Fees

It is possible for a user to earn arbitrage profit risk-free by manipulating the liquidity ratio using consecutive deposit/withdrawal and swaps. To prevent such misuse of the protocol, and to sustain the protocol over the long run, it is imperative that a deposit/withdrawal fee is charged to cancel such profit, and a small swap fee charged to sustain it.
Net Liquidity Ratio (NLR)
All fees calculations revolve around a central parameter, Net Liquidity Ratio (NLR).
Net Liquidity Ratio (NLR) = Total asset in all poolsTotal deposits made by LPsNet\ Liquidity\ Ratio\ (NLR)\ =\ \frac{Total\ asset\ in\ all\ pools}{Total\ deposits\ made\ by\ LPs}Net Liquidity Ratio (NLR) = Total deposits made by LPsTotal asset in all pools​
​Where does this fees go?
Depending on the NLR, a part of fees goes into the treasury, a part of it stays in the protocol to cover the NLR while the remaining goes to LPs for providing liquidity. LPs will earn a fixed swap fee, while the fees between treasury and protocol will depend on NLR. Initially, the distribution between treasury and protocol will be given as:
Treasury Ratio={0%NLR<140%1<=NLR<1.0580%NLR>=1.05Treasury\ Ratio =
    \begin{cases}
      0\% & \text{$NLR < 1$}\\
      40\% & \text{$1 <= NLR < 1.05$}\\
      80\% & \text{$NLR >= 1.05$}
    \end{cases}Treasury Ratio=⎩⎨⎧​0%40%80%​NLR<11<=NLR<1.05NLR>=1.05​
​The remaining % remains in the system to increase the NLR.

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Reward Emission Model

Deposit Fees

Last modified 3mo ago

Fees

Net Liquidity Ratio (NLR)

​Where does this fees go?

Where does this fees go?