Fee Collection, Burning, and Distribution

The Curve ecosystem generates revenue from various sources, primarily through trading fees from liquidity pools and interest from crvUSD markets. This page explains how these fees are collected, converted, and distributed to veCRV holders, detailing the contracts and processes involved.

The two primary revenue sources of the DAO are fees collected from liquidity pools and interest rate fees from crvUSD markets.

Usually, admin fees of liquidity pools are collected just as the tokens in the pool, though sometimes fees are collected in LP tokens. For the system, this distinction does not make any significant difference.

System Overview¶

The state of the system can be roughly summarized as follows:

The collected admin fees can accrue in any type of tokens, whether they are LP or "regular" tokens. For simplicity, the Hooker.vy contract, which is essentially responsible for transferring the reward tokens from the FeeCollector to the FeeDistributor, was omitted from the graph. This infrastructure functions exactly the same on chains where the CowSwap Protocol is deployed (Gnosis and soon Arbitrum). The only difference is that instead of transferring the reward tokens to a FeeDistributor contract, they are bridged to the FeeCollector on the Ethereum mainnet.

Key Contracts¶

The fee collection, burning, and distribution system of Curve involves the following main contracts:

Fee Burning¶

The process of burning coins into the target coin involves the following flow:

1. Collecting Fees: Admin fees are collected in various token types in the FeeCollector.
2. Burning Admin Fees: The burn process is initiated via the collect function, creating conditional orders for tokens to be burned.
3. Forwarding Fees: Collected target coins are forwarded to the FeeDistributor using the forward function.
4. Claiming Fees: Accrued fees can be claimed from the FeeDistributor using the claim function.
5. Splitting crvUSD Fees: The FeeSplitter handles the collection and distribution of crvUSD fees from crvUSD markets.

This system ensures efficient fee collection, conversion, and distribution across the Curve ecosystem, rewarding veCRV holders and supporting the ongoing development and maintenance of the protocol.

Curve has implemented different fee burning architectures over time to optimize the process:

The choice of architecture depends on the blockchain and available infrastructure. For chains where the CowSwap system isn't deployed, admin fees are burned using the original architecture and then transferred to Ethereum via bridging contracts.

This page will primarily focus on the CowSwap fee system while also providing information on the original architecture for context and comparison.

CowSwap Fee System¶

The current fee system utilizes a set of contracts to efficiently collect, convert, and distribute fees:

1. FeeCollector: Acts as the entry point for fee collection from various sources.
2. FeeSplitter: Handles the distribution of crvUSD fees from crvUSD markets.
3. CowSwapBurner: Converts collected fees into a unified token using CowSwap's conditional orders.
4. Hooker: Facilitates the execution of specific actions, such as forwarding fees.
5. FeeDistributor: Distributes the converted fees to veCRV holders.

This system ensures that all types of fees can be efficiently processed without the need to manually add coins to burners or hardcode exchange routes.

Previous Architecture¶

Prior to this system, Curve used multiple different kinds of burners where the exchange routes for the to-be-burned coins had to be manually added. Additionally, exchange routes were hardcoded, which often led to semi-efficient fee burning. If coins were not manually added to the burners, they could not be burned, which resulted in unburned (but obviously not lost) fees. The old burner contracts required lots of maintenance and dev resources.

The new system can and is deployed on other chains besides Ethereum but is partly dependent on, e.g., CoWSwap deployments if the CowSwapBurner is used. If the CowSwap protocol is deployed on a sidechain, fees can be burned there. For chains where this is not the case, the admin fees are still being burned using the original architecture and then transfered via a bridging contract to Ethereum.

Further Reading¶

• Old Fee Burning Architecture
• CowSwap Protocol Documentation
• veCRV Documentation