# Dynamic Fees

Redemption fee is in μtokens and scales with the Reserve Ratio. Normal Vault Redemptions becomes unavailable when Reserve Ratio of a collection is below 20% and only way to redeem will be by bidding on a specific NFT.

### **Purpose and Reasoning**

Dynamic Redemption Fees, levied in μtokens, are a feature of the Floor Protocol designed to regulate redemptions from the Vault and mitigate the risk of its exhaustion. The introduction of these fees serves several key purposes:

1. **Maintaining Stability**: The dynamic fees act as a financial deterrent to slow down mass redemptions, particularly when the Reserve Ratio is low. This ensures the protocol remains stable and robust.
2. **Risk Mitigation**: The fee structure is crucial for preventing a rapid depletion of the Vault, reducing the risk of its exhaustion.
3. **Incentive for Protocol Maintenance**: When the Reserve Ratio drops below a critical level of 20%, the normal vault redemptions will be unavailable. This provides a strong financial incentive for the Flooring Protocol team to purchase NFTs from external marketplaces and refill the Vault, thereby stabilizing the system.

### Fee Structure

The table below details the Dynamic Redemption Fees based on the Reserve Ratio:

<table><thead><tr><th width="242">Reserve Ratio</th><th width="266">Redemption Fees in μtokens</th><th>Vault Contribution Quota</th></tr></thead><tbody><tr><td>50% -> 100%</td><td>10,000</td><td>1</td></tr><tr><td>40% -> 49%</td><td>20,000</td><td>2</td></tr><tr><td>30% -> 39%</td><td>30,000</td><td>4</td></tr><tr><td>20% -> 29%</td><td>40,000</td><td>8</td></tr><tr><td>≥ 20% (Normal Vault Redemptions Disabled)</td><td>N.A </td><td>N.A</td></tr></tbody></table>


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