đšī¸Perfect Fee Mechanism
What Does an Innovative Fee Structure Look Like?
PerfectSwap continues to push the envelope with ve(3,3) by implementing our Perfect Fee Mechanism. The Perfect Fee Mechanism refers to the self-regulating dynamic fees that adjust without manual input. Though the concept itself isn't necessarily novel, PerfectSwap's implementation of it can be.
Understanding Dynamic Fees
To understand the significance of dynamic fees, we must first understand what purpose they serve and how they function within a DEX.
During times of volatility, certain pairs may see drastic price changes that make LPs prone to impermanent loss (IL).
Many times, and specifically with Solidly DEXs that do not have any automation mechanism, LPs become prone to IL and when the team actually takes notice of a volatile market event, it is often already too late to react being that the fees weren't adjusted upon entry into a new price range and that the DEX has operated in a capitally inefficient manner.
In order to make the best use of dynamic fees they must be changed on the go with absolutely no manual input for maximum efficiency.
Determining The Right Fee
PerfectSwap uses a unique model that combines a certain number of inputs to produce an output that will determine the fee to be set within the given parameters.
The excerpt below gives an example of how PerfectSwap automatically regulates fees:
By default, all V2 volatile pools on PerfectSwap are set to a 0.2% trading fee, while stable pools are set at 0.02%.
Concentrated V3 pools on PerfectSwap:
Pair | Pair Type | Default Fee |
---|---|---|
USDC/USDT | Ultra-stable | 0.01% |
WETH/USDC | Bluechip | 0.05% |
LINK/WETH | Standard | 0.25% |
PRFCT/WETH | Exotic | 0.5% |
PerfectSwap's RewardsDistributor
allocates 85% of trading fees to liquidity providers and 15% to vePRFCT
voters, distributed pro-rata in the base currencies of the pair.
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