Summary

This proposal introduces the LOAN protocol's first direct fees. The revenue funds Metallicus's continued work on the protocol — engineering, audits, compliance, and onboarding the institutional clients we are currently in conversations with.

The fees are deliberately small for the way most people use LOAN. The headline number: a withdrawal fee capped at $25, plus a redirect of half the existing liquidator bonus into the protocol treasury. There are no fees on deposits, borrowing, or repayments.

Why This Proposal Exists

Today the protocol generates no direct revenue for the core developer. Metallicus has funded all engineering, audits, and compliance work from its own balance sheet since launch. That isn't sustainable as the protocol grows, and it isn't acceptable to the institutional counterparties we are working with — they need to see a self-supporting protocol with funded ongoing maintenance.

In parallel, the existing 10% liquidation incentive currently flows entirely to liquidator bots. Over the past six months that has been a meaningful amount of value leaving the LOAN ecosystem with no benefit to LOAN holders or the protocol itself.

What's Being Proposed

A capped withdrawal fee

When a user withdraws assets out of the protocol (the redeem action), they pay a fee equal to 5% of the value, capped at $25. The cap is the important part: anyone moving more than $500 out at once pays $25 flat, no matter how big the withdrawal. A user pulling $1 million out pays $25.

For someone who keeps assets in the protocol — depositing collateral, borrowing against it, eventually repaying and withdrawing — this is a one-time cost on the way out. Day-to-day borrowing, depositing more collateral, and repaying loans cost nothing extra. The fee is structured this way on purpose: we want long-term users to feel essentially no impact.

Half of the liquidation bonus to the treasury

The protocol currently gives liquidator bots a 10% bonus on collateral they seize from underwater positions. This proposal splits that bonus 50/50: liquidators continue to receive a 5% bonus (still healthy and competitive with peer protocols), and 5% goes to the protocol treasury. This change does not affect any normal user. It only reallocates value that today leaves the system entirely.

LOAN-staker discount

To keep LOAN holders aligned with the protocol's revenue, stakers receive tiered discounts on the withdrawal fee:

• 10 million LOAN staked gets 25% off.

• 25 million gets 50% off.

• 50 million gets 75% off.

• 100 million LOAN staked waives the withdrawal fee entirely.

Anyone who finds the fee inconvenient has a clear path to reduce or eliminate it: stake more LOAN.

What This Is Not

This is not a borrow fee. It is not a deposit fee. It is not a repayment fee. It is not an interest rate change. It does not affect the existing 20% reserve factor that protects the markets.

The protocol's basic experience for the average user — depositing collateral, taking a loan, paying it down, withdrawing — costs the same as today, with the single exception of a small fee on the final withdrawal.

What the Revenue Funds

The treasury revenue is earmarked for ongoing protocol development (new markets, contract upgrades, audits, security work), compliance infrastructure required for institutional onboarding, the engineering work to support institutional access patterns and marketing campaigns. Metallicus commits to a regular transparency report on treasury usage if this proposal passes.

Implementation

A single non-breaking upgrade to the lending.loan contract introduces the fee logic and a governance-editable fee configuration table. The upgrade preserves all existing data and positions. After deployment, all fees start at zero, and governance flips them on individually after a soak period on testnet and an independent audit. Rollback to the no-fee state is always possible by setting fees back to zero — no contract redeploy required.

Honest Tradeoffs

Redirecting half of the liquidation bonus to the treasury reduces the liquidator’s direct incentive from 10% to 5%. A 5% incentive remains meaningful, but liquidation performance should be monitored closely after activation, especially during periods of high volatility. If liquidation participation declines or protocol risk increases, governance can adjust or disable the treasury share.

The staker discount tiers strongly favor large holders. The 10 million tier is the practical entry point, qualifying roughly the top 13% of LOAN stakers today for at least some discount. Smaller holders see less direct benefit. This is an intentional design choice to reward deep alignment.

Even a small fee can change user perception in DeFi. The design is conservative on this — whale-protection cap, no fee on entry, full waiver available to committed stakers — but it's a real consideration and one we expect to adjust over time based on data and community feedback.

Vote

Activate protocol fees on lending.loan as described — withdrawal fee capped at $25, liquidation incentive split 50/50, LOAN-staker discount tiers — with revenues earmarked for Metallicus core development, compliance, and institutional onboarding?

YES — Activate fees as proposed
NO — Maintain status quo
ABSTAIN

Voting is conducted via LOAN & sLOAN per the standard governance process.