# Fee model

Aqua Protocol utilizes a dynamic fee and penalty structure for various operations, including minting, repayment, borrowing, redemption, and liquidation. These fees are not only fundamental to the protocol's functionality but are also subject to change based on DAO voting, reflecting the community-driven governance of the platform.

### 1. Mint (Borrow) Fee:

* **Application**: When users mint AquaUSD against collateral.
* **Fee**: 0% 

### 2. Repayment Fee:

* **When Charged**: During repayment of borrowed AquaUSD.
* **Fees**: 0% 

### 3. Borrowing Rate:

* **Definition**: Interest rate on borrowed AquaUSD.
* **Current Rate**: 5%, but this can change as per DAO voting and market conditions.

### 4. Redeem Fee:

* **Occasion**: Applied during the redemption of AquaUSD for collateral.
* **Fee**: 1% on the redeemed amount, with potential adjustments via DAO decisions.

### 5. Liquidation Penalty:

* **Circumstances**: Triggered when CR drops below 150%.
* **Penalty**: A minimum of 12% on liquidated positions.
* **Distribution**:
  * **Partial Liquidation (CR > 125%)**: 9% to liquidator, 3% to Keeper.
  * **Full Liquidation (Overall CR < 150% and User's CR < 125%)**: Liquidator acquires collateral at a rate of X AquaUSD \* (current CR - 3% - borrowing fee - repayment fee).

### DAO Voting and Fee Adjustments:

* **Community Governance**: The Aqua Protocol community, through DAO voting, holds the power to modify these fees and penalties, ensuring that the protocol remains adaptive to evolving market conditions and user needs.

The fee system in Aqua Protocol, including the potential for adjustments through DAO voting, ensures that the platform remains flexible, user-centric, and aligned with the broader community's interests. Users engaging in transactions within the protocol should stay informed about these fees, as they directly influence the cost and strategy of engaging with the platform.

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