Fees

Fees are how a strategy compensates the people who run and secure it: the Operator, the Makina DAO, and the Security Module stakers. Each Machine delegates its fee policy to a swappable Fee Manager contract, so different strategies can use different fee models.

How fees are charged: share dilution

Makina does not skim the accounting token. Instead, fees are charged by minting new shares:

• When AUM is updated, the Machine asks its Fee Manager how many shares are owed, mints them, and distributes them to the fee recipients.
• New shares without new AUM dilute the share price slightly, so the cost is socialized across all share holders in proportion to their holdings.

Fees are minted atomically with each AUM update, and only once a minimum interval (the fee mint cooldown) has elapsed since the last minting. The Machine also caps how fast fees can accrue, via governance-set maximum fixed-fee and performance-fee accrual rates, a backstop against a misconfigured or malicious fee manager.

Two kinds of fee

• Fixed fee: accrues with time and strategy size, independent of performance. It is the equivalent of a management fee.
• Performance fee: accrues only when the strategy creates value, measured against a high-water mark.

Watermark Fee Manager

The standard implementation is the WatermarkFeeManager.

Fixed fee

The fixed fee grows with the share supply and the time elapsed since the last minting:

$\text{FixedFee} \approx \text{ShareSupply} \times \text{rate}_{\text{per second}} \times \Delta t$

It is split into two purposes: a management portion (supporting the Operator and the DAO) and a Security Module portion (rewarding stakers who provide the insurance backstop). If the strategy has a Security Module, its portion is carved out first and sent to it directly, and the remaining management portion is then divided among its recipients.

Example: at a 2% annualized fixed rate, a 1,000,000-share supply accrues ≈ 54.8 shares per day.

Performance fee

The performance fee uses a high-water mark: it is charged only when the share price rises above the highest price previously recorded. This ensures holders are never charged twice for the same gains: if the price falls and recovers, no performance fee is taken until it exceeds the prior peak.

$\text{PerfFee} \approx \text{ShareSupply} \times \dfrac{\text{newPrice} - \text{watermark}}{\text{newPrice}} \times \text{rate}_{\text{perf}}$

After the fee is computed, the watermark is raised to the new price.

Example: at a 10% performance rate, a 1,000,000-share supply whose price rises from 1.00 to 1.01 accrues ≈ 990 shares.

Configurable splits

Both the management fee and the performance fee are distributed to one or more recipients according to configurable basis-point splits (each set summing to 100%). This is how the protocol divides revenue between the Operator and the DAO, and it can be tuned per strategy by the fee-configuration role. The Security Module's cut, when present, is taken from the fixed fee before the management split.