Protocol Fees
To support the growth and maintenance of the protocol, fees are collected on option purchase and settlement.
The protocol must collect fees in order to grow and survive long-term. No fees are charged on deposit/withdrawal of liquidity from the Premia pools, rather, fees are charged when the pools facilitate a transaction between users.
Option Purchase: On option purchase, a protocol fee of 3% of the option's base price is charged to the buyer, included in the price quoted by the pool.
Option Settlement: On exercise, a protocol fee of 2.5% annual interest on the option's collateral value is collected from the pool for facilitating the utilization of capital.
As per community vote, 80% of all protocol fees are automatically collected and converted to PREMIA, which is then automatically distributed to xPREMIA holders (xPREMIA holders are PREMIA stakers). The remaining 20% of protocol fees are distributed to the PREMIA treasury, to be used for the further growth and development of the Premia ecosystem.
These fees help to maintain the suite of tools that make the protocol so great and to ensure the long-term sustainability of the Premia protocol.
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