Stability Fee
When KCD is minted, Stability Fee immediately starts to accumulate, which the KCD minter pays when repaying minted KCD. This accumulated Stability Fee is the source of ‘KCD Earn’ Interest profit; thus meaning that KCD minted without collateral will never be paid out as KCD Earn Interest. This way, Kurrency can always maintain over-collateralization.
Base Stability Fee (BSF)
Although Stability Fee is compounded based on Base Stability Fee(BSF) for each collateral type, the actual Stability Fee that KCD minters have to pay is highly likely to be less than BSF. This is because user collateral is safely managed by Kurrency to generate additional revenue, which directly reduces the Stability Fee payable by KCD minters. In other words, KCD minters only have to pay accumulated BSF minus Asset Management Profit.
BSF for each collateral is as follows (May change during Recovery Mode) :
| Collateral Type | Base Stability Fee |
|---|---|
oWEMIX | 5% |
KLAY | 5% |
Stability Fee per User
Kurrency calculates Stability Fee differently for each user. To be precise, we calculate Stability Fee differently for each open position,* following the logic outlined below :
To lower Stability Fee, KCD Minter can consider following options :
Utilize Kurrency when Asset Management Profit is high. However, Asset Management Profit cannot be controlled by an individual.
Deposit additional collateral to increase Asset Management Profit and decrease LTV, thereby lowering Stability Fee.
Deposit additional collateral to increase the management yield and reduce the issuance rate, thereby lowering the interest rate on the issuance position.
*Open Position refers to the account created by user for the mint and repayment of KCD, which is created and managed separately for each collateral.
Example: Stability Fee, based on Repayment Timing
The pink line in the diagram above represents accumulated Asset Management Profit generated from user's collateral, while the cyan line represents accumulated BFS to be repaid by the user.
At point ➊, accumulated BFS is greater than accumulated Asset Management Profit. Should the user repay at this point, user will repay BFS minus Asset Management Profit
At point ➋, accumulated BFS and accumulated Asset Management Profit are equal. Should the user repay at this point, user will ultimately have to repay 0 KCD because accumulated BFS has been offset by the equal amount of Asset Management Profit.
At point ➌, accumulated Asset Management Profit is greater than accumulated BFS. Should the user repay at this point, user will have to pay 0 KCD, just as in point ➋. However, the difference is that there now is an excess of Asset Management Profit. A portion of the excess is distributed to KCD Earn, which may temporarily increase KCD Earn Interest profit. The remaining portion is transferred to Kurrency Dev Fund.
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