> For the complete documentation index, see [llms.txt](https://docs.usefarlight.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.usefarlight.com/protocol/fees.md).

# Protocol fees

The five fees Farlight charges, who pays each one, when it is collected, and where the proceeds go.

Farlight charges a small number of visible fees, each at a point where value moves. There is no spread buried in the rate, and no token emissions prop up the rates that lenders quote.

| Fee                       | Initial rate                  | Paid by                                  | When collected                             |
| ------------------------- | ----------------------------- | ---------------------------------------- | ------------------------------------------ |
| Origination               | 0.25% of principal            | Borrower                                 | Deducted from the principal at origination |
| Interest share            | 10% of interest paid          | Lender, netted from the payout           | On repayment or rollover                   |
| Liquidation penalty share | 2 of the 3 penalty points     | Protocol and lenders (the keeper gets 1) | When the auction settles                   |
| Refinance                 | 0.10% of principal            | Borrower                                 | When a rollover auction clears             |
| Idle-capital yield share  | 5% of vault yield (scheduled) | Lender                                   | On withdrawal from the vault               |

Each rate in the table is a PolicyController parameter. It can be changed only through the timelock, and every change comes with a published rationale. Changes are not retroactive: an active loan keeps the origination and refinance fee it was charged, and its interest share stays at the rate in force when the loan was originated.

## Where the fees go

All fees accrue to the `Treasury` contract and pay for audits, the bug bounty and operations. When the governance module assumes control of parameters, how the treasury is allocated becomes its decision.

## Scale

With 50M USDG outstanding on average, a 30-day average term and an 8% average APR:

* Origination: 50M × 12 turns a year × 0.25%, roughly 1.5M USDG a year.
* Interest share: 50M × 8% × 10%, roughly 0.4M USDG a year.

Around 1.9M USDG a year combined, before any liquidation income. See [Business model](/resources/business-model.md).


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