Safety Mechanism

What is Risk fees?

Risk fees are a security tax on the rewards collected, to ensure the solvency of the guarantee pools in the event of several incidents impacting several protocols before a claim is made.

When providing more than one cover with the same capital, a risk fee is added to the initial fee.

The more liquidity a user provides on different covers with the same capital, the higher the risk fees.

When liquidity is provided in a single pool, the risk charge is 0%.

In the example above, the risk fees per additional cover provided are 0.7%

$$FeesRisk \sdot Number of Pools=FeesRiskTotal$$

$$0.7\sdot4=2.8$$

In the above example, risk fees represent 2.8% of premium income.

This means that 2.8% will be deducted from the premiums received by liquidity provider.