Economic Model

Fee Structure

Base Protocol Fee

Fee Model:

Every swap incurs protocol fee of 0.1%

Example:
User swaps: 1000 USDC → DAI
Protocol fee: 1000 * 0.001 = 1 USDC
Protocol receives: 1 USDC

Configurable via Fee Divisor:

Fee Divisor = 1000 results in 0.1% fee
Fee Divisor = 2000 results in 0.05% fee
Fee Divisor = 500 results in 0.2% fee

Formula: Fee % = 100 / Fee Divisor

Multi-Denomination Fee Accumulation

ETH Swaps:

User swaps: 10 ETH → USDC

Execution:
1. User sends 10 ETH
2. Fee calculated: 10 * 0.1% = 0.01 ETH
3. 9.99 ETH routed to venue
4. Protocol accumulates: 0.01 ETH in feeAccumulatedETH

Token Swaps:

User swaps: 100,000 LINK → USDC

Execution:
1. User sends 100,000 LINK
2. Fee calculated: 100,000 * 0.1% = 100 LINK
3. 99,900 LINK routed to venue
4. Protocol accumulates: 100 LINK in feeAccumulated[LINK]

Token-to-Token Swaps:

User swaps: 50,000 USDC → DAI

Execution:
1. User sends 50,000 USDC
2. Fee on input: 50,000 * 0.1% = 50 USDC
3. 49,950 USDC routed to venue
4. Receives ~49,950 DAI from venue
5. Protocol accumulates: 50 USDC

Fee Visibility

Users see exact fees before confirming trade:

Swap Details:
├─ Input: 1000 USDC
├─ Expected Output: ~999 DAI (estimated)
├─ Protocol Fee: 1 USDC
├─ Venue Fee: ~0.01% (built into output)
├─ Total Slippage: 0.1%
└─ Final Amount: ~999 DAI

User confirms: "Yes, I accept these terms"

Revenue Streams

Primary Revenue: Swap Volume

Volume-Based Model:

Daily Volume Processed: $100M
Fee Rate: 0.1%
Daily Fee Revenue: $100,000

Monthly Volume: $3B
Monthly Revenue: $3,000,000

Scaling Properties:

Revenue scales linearly with swap volume
No per-transaction costs to protocol
High-margin business model

Secondary Revenues (Future)

Potential Revenue Sources:

Premium API tier for developers
Advanced analytics/reporting services
Liquidity provider rewards
Integration partnerships
Governance participation

Cost Structure

Fixed Costs

Smart Contract Deployment:

One-time: ~$50,000 (initial deployment gas)
No recurring deployment costs
Costs decrease as network scales

Variable Costs

Minimal Operational Overhead:

No servers to maintain
No databases to operate
No staff (initially)
No ongoing infrastructure bills

Blockchain Network Costs:

Inherent to any on-chain protocol
Paid by users (included in transaction gas)
Not borne by protocol itself

Economic Efficiency

Centralized Aggregator Costs:
├─ Server infrastructure: $10,000+/month
├─ Database hosting: $2,000+/month
├─ Support staff: $100,000+/month
├─ Security monitoring: $20,000+/month
├─ Regulatory compliance: $50,000+/month
└─ Total: $180,000+/month minimum

MonBridge Costs:
├─ Smart contract deployment: $50,000 (one-time)
├─ Occasional audits: $20,000-100,000 (periodic)
├─ Developer team: $200,000+/month (for protocol improvements)
└─ Operating margin: 95%+ of fees retained

Profitability Analysis

Break-Even Analysis (Realistic)

Monthly Costs: $200,000 (small team + audits + infrastructure)
Fee Revenue Needed: $200,000/month

Daily Volume Needed for Breakeven:
$200,000 / 30 days = $6,667/day in fees
At 0.1% fee = $6,667,000 daily volume
= ~$200M monthly volume

Realistic Timeline:
Year 1: $100-150M annual (won't break even)
Year 2: $500M-1B annual (approaching breakeven, late Q4)
Year 3: $1-2B annual (breakeven achieved in Q1)

Growth Scenarios

Conservative Scenario (Year 1):

Monthly Volume: $100M
Fee Revenue: $100,000/month
Operating Margin: Negative (during development)
Focus: User acquisition and venue integration

Scenario Comparison:

Year 2 - Conservative:

Monthly Volume: $300-500M
Fee Revenue: $100-150K/month
Operating Costs: $200K/month
Margin: Negative (-$50-100K/month loss)
Status: Still investing, not profitable

Year 3 - Realistic:

Monthly Volume: $1-1.5B
Fee Revenue: $300-450K/month
Operating Costs: $250-300K/month
Margin: Breakeven to 20% profit
Status: Approaching sustainability

Year 5+ - Mature (If Everything Works):

Monthly Volume: $3-5B (IF becomes dominant)
Fee Revenue: $900K-1.5M/month
Operating Costs: $500K/month
Margin: 30-40% profit
Status: Sustainable, self-funding

Reality Check: These are ambitious but realistic. DeFi is competitive, market cycles exist, regulatory risks remain.

Fee Justification

Value Provided vs. Cost

What Users Get for 0.1% Fee:

1. Best-in-class price aggregation
   Without MonBridge, users pay:
   - Manual venue shopping (time cost): ~1%
   - Suboptimal execution: ~0.5%
   - Total hidden cost: ~1.5%

2. Automatic multi-venue optimization
   Value: ~0.5% slippage improvement

3. Guaranteed 24/7 availability
   Value: Insurance against outages

4. Flash loan protection (TWAP oracle)
   Value: Protection from manipulation

5. Automatic venue failover
   Value: Redundancy and reliability

MonBridge 0.1% fee << Typical hidden costs (1.5%)

Competitive Positioning

Service

Fee

Notes

Manual Trading

~1.0%

User time, suboptimal execution

Centralized Exchange

0.1%

Limited to their tokens

Traditional Aggregator

0.05%

But: Server outage risk

MonBridge

0.1%

Decentralized, always available

Positioning: Slightly higher fee offset by superior reliability and transparency.

Fee Governance

Current Model (Centralized)

Owner-controlled fee structure
├─ Can adjust fee divisor
├─ Can add/remove fees for features
├─ Can enable/disable slippage charges
└─ Can withdraw accumulated fees

Purpose: Initial flexibility for protocol optimization

Future Model (Decentralized)

Potential Governance Evolution:

Protocol Token Distribution
├─ Community voting on fee structure
├─ Stakeholders vote on parameter changes
├─ Treasury allocation via DAO
├─ Transparent governance process

Benefits:
- Reduces operator risk
- Aligns incentives with stakeholders
- Increases protocol legitimacy
- Enables community involvement

Fee Withdrawal & Treasury Management

Fee Accumulation

On-Chain Tracking:

uint public feeAccumulatedETH           // ETH fees
mapping(address => uint) feeAccumulated // Token fees by address

Example Accumulation:

Day 1: 1000 USDC fees accumulated
Day 2: 500 USDC + 0.5 ETH fees accumulated
Day 3: 1500 DAI fees accumulated

Total Treasury:
├─ USDC: 1500
├─ ETH: 0.5
└─ DAI: 1500

Fee Withdrawal

Owner-Authorized Withdrawal:

function withdrawFees() external onlyOwner {
    // Transfers accumulated feeAccumulatedETH to owner
    // Transfers accumulated tokens to owner
    // Resets accumulators to zero
}

Treasury Uses:

Protocol development and maintenance
Security audits and monitoring
Team operations
Community incentives
Liquidity provider rewards

Economic Incentives

User Incentives

Why Users Use MonBridge:

Better Execution: Best available pricing through aggregation
Lower Total Cost: 0.1% fee + reduced slippage < alternatives
Always Available: 24/7 reliable service (vs. servers going down)
Transparent Pricing: No hidden fees or manipulation
Automatic Optimization: Complex routing handled automatically

Venue Incentives

Why DEX Venues Support MonBridge:

Increased Volume: Routing traffic from aggregation
Better Pricing: Incentive-aligned routing to quality venues
Network Effects: More aggregators mean more users
Competitive Pressure: Encourages venue optimization

Developer Incentives

Why Builders Integrate MonBridge:

Easy Integration: Simple API to add DEX functionality
Consolidated Liquidity: Single integration spans multiple venues
Optimized Routing: Built-in algorithms handle complexity
Fee Sharing (future): Potential revenue share for integrators

Sustainability Analysis

Long-Term Viability

Positive Factors:

✅ Scalable business model (marginal cost ~0)
✅ Network effects (more users = more liquidity = better execution)
✅ No ongoing infrastructure costs
✅ Protocol exists indefinitely on blockchain
✅ Strong demand for reliable aggregation

Risk Factors:

⚠️ Competition from other aggregators
⚠️ DEX protocol changes could require updates
⚠️ Regulatory changes in crypto markets
⚠️ Token economics volatility

Revenue Diversification

Current: Primarily swap volume fees Future Opportunities:

Premium features/analytics
Integration partnerships
Liquidity provider rewards
Governance participation
Cross-chain bridge fees

Comparison: Economics vs. Alternatives

Metric

Centralized Agg.

MonBridge

Fee

0.05-0.3%

0.1%

Infrastructure Cost

High ($200K+/month)

Low ($200K/month team)

Outage Risk

High - Servers fail

None - On-chain only

Breakeven Timeline

Already profitable

Year 2-3

Long-term Scalability

Limited by infrastructure

Scales with blockchain

Total User Cost

0.05% + 0.3% slippage

0.1% + 0.1% slippage

Uptime Guarantee

99% (server-dependent)

99.99% (blockchain-dependent)

Key Insight: MonBridge's higher fee is offset by better execution and guaranteed availability. Total cost to user is likely lower.

Financial Projections

Year 1 (Conservative)

Q1 (Launch): 
- Daily volume: $50k-1M
- Monthly revenue: $1.5-3K
- Focus: Product stability, initial users

Q2:
- Daily volume: $1.5-2.5M
- Monthly revenue: $3-8K
- Focus: Building user base, venue integrations

Q3:
- Daily volume: $3.0-5.0M
- Monthly revenue: $10-15K
- Focus: Feature refinement, marketing

Q4:
- Daily volume: $5.0-10.0M
- Monthly revenue: $15-30K
- Year 1 target: $100-150K annual revenue

Year 2: Growth Phase

Realistic Scenario:
- Daily volume: $20.0-50.0M (if market cooperates)
- Monthly revenue: $15-35K
- Annual revenue: $72.0K - $180k
- Likely: Still in investment phase, slight losses

Optimistic Scenario:
- Daily volume: $50.0M-100m
- Monthly revenue: $50-120K
- Annual revenue: $500k - $1.8M

Year 3: Maturation

Market Share Reality:
- Total DEX volume: ~$150-200B annually
- 0.5-1% market share is realistic 3-year goal
- Not 10% (that's 10+ year vision)

Long-term (5+ Years):

IF protocol becomes ecosystem standard:
- Daily volume: $1-5B possible
- Monthly revenue: $1-2M
- But: Competitive landscape, market cycles will limit this

Next: See Use Cases to understand market opportunities driving economics.

PreviousSecurity Framework NextGovernance Framework

Last updated 2 months ago

Good night

hashtagFee Structure

hashtagBase Protocol Fee

hashtagMulti-Denomination Fee Accumulation

hashtagFee Visibility

hashtagRevenue Streams

hashtagPrimary Revenue: Swap Volume

hashtagSecondary Revenues (Future)

hashtagCost Structure

hashtagFixed Costs

hashtagVariable Costs

hashtagEconomic Efficiency

hashtagProfitability Analysis

hashtagBreak-Even Analysis (Realistic)

hashtagGrowth Scenarios

hashtagFee Justification

hashtagValue Provided vs. Cost

hashtagCompetitive Positioning

hashtagFee Governance

hashtagCurrent Model (Centralized)

hashtagFuture Model (Decentralized)

hashtagFee Withdrawal & Treasury Management

hashtagFee Accumulation

hashtagFee Withdrawal

hashtagEconomic Incentives

hashtagUser Incentives

hashtagVenue Incentives

hashtagDeveloper Incentives

hashtagSustainability Analysis

hashtagLong-Term Viability

hashtagRevenue Diversification

hashtagComparison: Economics vs. Alternatives

hashtagFinancial Projections

hashtagYear 1 (Conservative)

hashtagYear 2: Growth Phase

hashtagYear 3: Maturation

Fee Structure

Base Protocol Fee

Multi-Denomination Fee Accumulation

Fee Visibility

Revenue Streams

Primary Revenue: Swap Volume

Secondary Revenues (Future)

Cost Structure

Fixed Costs

Variable Costs

Economic Efficiency

Profitability Analysis

Break-Even Analysis (Realistic)

Growth Scenarios

Fee Justification

Value Provided vs. Cost

Competitive Positioning

Fee Governance

Current Model (Centralized)

Future Model (Decentralized)

Fee Withdrawal & Treasury Management

Fee Accumulation

Fee Withdrawal

Economic Incentives

User Incentives

Venue Incentives

Developer Incentives

Sustainability Analysis

Long-Term Viability

Revenue Diversification

Comparison: Economics vs. Alternatives

Financial Projections

Year 1 (Conservative)

Year 2: Growth Phase

Year 3: Maturation