Rewards for Liquidity Providers

The fees due to your liquidity position will be denominated in both tokens of the given pair. In any of the above examples, after swapping stEVMOS for EVMOS, or EVMOS for stEVMOS, a small amount of both EVMOS and stEVMOS will be due to your account as liquidity provisioning rewards.

Approaches to concentration when setting range orders are up to the user. Selecting a wider range may generate more fees if there is price churn within your range, at the cost of increasing the risk of having your order unfilled if the spot price reverses before completing your full range.

Swap Fees

Swap fees are distributed pro-rata to all in-range¹ liquidity at the time of the swap. If the spot price moves out of a position’s range, the given liquidity is no longer active and does not generate any fees. If the spot price reverses and reenters the position’s range, the position’s liquidity becomes active again and will generate fees.

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

Pool Fees Tiers

Forge introduces multiple pools for each token pair, each with a different swapping fee. Liquidity providers may initially create pools at four fee levels: 0.01%, 0.05%, 0.30%, and 1%. More fee levels may be added through a Governance Proposal, e.g. a 2% fee level can theoretically be added to the tier list.

Breaking pairs into separate pools was previously untenable due to the issue of liquidity fragmentation. Any incentive alignments achieved by more fee optionality invariably resulted in a net loss to traders, due to lower pairwise liquidity and the resulting increase in price impact upon swapping.

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

Finding The Right Pool Fee

We anticipate that certain types of assets will gravitate towards specific fee tiers, based on where the incentives for both swappers and liquidity providers come nearest to alignment.

We expect low volatility assets (stable coins) will likely congregate in the lowest fee tier, as the price risk for liquidity providers holding these assets is very low, and those swapping will be motivated to pursue an execution price closest to 1:1 as they can get.

Similarly, we anticipate more exotic assets, or those traded rarely, will naturally gravitate towards 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

At the time of this writing, Forge does not take any protocol fees: the DEX is considered an Evmos public good. The only fees that are paid are 1. Network Gas Fees; and 2. Fees to Liquidity Providers.

However, Forge has a protocol fee mechanism that can be turned on by a formal Governance Proposal - this must be proposed and passed by the Evmos Community.