Guide: How to Monetize Your Midnight Product

Products built on Midnight can monetize the integration layer around fixed-rate markets while the protocol stays permissionless. The built-in pattern is the referral fee of MidnightBundlesV1: a one-time fee, paid in the loan token to an address you choose, taken in the same transaction as the trade.

This guide explains which fees belong to the protocol and which to your product, how the referral fee is computed on each Bundles entrypoint, and what to disclose, simulate, and guard before shipping it.

Protocol fees versus your fee

The referral fee is on top of the settlement fee. A borrower using your product pays both when both are set. No Midnight market has a settlement or continuous fee activated today, so at the time of writing the referral fee is the only fee a user of your product pays.

How the referral fee works

The five MidnightBundlesV1 trade and repay entrypoints listed below take two fee parameters:

• referralFeePct: a WAD-scaled percentage (1e18 = 100%), strictly below WAD. Pass 0 for no fee.
• referralFeeRecipient: the address that receives the fee. It is only used when the fee is positive.

Bundles takes the offers, applies the fee to the loan-token leg, transfers the fee to the recipient and the remainder to the user, all in one transaction. No custom router or fee contract is needed. The user authorizes Bundles on Midnight once (setIsAuthorized), the same requirement as a fee-free integration.

The fee base depends on the entrypoint. Amount-targeted entrypoints keep the user-facing amount exact and adjust the amount filled on the book. Units-targeted entrypoints keep the units exact and adjust the loan-token amount. In the table, pct is referralFeePct and WAD is 1e18.

All divisions round down to whole token units. On the two amount-targeted take entrypoints the referral fee changes the amount sent to the order book, which may consume more or fewer price levels and change the average taking price. Build the quote from the amount Bundles will actually fill, not from the user-facing amount: target + fee for a borrow with an exact loan-token amount, target - fee for a lend with an exact loan-token amount.

Worked example: borrow an exact loan-token amount

A borrower wants to receive 10,000 USDC (10_000_000_000 units of USDC). Your product charges referralFeePct = 0.02e18 (2%).

• fee = floor(10_000_000_000 * 0.02e18 / 0.98e18) = 204_081_632 (204.081632 USDC)
• Bundles fills 10_204_081_632 on the book (10,204.081632 USDC)
• the borrower receives exactly 10_000_000_000 (10,000 USDC)
• the recipient receives 204_081_632 (204.081632 USDC)

At an average settlement price of 0.95, the borrower sells about 10,741 units instead of about 10,526. The extra 215 units are debt at maturity that finance the fee. referralFeePct is a share of the gross amount filled, so 2% of gross is 2.04% of the net amount the borrower sees. To charge feeBps on the net amount instead, set referralFeePct = feeBps * WAD / (10_000 + feeBps).

Implementation

The Morpho SDK Midnight taker flows (takeLend, takeBorrow, supplyCollateralTakeBorrow, repayWithdrawCollateral) encode referralFeePct = 0 today. To charge a fee, call MidnightBundlesV1 directly with the ABI exported by the SDK (midnightBundlesAbi from @morpho-org/morpho-sdk/abis). The Borrow at a fixed rate tutorial shows the full flow with referralFeePct = 0. The change for a fee-charging product is:

import { parseUnits } from "viem";
import { midnightBundlesAbi } from "@morpho-org/morpho-sdk/abis";

const WAD = 10n ** 18n;
const referralFeePct = parseUnits("0.02", 18);                // 2% of the gross amount filled
const referralFeeRecipient = "0xYourFeeRecipient";

const targetSellerAssets = parseUnits("10000", 6);            // what the borrower receives
const fee = (targetSellerAssets * referralFeePct) / (WAD - referralFeePct);
const grossSellerAssets = targetSellerAssets + fee;           // what Bundles fills on the book

// 1. Quote the gross amount, not the net amount: Bundles needs offers for
//    `grossSellerAssets`, and `maxUnits` must be derived from it.
const quote = await MidnightApi.fetchBookQuote({ /* ..., */ assets: grossSellerAssets });
const worstAcceptablePriceWad = parseUnits("0.95", 18);
const maxUnits =
  (grossSellerAssets * WAD + worstAcceptablePriceWad - 1n) / worstAcceptablePriceWad;

// 2. Pass the fee parameters to Bundles.
const hash = await walletClient.writeContract({
  account: taker,
  address: MIDNIGHT_BUNDLES,
  abi: midnightBundlesAbi,
  functionName: "midnightBundlesV1SupplyCollateralAndSellWithAssetsTarget",
  args: [
    targetSellerAssets,     // the borrower receives exactly this amount
    maxUnits,               // rate guard, derived from the gross amount
    taker,
    false,                  // reduceOnly
    taker,                  // receiver
    collateralSupplies,
    takes,                  // takeable offers from the gross quote
    referralFeePct,
    referralFeeRecipient,
    maxUint256,             // maxContinuousFee
    deadline,
  ],
});

The same two parameters apply to the lend, units-targeted, and repay entrypoints. Use the fee formula of the entrypoint you call to derive the amount Bundles fills, minUnits, maxUnits, or maxBuyerAssets.

Production checklist

The fee is plain calldata that the user signs. Make it explicit and verifiable.

User disclosure

Show the user, before signature:

• the net loan-token amount they receive (borrow) or spend (lend);
• the referral fee amount and its recipient;
• the units sold or bought, which is the debt or credit at maturity, after the fee;
• the effective fixed rate after the referral fee and the protocol settlement fee, not the headline offer rate;
• the resulting LTV or health after the fee, for a borrow;
• the exact repayment amount at maturity, including the repay-side fee if you charge one.

Do not present the net amount as the debt. On a borrow, the debt is the units sold, and the fee increases them.

Simulation and guards

• Quote and simulate with the amount Bundles fills on amount-targeted entrypoints: target + fee for a borrow, target - fee for a lend.
• Derive maxUnits (borrow) or minUnits (lend) from that filled amount, so the rate guard still holds with the fee.
• On midnightBundlesV1BuyWithUnitsTargetAndWithdrawCollateral, set maxBuyerAssets to at least filledBuyerAssets + fee, or Bundles reverts.
• Check collateral health against the gross debt, not the net amount received.
• Handle rounding in token units. All fee divisions round down.
• Make sure the fee recipient can receive and handle the loan token.
• Keep maxContinuousFee and deadline as tight as your product allows. They are unrelated to the referral fee but ship in the same call.

Fee parameters and authorization

The fee parameters are chosen by your frontend or backend, not enforced on-chain. Keep them auditable:

• pin referralFeePct and referralFeeRecipient in your product configuration and show them in the transaction preview;
• reject a referralFeePct above your published cap before building the call;
• MidnightBundlesV1 requires taker == msg.sender or a Midnight authorization from the taker. setIsAuthorized grants persistent authority across Midnight, including the ability to authorize other accounts; it cannot be limited to a market, action, amount, fee, or deadline. For onchain scope, authorize a smart contract that enforces those limits. Otherwise, disclose the full scope and provide a clear revocation path.

Important limitations

A referral fee at the integration layer does not make the market permissioned. Users can call Midnight or MidnightBundlesV1 directly, or use another integration, and bypass your fee. This pattern monetizes your product flow, not the protocol.

Use it when the user receives clear value from your product, such as distribution, onboarding, rate discovery, risk tooling, account abstraction, sponsored gas, or portfolio management.