> For the complete documentation index, see [llms.txt](https://arcafinance.gitbook.io/arcafinance-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://arcafinance.gitbook.io/arcafinance-docs/protocol/ntoken-metro-shadow/exit-penalty.md).
# Exit Penalty
## Exit Penalty in Arca's DeFi Protocol Overview
*nTokens make locked governance tokens like (nMetro) fungible, the Exit Penalty is a mechanism in Arca's DeFi protocol that slashes a portion of a user's claim when they exit their nTOKEN position early.*
*This protects protocol stability, rewards long-term commitment, and redistributes penalties to enhance liquidity and performance through the Piggy Bank. Base penalties vary by lock duration (e.g., 25% for 3 months, up to 75% for 12 months), scaled proportionally by remaining time.*
*Early exits fuel the system rather than breaking it, promoting sustainability.*
### What is Exit Penalty?
*When a user exits their nTOKEN position early, a portion of their claim is slashed. This mechanism protects protocol stability and rewards those who commit to the full lock duration.*
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### Why It Matters
* *Encourages long-term commitment*
* *Redistributes value to loyal lockers*
* *Helps build sustainable protocol liquidity*
* *Powers the Piggy Bank & vault performance*
*Early exits don't break the system; they fuel it.*
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### Penalty Calculation
Base *Penalty Rates (varies on each DEX token's lock durations):*
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*3-month lock → **`25%`***
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*6-month lock → **`50%`***
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*12-month lock → **`75%`***
#### Formula:
*`Exit Penalty = Base % × (Time Left / Total Lock Time)`*
#### Example:
*6-month lock, exiting after 2 months:*
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*Penalty = `50%` × (4/6) = `33.3%`*
*Early exit = less rewards*
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*Hold full = max yield + bonus*