> For the complete documentation index, see [llms.txt](https://docs.drunkencats.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.drunkencats.xyz/economic-model/fee-distribution.md).

# Fee distribution

| Source            | Fee        | Recipient      |
| ----------------- | ---------- | -------------- |
| Swap Fee          | 0.3%       | LPs / Treasury |
| CDP Opening Fee   | up to 0.5% | Treasury       |
| Liquidation Bonus | 5%         | Treasury       |

## Swap Fee

Total swap fee: **0.3%**

Fee distribution:

* **70%** → Liquidity Providers
* **20%** → DrunkenCats Treasury
* **10%** → $CAT buyback & burn

This means that for every swap executed through the protocol, a portion of the trading fee is automatically allocated to the treasury.

As trading activity grows, treasury revenue grows alongside the ecosystem.

***

## CDP Opening Fee

The CDP Opening Fee is currently set to **0%**.

Governance may increase this fee in the future, up to a maximum of **0.5%**.

Any fees collected from opening new CDP positions are transferred directly to the **Treasury**.\ <br>

***

## Liquidation Bonus

To maintain the solvency of the protocol, undercollateralized positions can be liquidated when their collateral ratio falls below the minimum required threshold.

When a liquidation occurs, a **5% liquidation bonus** is applied.

* **5%** → Treasury

The entire liquidation bonus is transferred to the protocol Treasury.

#### Purpose

Liquidation fees serve several important functions:

* Strengthen protocol reserves.
* Support long-term sustainability of the dcUSD ecosystem.
* Fund future development, audits, incentives, and ecosystem growth.
* Create an additional safety buffer for the protocol.

#### Example

A vault becomes eligible for liquidation and collateral worth **$1,000** is liquidated.

* Liquidated collateral value: **$1,000**
* Liquidation bonus (5%): **$50**
* Treasury receives: **$50**

The remaining collateral value is used to repay the outstanding dcUSD debt according to the liquidation process.


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