Fees & Economics
2 min read
Overview
RAC is designed with a transparent, on-chain fee structure. All fees are enforced at the smart contract level and can be independently verified on Arbitrum.
The protocol charges no AUM-based management fee and no performance fee on crypto gains.
Transaction Fees
When entering or exiting RAC, a small transaction fee applies. These fees are read directly from the deployed smart contracts.
Yield Strategy
RAC does not let idle capital sit dormant. The protocol's USDC buffer — maintained for risk management and exit liquidity — is deposited into Aave V3, earning yield as aUSDC.
This means:
- USDC held by the protocol earns lending yield continuously
- The yield accrues automatically via Aave's interest-bearing token mechanism
- 100% of harvested yield goes to the protocol treasury as a yield fee
- The yield strategy is modular — the underlying yield source (currently Aave) can be swapped to an alternative (e.g., Compound) via governance without redeploying the core system
Yield-Bearing Assets
Where available, non-USDC assets in the portfolio are also held in yield-bearing wrappers. These wrappers earn additional yield on crypto holdings, with the same yield fee structure applying.
This is an extension of the same principle: every unit of capital in the protocol should be working, even when it is not being actively rebalanced.
What RAC Does Not Charge
- No AUM-based management fee. There is no recurring percentage charge on assets under management.
- No performance fee on crypto gains. When the portfolio appreciates in value, 100% of that appreciation accrues to RAC holders through a higher NAV.
- No lock-up penalties. Users can exit at any time via instant burn (if buffer is sufficient) or queued burn (hourly windows).
Round-Trip Cost in Context
RAC's round-trip cost (mint + burn) should be evaluated against the alternatives:
- DEX swaps for an equivalent basket: Entering a diversified basket of 5 assets through individual DEX swaps typically costs 0.3% per swap (Uniswap v3 standard fee) plus gas plus slippage — roughly 1.5%+ for entry alone, before accounting for the complexity of managing and rebalancing the positions.
- Traditional hedge funds: The industry-standard "2 and 20" model charges a 2% annual management fee plus 20% of profits. RAC charges neither.
- Crypto index products: Many charge 1–3% annual management fees in addition to entry/exit fees.
The mint/burn fee also serves as a structural disincentive against short-term speculation, ensuring that frequent traders subsidize long-term holders rather than the other way around.
Protocol Sustainability
The protocol's primary sustainable revenue mechanism is the yield fee on idle capital. The USDC buffer (5–10%+ of TVL) earns Aave lending yield, which flows to the protocol treasury. At scale, this provides reliable revenue without extracting fees from investor returns on the crypto positions.
At current AUM, the protocol operates at a loss. We are transparent about this. The business model is designed to be viable at scale, and we have chosen to charge fees that are fair to users rather than extractive fees that subsidize early-stage economics.