> For the complete documentation index, see [llms.txt](https://docs.snowballfi.app/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.snowballfi.app/documentation/protocol-mechanics/minting-and-melting.md).

# Minting and Melting

## 🧊 Minting

**Mechanism:** Users can mint `$SNOW` by depositing `$AVAX` into the protocol's smart contract.

**Fee:** A 2.5% minting fee is applied to each minting transaction. Fees increase backing of `$SNOW`.

**Result**: Each new mint increases the `$AVAX` treasury, and backing per `$SNOW` always increases — no matter the user’s intent.

<figure><img src="/files/Vux0XkmehFkGLsAOHm2U" alt=""><figcaption></figcaption></figure>

***

## 🌊 Redeeming (Melting)

**Mechanism:** Users can redeem `$AVAX` by burning `$SNOW`.

**Fee:** A 2.5% burn fee applies to every redemption.&#x20;

**Effect:** Redeeming reduces circulating supply while still growing backing — which increases the `$AVAX`-per-`$SNOW` ratio.

***

## 🧮 Example

Imagine there are 100 `$SNOW` in existence, backed by 100 `$AVAX`.\
That gives a 1:1 backing ratio.

A user mints 1 `$SNOW` and deposits 1.025 `$AVAX`:

* 1 `$AVAX` → backing
* 2.5% fee = 0.025 `$AVAX`. 0.01625 `$AVAX` (65%) → `$AVAX` backing
* Remaining fee split between Treasury and Bribes.

**New state:**

* Supply = 101 `$SNOW`. Backing = 101.01625 `$AVAX`
* Backing per `$SNOW` = \~1.00016 `$AVAX`

If another user burns 5 `$SNOW`:

* Burn fee = 0.125 `$AVAX` (2.5% of 5 `$AVAX`)
* 65% of fee = 0.08125 `$AVAX` → added to backing
* 35% of fee = \~0.044 `$AVAX` → sent to treasury & bribes
* New supply = 96 `$SNOW`. New backing = 96.0975 `$AVAX`
* New backing per `$SNOW` ≈ 1.00102 `$AVAX`

{% hint style="success" %}
&#x20;Whether Minting or Redeeming, backing per $SNOW always goes up.
{% endhint %}

```
[User Deposits 1.025 AVAX]
         |
         v
+-----------------------------+
|     SNOW Smart Contract    |
+-----------------------------+
         |
         |---> Adds to Contract Backing:
         |        - 1.00 AVAX
         |        - 0.01626 AVAX (65% of Fee)
         |
         |---> Distributes Fees:
         |        - 0.00625 AVAX (25% of Fee) to Treasury
         |        - 0.0025 AVAX (10% of Fee) to Bribes
         |
         |---> Mints 1 $SNOW
         v
[User Receives 1 $SNOW Token]
```


---

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