# Protocol Fees

There are two sources of protocol fee revenues:

1.  A SMART Token fee for the risk infrastructure provided by The Risk Protocol  
2. A Protocol Swap fee on transactions on the TRP DEX

To minimize user friction, there is no creation or redemption fee.

### 1.  SMART Token Fee 

Users are charged for the upcoming `Fee` period at each interval. A `Fee`  period is the atomic unit for charging SMART Token fees, usually set to 24 hours or one day. The `fee` is charged in the SMART Tokens themselves.

**Example:**\
If the `fee` is 0.01%, and a user holds 10 RiskON at a given time, the fee for that period would be 0.01% of 10 RiskON, which equals 0.0001 RiskON.

This `fee`  mechanism was designed to ensure that users are only charged for the actual time their assets are in the TRP ecosystem, promoting fairness and transparency in fee assessments. For instance, if a user splits an underlying asset and then redeems after 7 days, they will incur fees only for the 7-day period they were in the system, rather than a flat fee charged at the time of splitting and creating the SMART Tokens.  

### 2.  Protocol Swap Fees

A Protocol Swap Fee is charged on swap operations to generate revenue for the protocol treasury. Users are charged a percentage-based fee on the input token amount for each swap transaction. The fee is deducted before the swap calculation occurs. This fee mechanism ensures the protocol captures value from trading activity while maintaining transparent, predictable costs for users.

`Fee Token`: The fee is charged in the input token of the swap.

**How It Works**

1. Fee Calculation: The protocol fee is calculated as a percentage of the swap input amount.
2. Fee Collection: The fee is transferred directly from the user to the protocol address.
3. Swap Execution: The remaining amount (after protocol fee deduction) proceeds through the swap calculation, which nets out the [Dynamic LP Fees](/protocol-design-and-specifications/risk-marketplace/dynamic-lp-fees.md).

**Example**

If the protocol fee is 0.15% and a user swaps 1000 ETH:

* Protocol fee = 0.15% × 1000 ETH = 1.5 ETH (sent to protocol treasury)
* Remaining amount = 998.5 ETH (used for swap calculation)
* The LP fee (e.g., 0.4%) is then applied to the 998.5 ETH during swap price calculation

*Note: The values above are for illustrative purposes only.*


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