> For the complete documentation index, see [llms.txt](https://hedgehog-protocol.gitbook.io/main/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://hedgehog-protocol.gitbook.io/main/how-it-works/protocol-fees.md).

# Protocol Fees

{% hint style="success" %}
The protocol will have different fees, as described below.
{% endhint %}

Hedgehog introduces a **fee structure centered around outcome efficiency and market health**.\
In every market, whether it’s BaseFee, BTC tx fees, or MEV priority spreads, **all winning positions incur a trading fee upon settlement**.

This approach aligns incentives across all participants:

* **Winners contribute back** to the system, ensuring continuous liquidity and protocol sustainability.
* **Losers pay nothing beyond their loss**, preserving fairness and encouraging participation even in high-frequency or short-term markets.

By applying fees only to **profitable outcomes**, Hedgehog mirrors the logic of **options settlement and prediction markets,** rewarding successful hedges and speculations, while maintaining a lean, self-sustaining market design.

The collected trading fees are distributed across the ecosystem:

* A portion goes to **liquidity providers and market makers**, incentivizing continuous depth and tight spreads.
* Another portion funds **protocol operations and future market expansions**, such as upcoming FeeM auctions and MEV hedging instruments.

This **“fee-on-success” model** transforms Hedgehog into a **positive-sum ecosystem**: every win funds the next opportunity, creating perpetual liquidity and reinforcing the market’s predictive accuracy over time.