This page describes how the Bao platform earns revenue and how it is used

Borrow Vaults

All synths borrowed from the lend vaults are minted directly into the borrow vault, meaning there are no lenders. All interest from borrowing in the Borrow Vaults is revenue. Revenue is also earned from liquidation incentives. Loan interest is split between the insurance fund and BAO buybacks based on the "reserve factor". Liquidation revenue is added to the insurance fund.

Liquidity Balancers

Liquidity balancers earn revenue through trading fees, arbitrages, and liquidity incentives. Trading fees and arbitrages are used to buy back BAO tokens Liquidity incentives are used to recycle back into more liquidity incentives

The Minter (COMING SOON)

The minter earns revenue from minting fees and yield on the collateral backing the baoTOKENS and upTOKENS. Minting fees go to BAO token buybacks. Collateral yield is used to incentivize stability pool deposits

Lend Markets (COMING SOON)

Lend markets earn a share of interest on loans and a share of liquidation incentives similar to borrow vaults. The only difference is a portion of interest on loans is given to lenders.

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