatee's position collateral at time of liquidation
- Liquidator fee: The liquidator earns
- 2.5% of the liquidatee's liquidated collateral, or
- 50% of the liquidatee fee
- Insurance fund fee: The collateral asset-specific insurance fund collects
- 2.5% of the liquidatee's liquidated collateral, or
- 50% of the liquidatee fee
The marginfi protocol charges 10bps on LST withdrawals, and no other fees besides this.
marginfi has asset-specific insurance funds. They're filled up in two ways:
- When users borrow from marginfi, part of the fee they pay goes to insurance pools.
{% hint style="info" %} Currently, insurance pool fees charged to borrowers are 0% for all pools except for the $BONK pool. {% endhint %}
- When user positions are liquidated, the collateral asset insurance fund collects 2.5% of the liquidatee's liquidated collateral.