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Fee

Morpho Vaults implement a performance fee system that allows vault owners to capture a portion of the yield generated without affecting users' principal.

Fee Mechanism

How Fees Work

  • Interest-Based: Fees are charged only on the yield/interest generated by the vault, not on the principal amounts deposited by users
  • Performance Structure: The fee is calculated as a percentage of the total interest accrued since the last fee collection
  • Collection Method: Fees are collected automatically during key vault interactions:
    • Deposits and withdrawals
    • Fee parameter changes
    • When the fee recipient is updated
  • Crediting System: Fees are credited by minting new vault shares to the fee recipient, which represents their portion of the accrued interest

Fee Parameters

Fee Rate

  • Maximum Limit: Fees are capped at 50% (0.5e18) of generated interest
  • Default Value: Determined at vault deployment, and can start at zero
  • Adjustment Authority: Only the vault owner can modify the fee rate
  • Immediate Effect: Fee changes take immediate effect without requiring a timelock

Fee Recipient

  • Configuration: The vault owner sets the fee recipient address
  • Constraints: A non-zero fee can only be set when a valid fee recipient is specified
  • Accrual Timing: When changing the fee recipient, accrued fees are sent to the current recipient before the change

Fee Collection Flow

  1. A vault interaction triggers the _accrueInterest() function
  2. The system calculates total interest accrued since the last update
  3. The fee portion of this interest is determined based on the current fee rate
  4. Fee shares are minted directly to the fee recipient
  5. The vault's asset tracking variables are updated to reflect the new state

Practical Implications

For Vault Users

  • Your principal is never affected by the fee system
  • Fees only impact the yield you would otherwise receive
  • The fee percentage is public and can be verified on-chain
  • Fee changes are immediately visible and transparent

For Vault Owners

  • Fee revenue can be directed to any address, including:
    • Treasury management contracts
    • Multi-signature wallets
    • Revenue sharing systems
    • DAO-controlled addresses
  • Competitive fee setting is important for vault attractiveness
  • Fee changes are visible events that users can monitor

Viewing Fee Settings

You can check current fee parameters for any Morpho Vault by examining:

  • fee(): Returns the current fee rate (e.g., 50000000000000000 = 5*1e16 = 0.05*1e18 and represents 5%)
  • feeRecipient(): Returns the address that receives the fee shares
vault Fee

Both values can be viewed through the "Read Contract" section on any blockchain explorer.

This fee design carefully balances revenue generation for vault operators while ensuring transparency and fairness for users. Since fees apply only to newly generated yield, users always receive at least their principal back upon withdrawal.