# Minting

**Minting NEST:**

* **Mechanism:** Users can mint NEST by depositing EGGS into the protocol's smart contract.
* **Fee:** A 2.5% fee is applied to each minting transaction. Fees are added to the protocol, increasing the EGGS backing per NEST.
* **Supply Cap:** There is no supply cap on NEST. This ensures that minting and one-click leverage will continue indefinitely. While the token supply may inflate over time, fees and burning mechanisms ensure that the ratio of EGGS per NEST can only increase, ultimately preventing dilution.

<figure><img src="https://3389746960-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F6XOTuBliZWmYNBrB0hJ2%2Fuploads%2FfmKVuEd2BzVnOrylNJgB%2FWelcome%20to%20FigJam-8.png?alt=media&#x26;token=ba728b95-2885-4bac-b978-6e1302a76dfd" alt=""><figcaption></figcaption></figure>

**Redeeming NEST:**

The simplest way to redeem your NEST for EGGS is to 'sell' back to the contract via the 'swap' tab in the dApp.  This incurs the same 2.5% fee as minting, but burns the NEST and sends the underlying EGGS to the user. Fees are distributed to the contract, LP incentives, burn wallet and team at the same rates as minting.&#x20;

Alternatively, NEST can be redeemed by taking a loan against your position and instantly defaulting. This returns the underlying EGGS to the user, minus the collateral premium and interest, and burns the NEST.

***Minting Example:***

* Let's say there is 100 NEST tokens in existence, and there is 100 EGGS tokens backing them on the contract. That means the price of 1 NEST is 1 EGGS. There is a 2.5% minting fee, so to mint the next NEST token a user must pay 1.025 EGGS. Of the fee collected, 70% or 0.0175 EGGS, is added to the backing, so there is now 101 NEST and 101.0175 EGGS. We can calculate the new price of NEST by doing 101.0175 EGGS / 101 NEST = 1.0001732673 EGGS/NEST. The price of every NEST token has increased! The other 30% of the fee collected, or 0.0075 EGGS, is distributed to LP incentives, burn wallet and the team.

<pre class="language-html" data-full-width="false"><code class="lang-html"><strong>[User Deposits 1.025 EGGS]
</strong>         |
         v
+---------------------------+
|  NEST Token Smart Contract |
+---------------------------+
         |
         |---> Adds to Contract Backing:
         |        - 1.00 EGGS (Base Amount)
         |        - 0.0175 EGGS (70% of Fee)
         |
         |---> Distributes Fees:
         |        - 0.001875 EGGS (7.5% of fee) to LP Incentives
         |        - 0.001875 EGGS (7.5% of fee) to Burn Wallet
         |        - 0.003750 EGGS (15% of fee) to Team
         |
         |---> Mints 1 NEST Token
         v
[User Receives 1 NEST Token]
</code></pre>
