Fees

Morpho Vaults include fee mechanisms that allow vault managers to generate revenue from the yield they produce. The implementation and capabilities of these fees have evolved significantly from Vaults V1 to Vaults V2, offering curators more flexibility in designing their business models.

Fee Structure in Morpho Vaults V2

Vaults V2 introduce a sophisticated, dual-fee structure, giving curators precise control over revenue streams. All fee-related changes are managed by the Curator and are subject to a timelock, ensuring transparency and giving users time to react to proposed changes.

1. Performance Fee

The performance fee is a percentage of the yield generated by the vault, aligning the curator's revenue with the vault's success.

• Fee Basis: Charged as a percentage of the interest reported by the Vault Interest Controller (VIC). This means the fee is based on the curated yield stream, not necessarily the real-time, atomic yield from underlying protocols.
• Maximum Rate: Capped at 50% of the generated interest.
• Control: The Curator sets the fee rate and the recipient address.

2. Management Fee

The management fee is a continuous fee charged on the vault's total assets under management (AUM), providing a steady revenue stream for the vault's managers.

• Fee Basis: Calculated as an annualized percentage of the vault's totalAssets. A small portion of this fee is collected each time interest is accrued.
• Maximum Rate: Capped at 5% per year.
• Control: The Curator sets the fee rate and the recipient address.

Fee Collection Mechanism in V2

Fees in Vaults V2 are collected seamlessly without affecting depositors' principal.

1. An interaction (like a deposit, withdrawal, or a direct accrueInterest call) triggers interest and fee calculations.
2. The vault queries the VIC to determine the total interest to be distributed.
3. The performance and management fees are calculated based on this interest and the total assets.
4. New vault shares corresponding to the fee amounts are minted directly to the performanceFeeRecipient and managementFeeRecipient addresses.
5. The vault's totalAssets are updated to reflect the new state after interest distribution.

This share-minting mechanism ensures that fees are taken from the profits, while the principal of all depositors remains fully intact.

Fee Structure in Morpho Vaults V1

The fee system in Vaults V1 is simpler, consisting of a single performance-based fee controlled by the Owner.

• Fee Type: A single performance fee. There is no management fee.
• Fee Basis: The fee is a percentage of the actual interest accrued onchain from the underlying Morpho Market V1 positions.
• Control: The Owner of the vault sets the fee rate and the recipient.
• Security: Fee parameter changes are immediate and do not have a timelock.
• Maximum Rate: Capped at 50% of the generated interest.
• Collection: Like in V2, fees are collected by minting new vault shares to the feeRecipient.

Comparison: Vaults V2 vs. Vaults V1