# Protocol Fees

Three different fees are implemented in the USDN protocol. Here’s how each fee works:

### Fee on Actions

* **Long position:** A fee (`_positionFeeBps`) of 0.04% is charged on the provided price at both the opening and closing of a position.
* **Vault:** For each deposit or withdrawal of [USDN tokens](/ultimate-synthetic-delta-neutral/the-usdn-protocol/glossary.md#the-usdn-token), a fee (`_vaultFeeBps`) of 0.04% is charged on the deposited amount of assets.
* **Destination:** These fees are directly transferred to the [vault](/ultimate-synthetic-delta-neutral/the-usdn-protocol/glossary.md#vault) and, by extension, to USDN token holders.

### Fee on USDN Token Minting

When USDN tokens are minted, a unique mechanism is applied: 5% of the total amount of minted USDN tokens must be paid in SDEX tokens, the native token of the SmarDex ecosystem.

* **How does it work?** If you mint 100 USDN tokens, 5% of that amount must be paid in SDEX tokens, meaning 5 SDEX tokens in this example (not $5 worth of SDEX).\
  This mechanism reduces the supply of SDEX, thereby increasing its value for the benefit of all holders.

<figure><img src="/files/gdx2AuVxSSrDpSRttTSN" alt=""><figcaption></figcaption></figure>

### Fee on the Funding Rate

Whenever funding is applied on one side or the other, a fee (`_protocolFeeBps`)  of 8% is applied to the transferred amount.

* **Destination:** This fee is accumulated within the protocol until it reaches a predefined threshold. Once the threshold is met, the accumulated fees are sent to a fee collector.
* **Rules**: The protocol governance can change the fee collector address, and the community can independently verify the current address.
* **Goal**: Currently, the fee collector is a safe wallet controlled by the SmarDex team. The team's present practice is to convert wstETH into SDEX and then burn the SDEX tokens. This process is currently performed manually. However, the protocol governance may decide on a different use for these fees in the future, potentially shifting from the current swap-and-burn strategy to a more decentralized approach.


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.smardex.io/ultimate-synthetic-delta-neutral/the-usdn-protocol/fees/protocol-fees.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.