The Protocol's Cut
We've seen the rates, the caps, and the flywheel that grows the whole machine - now let's look at the thinnest slice of all: what Own itself keeps.
Own is not a charity, but it's also not a toll booth. It takes a small cut of every trade and leaves the lion's share to the people doing the work - the LPs who supply collateral and the Market Maker who quotes and hedges. This chapter is about that cut: where it comes from, and how it gets divided.
Where the cut comes from: the spread
Every time someone mints or redeems an eToken, there's a tiny gap between the buy price and the sell price. That gap is the trading spread - about 0.25% per trade. It's the cost of doing business, and it's the only trading cost on Own. There are no separate platform fees layered on top.
On its own, 0.25% sounds like nothing. But it adds up. At a modest $3M of total value locked, the protocol expects roughly $15.6M in annual trading volume - and a 0.25% spread on that volume is about $39,000 a year in revenue. Real money, generated automatically by activity.
So the only question left is: who gets that $39,000?
A note before we go further
One honest caveat. Everything below describes Own's target mechanics - the economic model the protocol is built to run.
On the current testnet contracts (Own runs on Base Sepolia today), there is no separate protocol fee carved out of a trade. The Market Maker simply quotes a price with its spread baked in, and that quoted spread is the trading cost. The full payment flows to the maker, who captures the spread off-chain. The formal split we're about to describe is the intended way that spread revenue gets divided as the protocol matures - not a line item you'd find onchain right now.
With that said, here's the plan.
Two ways to split it
The split is a business decision, not a law of physics, and it changes depending on what the protocol needs most at a given moment. There are two models.
Option A - Maker-friendly (50 / 40 / 10). Half goes to LPs, a generous 40% goes to the Market Maker, and 10% goes to the Protocol treasury.
Option B - LP-friendly (80 / 10 / 10). LPs take the lion's share at 80%, the Market Maker takes a thin 10%, and the treasury keeps its 10%.
Here's the same idea as a picture:
Option A (launch) Option B (scale)
LP ######## 50% LP ################ 80%
MM ####### 40% MM ## 10%
Prot ## 10% Prot ## 10%
--> recruit the maker --> reward the LPs
Notice the treasury's 10% never moves. Own's own cut stays thin and constant either way - the negotiation is really between LPs and the Market Maker.
Why start generous to the maker
At launch, the protocol's biggest problem is liquidity: you can't trade if no one is quoting prices. The Market Maker is the hardest, most fragile piece to recruit and keep - it has to commit capital, run a hedging operation, and stay online. So early on, you pay it well.
Under Option A, on that $39k of spread revenue:
| Recipient | Share | $/year | Effect |
|---|---|---|---|
| LPs | 50% | ~$19,500 | +0.65% to LP yield |
| Market Maker | 40% | ~$15,600 | Strong incentive to keep quoting and hedging |
| Protocol | 10% | ~$3,900 | Treasury |
A 40% share is how you convince a market maker to show up before there's much volume to earn from. The generous slice is the recruiting bonus.
Why shift toward the LPs later
Once volume is high, the math flips. A market maker earning 10% of a large pie is doing just fine - it no longer needs the oversized share to stay interested. Meanwhile, every extra dollar handed to LPs raises their yield, which pulls in more collateral, which feeds the flywheel we saw last chapter.
Under Option B, on the same $39k:
| Recipient | Share | $/year | Effect |
|---|---|---|---|
| LPs | 80% | ~$31,200 | +1.04% to LP yield |
| Market Maker | 10% | ~$3,900 | Thin - only works once volume is high |
| Protocol | 10% | ~$3,900 | Treasury |
That extra LP yield - over a full percentage point - is what feeds growth: it pulls in more collateral, which feeds the flywheel. So the plan is simple: start with Option A to recruit the maker, then migrate toward Option B as volume scales. More to the maker makes it easy to launch; more to the LPs makes it grow fast.
The bottom line
We've now walked the entire money story - demand, capture, dials, and cut. Here's the whole thing on one page:
| Question | Answer |
|---|---|
| Where's the demand? | Crypto funds harvesting perp funding (~+5-13%/yr) via leveraged stock positions |
| How do we capture it? | Borrowers pay ~7% - the premium above Aave (~3%) flows to LPs, MM, protocol |
| What do LPs earn? | ~4.5% (USDC), ~3.8% (wstETH), ~1.5% (BTC) organic - 30-50% above benchmark; ~6-7% with incentives |
| What do borrowers pay? | ~7% - cheaper than perp funding, so the trade stays profitable |
| How much gets borrowed? | ~21-28% of each vault, at ~77% of the lending book's capacity |
| What keeps it safe? | Per-collateral backing caps (1.5×-2.0×), never loosened for growth |
| How does it grow? | Flywheel: yield → collateral → capacity → borrowing → yield |
| How is spread split? | 50/40/10 at launch (recruit the maker) → 80/10/10 at scale (reward LPs) |
The shape of the whole business is right there: traders pay to borrow, LPs and the maker earn the bulk of it, and Own keeps a steady, modest 10% to fund itself. Everyone is paid out of the same activity, and no single party's cut is large enough to break the others.
What just happened
- Every mint and redeem carries a small trading spread (~0.25%) - the only trading cost on Own, and the source of protocol revenue.
- At ~$3M TVL, that spread is worth roughly $39k a year, split three ways: LPs, the Market Maker, and the Protocol treasury.
- Option A (50/40/10) pays the maker generously - best at launch, when recruiting a market maker matters most.
- Option B (80/10/10) pays LPs generously - best at scale, where extra LP yield supercharges the flywheel. The treasury keeps a steady 10% in both.
- This is the target economic model. On today's testnet contracts there is no separate protocol fee - the maker's quoted spread is the trading cost, captured off-chain.