Withdrawal Fees
A user can earn arbitrage profit by performing a swap and withdrawal followed by a reverse swap on a token with liquidity ratio < 1. Thus the withdrawal fees is only charged for tokens where the liquidity ratio < 1.
The arbitrage fee is given by:
Here,
L = Deposits made by LPs in the stablecoin
W = Withdrawal Amount
f(r) = Slippage function
r_1 = Liquidity Ratio before deposit
r_2 = New liquidity ratio after deposit
Withdrawal fees can become significant when liquidity ratio is low and NLR < 1. Thus, users are also allowed to withdraw in other tokens whose liquidity ratio > 1. Withdrawing in other tokens does not incur any fees for the user except a nominal swap fees.
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