Fee Structure in Mage Labs

Mage Labs employs a transparent, configurable fee model that combines flat-rate simplicity with mathematical precision, delivering predictable trading costs and equitable reward distribution across all participants.

Core Fee System

Flat-Rate Fee Model

Mage Labs utilizes a flat-rate fee structure to maintain consistency and predictability across all trade volumes:

• Uniform Application: Ensures consistent fee application regardless of trade size
• Reduced Volatility: Minimizes percentage-based cost fluctuations, making high-volume trades more efficient
• Transparent Governance: Fee parameters are configurable on-chain for transparent governance and dynamic updates

Fee Tiers

The Mage Liquidity Layer offers 7 fee tiers ranging from 0.0001% to 1%, allowing communities to choose rates that align with their volume brackets and promote optimal swap rates.

Fee Distribution per Period

Let $\text{Fee}_{s,p}$ represent the total DEX fees accrued during a given period $p$.

Split of Fees

The protocol distributes fees according to the following allocation:

Liquidity Providers (LPs): 70%

Protocol Allocation: 30%

The protocol’s 30% share is subdivided as follows:

1. Token Staking Pool: 15%

   $$\text{Token Staking} = 0.15 \times \text{Fee}_{s,p}$$

   (15% of protocol share = 4.5% of total fees)

2. Treasury: 10%

   $$\text{Treasury} = 0.10 \times \text{Fee}_{s,p}$$

   (10% of protocol share = 3% of total fees)

3. NFT Staking Pool: 5%

   $$\text{NFT Staking} = 0.05 \times \text{Fee}_{s,p}$$

   (5% of protocol share = 1.5% of total fees)

User Payouts (Pro-Rata Distribution)

Variables

Let:

• $H_{u,p}^{tok}$: User $u$‘s staked MAGE tokens during period $p$
• $H_{\Sigma,p}^{tok}$: Total MAGE tokens staked across all users during period $p$
• $H_{u,p}^{nft}$: User $u$‘s staked NFT weight during period $p$
• $H_{\Sigma,p}^{nft}$: Total NFT staking weight across all users during period $p$

Token Staking Rewards

The payout for each token staker is calculated pro-rata based on their share of the total staked tokens:

In words: Each user receives a share of the 15% token staking pool proportional to their stake.

NFT Staking Rewards

Similarly, NFT stakers receive rewards based on their proportional stake:

In words: Each NFT staker receives a share of the 5% NFT staking pool proportional to their staked NFT weight.

Distribution Characteristics

• On-Chain: All distributions are executed on-chain
• Pro-Rata: Rewards are distributed proportionally based on stake
• Non-Custodial: Stakers maintain full control of their assets
• Daily Claims: Stakers can claim accrued rewards daily

Fee Distribution Breakdown

Visual Summary

Loyalty Boost Multiplier

Early and long-term liquidity providers earn an increased percentage of fees through the Capital Endpoint Loyalty Boost:

• Standard LP Rate: Base 70% of trading fees
• Loyalty Multiplier: 2-3× after approximately 90 days
• Effective Rate: Up to 140-210% of standard LP fees for boosted providers

This boost is designed to reduce risk/reward curves and break-even periods for long-term capital endpoints.

Governance & Transparency

On-Chain Configuration

All fee ratios and staking reward coefficients are governance-controlled and on-chain configurable, ensuring:

• Transparent Allocation: Clear, verifiable distribution of platform revenue
• Equitable Returns: Fair compensation for active participants
• Market Adaptability: Dynamic adjustment to evolving market conditions
• Community Control: Governed transactions ensure transparency and oversight

Configurable Parameters

The following parameters can be adjusted through governance:

• Protocol fee rates
• LP fee rates
• Token staking allocation
• NFT staking allocation
• Treasury allocation
• Loyalty boost multipliers
• Fee tier structures

Comparative Advantage

Cost Efficiency

Mage Labs Adaptive Fee Framework with flat-fee curves reduces execution costs by:

• 20x to 1000x cheaper than some competing infrastructure layers
• 95% to 99% lower execution costs per swap compared to other Solana DEX protocols
• Predictable, stable fees across all trade sizes

Revenue Sharing Model

The “everyone eats” model ensures sustainable growth:

• 70% to liquidity providers (with loyalty boost potential)
• 30% distributed across stakers, NFT holders, and treasury
• Creates a self-reinforcing economic loop where all participants benefit from network expansion

Example Calculations

Scenario: $100,000 in Total Fees

1. Liquidity Providers: \70,000$ (70%)
2. Token Stakers: \15,000$ (15%)
3. Treasury: \10,000$ (10%)
4. NFT Stakers: \5,000$ (5%)

Individual Token Staker Example

If a user has staked 10,000 MAGE and the total staked is 1,000,000 MAGE:

Individual NFT Staker Example

If a user has staked NFTs worth 50 weight units and total NFT weight is 5,000 units:

Summary

Mage Labs fee architecture combines:

• Flat-Rate Simplicity: Predictable costs across all trade sizes
• Mathematical Precision: Pro-rata distribution ensures fairness
• Equitable Rewards: Fair distribution to LPs, stakers, and NFT holders
• Transparent Control: Community-driven governance of fee parameters
• Sustainable Growth: “Everyone eats” model aligns all participants with protocol success

This fee structure creates a self-sustaining liquidity fabric where protocol growth directly benefits all ecosystem participants through recurring, predictable cash flows.

Additional Resources

For more information on Mage Labs technical implementation and liquidity mechanisms, see:

• CFMM Implementation
• Smart Contract Architecture
• Security & Audits
• FAQ