Deposit Fees

A user can earn arbitrage profit by performing a swap, deposit followed by a reverse swap on a token with liquidity ratio > 1. Thus, the deposit fees is only charged for tokens where the liquidity ratio > 1.

The arbitrage fee is given by:

$$\text{Deposit fees} = (L+d) \left(f(r_2)-f\left(\frac{r_{\text{max}}L+d}{L+d}\right)\right) + L (f(r_{\text{max}})-f(r_1))$$

​Here,

L = Liability

d = Deposit amount

r_1 = Liquidity ratio before deposit

r_2 = Liquidity ratio after deposit

r_max = Maximum liquidity ratio of the token

r_max is a weighted average of the maximum liquidity ratio observed over a period of time. It is calculated such that

$$r_{max} \geq r_1$$

always holds true.

Deposit fees increases as the difference between r_max and r_1 increases, as this denotes a possible arbitrage opportunity. When r_max = r_1, deposit fees = 0