Fee Calculation Example

A real-life calculation example for Layer-1 and Layer-2 fees

Pre-Defined parameters (Assumptions)

• Liquidity Fee is charged at the end of each clearing cycle

• Clearing Fee is charged at the end of each clearing cycle

• Liquidity Fee as agreed between brokers is 0.01%

• Price BTC/USDT = 20,000

• Price $YELLOW/USDT = 10

• Transaction: Broker A buys 20 BTC vs. USDT from Broker B

• Agreed Liquidity Fee between brokers = 0.05%

Broker A

• Acts as Market Taker and is thus subject to pay the Liquidity Fee

• 4 open State Channels = 100 bps Clearing Fee

• Liability Broker A: 200,000 USDT (will have to settle/send USDT to Broker B)

Broker B

• Acts as Market Maker and is thus entitled to receive the Liquidity Fee

• 8 open State Channels = 80 bps Clearing Fee

• Liability Broker B: 10 BTC (will have to settle/send BTC to Broker A)

Fee Calculation

• Liquidity Fee Broker A = 200,000 x 0.05% = 100 USDT

• Clearing Fee Broker A = 200,000 / 10 x 1% = 200 YELLOW

• Clearing Fee Broker B = 10 x 20,000 / 10 x 0.8% = 160 YELLOW

Settlement Amounts

Currency	Broker A	Broker B
BTC	+10	-10
USDT	-200,100	+200,100

Fee Payment Cash Flow

Type	Broker A	Broker B	Period
Liquidity Fee (L1)	-100 USDT	n/a	On Settlement
Clearing Fee (L2)	-200 $YELLOW	-160 $YELLOW	On Settlement

Broker A will receive a total of 10 BTC on settlement and pay a total of USDT 200,100. Yellow Network will receive a total of 360 $YELLOW for the Reserve Vault.

• The Liquidity Fee is charged automatically to the wallet of the Market Taker at the clearing.

• The Clearing Fee is automatically charged to the $YELLOW wallet of both brokers at the clearing.