> For the complete documentation index, see [llms.txt](https://paragon-protocol.gitbook.io/paragon-protocol/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://paragon-protocol.gitbook.io/paragon-protocol/core-products/surplus-and-rebates.md).

# Surplus & Rebates

### What Is Surplus?

When you swap, you define a minimum acceptable output:

* **minOut** → your guaranteed result
* **amountOut** → actual execution result

If execution performs better:

**Surplus = amountOut − minOut**

***

#### Important

* Surplus is never negative
* If execution cannot meet your minimum → the trade reverts (or falls back)
* Your minimum output is always enforced

***

### How Surplus Is Distributed

Surplus is split programmatically:

* **60% → Trader**
* **30% → Liquidity Providers (LPs) used in the route**
* **10% → stXPGN / veFlow lockers**

***

### Why This Matters

In traditional DEX execution:

* pricing improvements are not always returned to the user
* value can be lost to MEV or inefficient routing

With Paragon:

* execution is optimized through solver competition
* improvements beyond your minimum are shared transparently
* incentives are aligned across traders, LPs, and governance

***

### Example

You swap:

**1,000 USDT → BNB**\
**minOut = 3.0000 BNB**

Actual execution:

**amountOut = 3.0120 BNB**

***

**Surplus = 0.0120 BNB**

Distribution:

* Trader → 0.0072 BNB
* LPs → 0.0036 BNB
* Lockers → 0.0012 BNB

***

👉 In the UI this appears as:

**“You saved 0.40%”**

***

### Where Rewards Go

#### 🧑 Trader

* receives immediate rebate
* paid in the output token
* can:
  * remain in wallet
  * be used directly
  * be routed into staking (optional)

***

#### 💧 Liquidity Providers (LPs)

* only LPs used in the execution route receive rewards
* rewards are proportional to:
  * liquidity contribution
  * actual usage during execution

👉 Only active, useful liquidity earns surplus.

***

#### 🔒 Lockers (stXPGN / veFlow)

* receive a protocol-aligned share
* participate in long-term incentive distribution
* benefit from overall system activity

***

### How LP Rewards Work

For each trade:

* specific pools are used in routing
* those pools receive a portion of surplus
* LPs earn based on their share of liquidity at execution time

***

### Claiming Rewards

**Trader Rebates**

* instant
* no claim required

***

**LP Flow Earnings**

* tracked per pool
* claimable at any time

***

**Locker Rewards**

* accumulate over time
* claimable via staking systems

***

### Transparency (PoBE)

Each trade records:

* expected output (minOut)
* actual execution output
* surplus generated
* distribution breakdown

Displayed as:

👉 **Proof-of-Best-Execution (PoBE)**

All data is:

* on-chain
* verifiable
* auditable

***

### Edge Cases

* no surplus → no additional rewards
* market movement → trade may revert
* very small surplus → minimal distribution

***

### Security & Protections

* minimum output always enforced
* solver execution validated
* routing checked before settlement
* invalid or unsafe routes rejected

***

### Parameters (Testnet)

* surplus split: **60 / 30 / 10**
* protocol fee: **0% (initial phase)**
* route complexity: controlled

***

### Positioning

Surplus & Rebates transform execution efficiency into shared value.

Rather than extracting value from users, Paragon redistributes execution improvements across participants.

***

### Summary

Surplus & Rebates introduce a new execution model:

* traders receive execution improvements
* LPs earn based on real usage
* lockers benefit from protocol activity

This aligns incentives across the entire system and connects execution quality directly to user outcomes.


---

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