Fees, Costs and Incentives

User

Users risks are born of the trustless nature of the vault, by giving up custody to a Vault, a user accepts the risk of losing their stable-coins

Incentives and Income

Users can earn income through a vault:

• By earning yield / income through DeFi

• By Exchanging/Swapping to other stable-coins

• By using additional services and their rewards

Furthermore, any slashed collateral of the Vault is given to the user, providing a safety net for the possible loss of stored assets

Costs

The only costs users faces is in issuing transaction to Issue and Redeem their coins, and in the fees associated to every PEN transaction.

Operator

In locking up their assets as a collateral, Vaults make a bet that their asset will either stay constant or increase in value against PEN. Should the exchange rate drop, the vault risks being at an over-collateralization state, meaning their collateral will start getting slashed.

Incentives and Income

Vault Operators earn an income through:

• Issue and Redeem Fees: Currently set at zero for enhancing accessibility for users.

• Slashed Collateral of Users: Occurs on failed issuance transactions by the user.

• Slashed Collateral of Vaults: refers to the penalty imposed on a Vault when it fails to successfully execute an asset replacement process.

Costs

Operators costs are related to operation/maintenance costs, as well as any transaction fees on Pendulum