Swap Fees

Swap fees are distributed proportionally to all liquidity within range1 at the time of swap. If the spot price moves out of the range of a position, the corresponding liquidity is no longer active and does not generate any fees. If the spot price reverses and re-enters the position's range, the position's liquidity becomes active again and will incur fees.

Swap fees are not automatically reinvested as they were in previous versions of FenixSwap. Instead, they are collected separately from the pool and must be manually redeemed when the owner wishes to collect their fees.

Pool Fee Tiers PipiSwap v3 introduces multiple pools for each pair of tokens, each with a different exchange fee. Liquidity providers can initially create pools at three fee levels: 0.05%, 0.30% and 1%. More fee levels may be added by FENIX governance, for example the 0.01% fee level added by this governance proposal in November 2021, as executed here.

Splitting pairs into separate pools was previously infeasible due to the liquidity fragmentation issue. Any incentive alignment achieved through increased fee choice inevitably resulted in a net loss for traders, due to lower pair liquidity and the resulting increased price impact when trading.

The introduction of concentrated liquidity decouples total liquidity from the price impact. With price impact concerns out of the way, splitting pairs into multiple pools becomes a feasible approach to improving a pool's functionality for assets previously underserved by the 0.30% swap fee.

Finding the Right Pool Fee We anticipate that certain asset types will trend toward specific fee levels, based on where the incentives for both exchangers and liquidity providers are closer to alignment.

We expect that low-volatility assets (stablecoins) will likely congregate at the lowest fee tier, as the price risk for liquidity providers holding these assets is very low, and those who exchange will be motivated to seek a price. execution as close to 1:1 as possible.

Likewise, we anticipate that more exotic assets, or those traded rarely, will naturally trend toward a higher fee, as liquidity providers will be motivated to offset the cost risk of holding these assets for the duration of their position.

Protocol Fees PipiSwap v3 has a protocol fee that can be activated by FENIX governance. Compared to v2, FENIX governance has more flexibility to choose the fraction of exchange fees that go to the protocol. For more details on the protocol fee, see the whitepaper.

1. Range liquidity refers to the liquidity contained in any position that spans both sides of the spot price.