Fees

In the protocol, every swap transaction is charged with a nominal fee of 0.3%. This fee serves as both a source of revenue for the protocol and an incentive for liquidity providers (LPs) who supply the capital necessary for smooth market operations.

For example: when the protocol processes $10 million in trading volume, a total of $30,000 in fees is generated. These fees are then distributed according to a predetermined fee split:

• LPs share - 70% of the fees, (or $20,000 following the example) is allocated to liquidity providers. This reward acknowledges the critical role LPs play in ensuring continuous liquidity and encourages additional participation in liquidity provision.

• Protocol share - 30% of the fees, (or $10,000 following the example) is retained by the protocol to support ongoing development, operational costs, and innovation within the ecosystem.

A unique feature within the protocol is the system integrated arbitrage bot. This bot operates seamlessly on top of the core exchange functions, executing trades to efficiently rebalance prices across different markets. Notably, the arbitrage bot is exempt from paying swap fees, which provides it with a competitive advantage in quickly correcting price discrepancies and protecting liquidity providers from open market arbitrage, which can cause impermanent loss to their liquidity positions.

The arbitrage bot serves two primary purposes:

1. Price Rebalancing: By rapidly identifying and correcting price differences, the bot helps ensure that liquidity providers are protected from open market arbitrage and asset prices remain aligned across various trading pairs, contributing to overall market stability and efficiency.

2. Profit Sharing: Profits generated by the arbitrage bot are shared according to the same 70% LPs/30% Protocol split. For instance, if the bot generates an additional $30,000 in profits, 70% (or $20,000) is distributed to liquidity providers, while 30% (or $10,000) is allocated to the protocol.

This fee structure, coupled with the integration of the arbitrage bot, is designed to foster a robust and self-sustaining ecosystem. The arrangement rewards liquidity provision and simultaneously ensures that the protocol remains agile, maintaining market integrity through continuous price rebalancing. Ultimately, the balance between incentivising users and sustaining operational efficiency contributes to a vibrant and flourishing ecosystem.