Fees

Liquidity provider fees

There is a 0.25% fee for swapping tokens. This fee is split by liquidity providers proportional to their contribution to liquidity reserves.

Swapping fees are immediately deposited into liquidity reserves. This increases the value of liquidity tokens, functioning as a payout to all liquidity providers proportional to their share of the pool. Fees are collected by burning liquidity tokens to remove a proportional share of the underlying reserves.

Since fees are added to liquidity pools, the invariant increases at the end of every trade. Within a single transaction, the invariant represents token0_pool / token1_pool at the end of the previous transaction.

There are many community-developed tools to determine returns. You can get additional insight on LP returns by reading the documentation.

Protocol Fees

At the moment there are no protocol fees, however, a .01% to .05% fee may be turned on in the future.

Protocol Charge Calculation

A protocol-wide charge of .05% per trade may be introduced in the future. This represents 1/5th (.20%) of the .25% fee. The fee is in effect if feeTo is not address(0) (0x0000000000000000000000000000000000000000), indicating that feeTo is the recipient of the charge.

This amount will not affect the fee paid by traders, but will affect the amount received by liquidity providers.

Rather than calculating this charge on swaps, which would significantly increase gas costs for all users, the charge will instead be calculated when liquidity is added or removed.