Swap Fees

Swap fees are proportionally distributed to all liquidity that is within the designated range at the time of the swap. If the spot price moves outside of a position's specified range, that segment of liquidity becomes inactive and ceases to earn fees. Should the spot price move back into the range, the liquidity is reactivated and resumes generating fees.

Unlike Plenty V2, swap fees are not distributed to veNFT holders for voting. They are instead collected separately and must be manually claimed by the liquidity providers when they choose to collect their earnings.

Fee Tiers

Plenty V3 introduces a variety of pools for each token pair, each with its own unique swap fee. Initially, liquidity providers can create pools with four different fee levels: 0.01%, 0.05%, 0.30%, and 1%. Additional fee tiers may be introduced later.

The concept of splitting pairs into separate pools was previously impractical due to liquidity fragmentation concerns. However, the introduction of concentrated liquidity in Plenty V3 mitigates the issue of price impact, making it feasible to have multiple pools for better functionality and capital efficiency.

Choosing the Appropriate Fee Tier

We foresee that specific asset types will naturally align with particular fee tiers based on the incentives for both traders and liquidity providers.

For instance, low-volatility assets like stablecoins are likely to be most compatible with the lowest fee tier. The risk for liquidity providers holding these assets is minimal, and traders will aim for an execution price as close to 1:1 as possible.

Conversely, more exotic or infrequently traded assets are expected to align with higher fee tiers. Liquidity providers will be incentivized to offset the risks associated with holding these more volatile assets for extended periods.

Development Fee Structure

In Plenty V3, we've introduced a development fee that accounts for 20% of the total fees generated. This is a shift from our previous model in Plenty V2, where all fees were allocated to voters. In V3, the remaining 80% of the fees are distributed to liquidity providers.

This fee will be reinvested into the ongoing development and maintenance of the Plenty ecosystem, ensuring that we can continue to offer cutting-edge features and security measures.

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