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 goes directly to the Protocol Fee Contract, then distributes 50% to the xGNS holders, and 50% to the GnoSwap team (DevOps) to sustain the core protocol and foster the success of the ecosystem. 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

• Unvested Internal Rewards: Unvested $GNS rewards from liquidity mining pools due to Warm-up Periods

The GnoSwap Team considers the Protocol Fee as a vital element in securing the long-term viability, stability, and enhancement of the GnoSwap protocol. As part of our ongoing effort to embrace decentralization, we recognize the importance of meticulous planning and developing a robust ecosystem to achieve full decentralization. We are dedicated to iterating and evolving as we progress toward decentralization while maintaining the stability and growth of the GnoSwap protocol.