➰Mutable Protocol Fees

There is only one protocol fee

Overview

Shell Protocol was designed with one, and only one, protocol-level fee. This fee is an "unwrap" fee, to be applied only when users remove value from the Ocean.

At this time, the fee is set to zero.

The fee has a hard-coded cap of 0.05% to prevent wild rent-seeking behavior. It’s also a security measure—in case the DAO is compromised, an attacker can’t lock user tokens in the protocol by setting the fee to 100%.

Value Generation

How does Shell Protocol generate value? Shell is like a nightclub that is free to enter but costs money to leave. You can stay in the nightclub as long as you want—days, weeks, even years, all the while having a great time without paying a cent. It’s only the moment you walk out the door that you pay an exit fee.

Wrapping tokens into Shell’s accounting layer, the Ocean, is free. It is also free to move your tokens around Shell, whether that means transferring your tokens to other addresses within the Ocean, or using them with various applications in the Shell ecosystem—no matter if you make ten transactions or ten thousand. However, if you want to unwrap tokens, aka remove your liquidity from the Shell ecosystem, you have to pay a percent fee.

That's a benefit to using primitives built natively on the Ocean, in contrast to external protocols connected to the Ocean with an adapter. External protocols rely on external token accounting, which means they will ultimately be subject to the unwrap fee.

As more people use Shell, more volume will flow in and out of the Ocean, and the protocol collects more revenue.

The Shell DAO is the beneficiary of this revenue. SHELL token holders collectively control the DAO via voting. Hence, SHELL tokens directly benefit from the revenue collected by the Ocean.

What to do with the protocol revenue is up to the DAO, and thus up to the SHELL token holders. For example, they could distribute the funds amongst themselves. Or, they could reinvest the capital into further developing the protocol. Or, something else entirely.