> ## Documentation Index
> Fetch the complete documentation index at: https://docs.meteora.ag/llms.txt
> Use this file to discover all available pages before exploring further.

# Operation Fee Calculation

When an operator submits a `deposit_strategy` or `withdraw_strategy` transaction (i.e., when assets are rebalanced between lending protocols), we call this the **rebalance crank**.

A fee is collected to the [fee\_vault](https://solscan.io/account/9kZeN47U2dubGbbzMrzzoRAUvpuxVLRcjW9XiFpYjUo4#splTransfers) every time the operator sends a rebalance crank. This fee is paid in vault LP SPL tokens and can be seen at the fee\_vault address.

Currently, we charge **5% of profit** as the operation (performance) fee.

***

# Variables

**Before rebalance:**

* `vault.total_amount`: $t_1$
* `lp_mint.total_supply`: $p_1$
* **Virtual price** (value of LP token): $v_1 = t_1 / p_1$

**After rebalance:**

* `vault.total_amount`: $t_2$
* `lp_mint.total_supply`: $p_1$
* **Virtual price**: $v_2 = t_2 / p_1$

***

# Fee Calculation

We charge an operation fee:

```math theme={"system"}
fee = 0.05 \times (t_2 - t_1)
```

***

# Adjusting Virtual Price After Fee

After deducting the fee, the virtual price becomes:

```math theme={"system"}
v_{21} = (t_2 - fee) / p_1
```

However, the vault does **not** send tokens directly to the treasury token account (since it may not have enough liquidity). Instead, the vault **mints additional LP tokens** for the fee\_vault.

Let $\delta$ be the number of new LP tokens minted for the fee. The new virtual price is:

```math theme={"system"}
v_{22} = t_2 / (p_1 + \delta)
```

We want the virtual price after fee to remain the same, so set $v_{21} = v_{22}$:

```math theme={"system"}
(t_2 - fee) / p_1 = t_2 / (p_1 + \delta)
```

***

# Solving for $\delta$

Rearranging the equation above, we get:

```math theme={"system"}
\delta = (p_1 \times fee) / (t_2 - fee)
```

Or, substituting $fee = 0.05 \times (t_2 - t_1)$:

```math theme={"system"}
\delta = (p_1 \times 0.05 \times (t_2 - t_1)) / (t_2 - 0.05 \times (t_2 - t_1))
```

Which simplifies to:

```math theme={"system"}
\delta = (p_1 \times 0.05 \times (t_2 - t_1)) / (0.95 \times t_2 + 0.05 \times t_1)
```

***

**Summary:**

* The operation fee is 5% of the profit from each rebalance crank.
* The fee is paid by minting new LP tokens to the fee\_vault, not by transferring underlying assets.
* The number of LP tokens minted is calculated to ensure the virtual price for LP holders remains consistent after the fee is taken.