# Fees

## Redemption Fee

The fee is derived from a Base Rate, which increases with redemptions and decays over time: 

1. Base Rate and Decay:
   * The base rate starts at zero. Every time someone redeems BSD, this base rate goes up.
   * When redemptions cease, the Base Rate decays exponentially over time based on blocks elapsed since the last redemption. The decay factor is pre-calculated for different time intervals, effectively reducing the rate to zero over 72 hours of inactivity.
2. Ratio and Scaling:
   * When you redeem BSD, the redemption amount is compared to the total BSD supply. 
   * The resulting ratio is then scaled by 0.5 and added to the base rate, bumping the base rate up proportionate to the size of recent redemption(s). 
3. Final Redemption Fee:
   * The updated base rate determines the fee. 
   * Redemption fee minimum: 0.5%

This fee is assessed in sBTC and subtracted from the redemption amount. The fee will go to the vault(s) consumed in the redemption. 

## Borrow Fee

1. **Base Rate and Decay**:
   * Base rate decay works exactly the same as redemption fee. 
   * Critically, borrowing does not increase the base rate, only redemptions. 
2. **Final Borrow Fee**:
   * The current decayed base rate determines the fee. 
   * Borrow fee minimum: 0.0%
   * Borrow fee maximum: 5%

The fee is assessed in BSD and added to the vault debt. 

Note: There are no fees for repaying debt. 

{% hint style="info" %}
If the protocol is in recovery mode the borrow fee is always zero to encourage new, highly collateralized, debt creation. 
{% endhint %}


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