Fees

Swap Fees

Swap fees are paid to liquidity providers from traders by taking a portion of the output of trades. Unlike regular CPMMs, concentrated liquidity pools hold swap fees instead of automatically re-investing them into the pool, as positions are non-fungible. Instead, the liquidity pool contracts track claimable fees, allowing liquidity providers to claim fees at any time without removing liquidity.

Fee Tiers

Due to the high capital efficiency of concentrated liquidity pools, lowering swap fee rates has become a viable option for liquidity providers to attract more traders to engage in the pool to increase the trading volume.

By default, GnoSwap allows 4 different fee tiers:

• 0.01%: Best for very stable pairs with low volatility and IL, such as stablecoins.

• 0.05%: Best for stable pairs with relatively low volatility and IL, such as stablecoins and liquid staking tokens.

• 0.3%: A generic tier that works best for most pairs.

• 1%: For exotic pairs with high volatility and IL, such as meme tokens.

While having multiple fee tiers can lead to liquidity fragmentation, we expect rational liquidity providers and traders to eventually agree on a single pool that works best for each pair to utilize. The characteristics of concentrated liquidity will also mitigate liquidity fragmentation by sharply reducing lazy liquidity. In addition, the Auto Router feature can split a single trade across multiple pools to ensure the maximum output.

Protocol Fees

A Protocol Fee is charged on core interactions on GnoSwap. This fee is sent directly to the Protocol Fee Contract, which then distributes 100% to the xGNS holders (GNS stakers). The interactions and the applied fee rates are as follows:

• Swap Fee: 0.15% of the total swap amount

• Pool Creation Fee: 100 GNS when creating a pool

• Withdrawal Fee: 1% of liquidity provider's fees claimed

• Unstaking Fee: 1% of staking rewards claimed