Stability Fees
What are Stability Fees?
Stability Fees act as annual interest rates within the Hubble system. When a user deposits collateral and takes a USDH loan, the Stability Fee will be clearly indicated on the borrowing page, as well as the loan management page.
If Stability Fees are active on a certain loan, it means that the debt on that loan will gradually increase.
In its current iteration, the protocol has one, main borrowing vault, with a 0% Stability Fee. However, Hubble will soon be opening various vaults with different asset combinations in each. The Stability Fees on these vaults will differ depending on the risk profiles of the assets within the vault. Typically, assets with a perceived higher risk will have a higher Stability Fee.
Will Stability Fees be a global parameter?
No. Stability Fees will vary between different vaults. Adjusting the fee on a certain vault will have no impact on the fee in other vaults.
How can Stability Fees impact USDH peg?
When USDH is below peg, Stability Fees can be used to increase USDH demand on the market.
An increase in the Stability Fee should theoretically incentivize borrowers to repay their loans, as users are averse to seeing their debt accumulate. In theory, the USDH demand on the market should increase as borrowers acquire USDH to repay their debt.
A higher Stability Fee should also disincentivize users from using that specific vault, thus preventing further USDH flowing into the open market.
Where do Stability Fees go?
Stability Fees will be divided between three parties:
Stability Vault stakers via the Hubble Native Yield
Hubble treasury
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