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Minter

The Minter contract handles fee calculation for the minting, burning and redeeming of cUSD, where dynamic fees are used to maintain the exposure of each backing asset to its optimal level. A balanced reserve composition reduces centralization of a particular asset, ensuring that the protocol is resilient to black swan events. Fees accrue to the treasury used for protocol safety.

Mechanics

Dynamic Mint/Burn Fees

Fees are dynamically adjusted according to the exposure of assets in the system. For each asset, there are two predefined piecewise linear functions that determine the mint/burn fees. Fees increase as they deviate from the optimal ratio, increasingly sharply beyond the kink ratio.

Process Flow for Mint/Burn:

  1. Pre-fee Calculation: Calls _amountOutBeforeFee to get base amount and new ratio
  2. Whitelist Check: Bypasses fees if user is whitelisted
  3. Fee Application: Applies dynamic fees using _applyFeeSlopes if not whitelisted

Fee Calculations

The fee system operates across three distinct zones based on where the current ratio is:

  1. current ratio <= optimal ratio: Minimum mint fee to mint, 0 fees for burn
  2. optimal ratio < current ratio < kinkRatio: Linear fee increase using the first slope
  3. current ratio > kinkRatio: Steep fee increase using the second slope

Price Oracles are used for fee calculations and amount determination. A minimum mint fee is placed to prevent manipulation around price oracles.

The current minimum mint fee is set to 10bps, capped to 5% maximum.

Fee Parameters

Parameter Description Validation
minMintFee Base fee for minting ≤ 0.05e27 (5%)
optimalRatio Target allocation ratio 0 < ratio < 1e27
mintKinkRatio Mint fee kink point 0 < ratio < 1e27
burnKinkRatio Burn fee kink point 0 < ratio < 1e27
slope0 First slope coefficient
slope1 Second slope coefficient

Redeem Fees

Redeem fees in Cap Protocol are simple percentage-based fees applied to proportional redemption operations. Same fees apply to all assets proportional to their asset allocation. Whitelisted users pay 0% redeem fee

Process Flow for Redeem:

  1. Fee Determination: Sets redeem fee (0 if whitelisted)
  2. Share Calculation: Calculates user's share of total supply
  3. Amount Calculation: Calculates proportional amount for each asset
  4. Fee Application: Applies redeem fee to each asset amount

Whitelisting

Whitelisted users can bypass fees for larger scale operations. Whitelist management is restricted to authorized admins.

For function signatures, parameters, and data structures, see the Minter Contract Reference.