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:

Withdrawal fees=(LW)(f(r2)f(r1))\text{Withdrawal fees} = (L-W)(f(r_2)-f(r_1))


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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