Fee Structure

BaseX provides liquidity providers with four distinct fee tiers per pair: 0.008%, 0.045%, 0.25%, and 1%. This flexibility enables LPs to match their profit margins with the expected volatility of each pair. They can assume higher risks for non-correlated pairs like ETH/USDC and opt for minimal risks with correlated pairs, such as USDT/USDC.

While having multiple fee tiers might lead to some fragmentation of liquidity, it's anticipated that most pairs will naturally settle into a specific fee tier, which will establish itself as the main market. For instance, pairs of similar assets are likely to align with the 0.008% fee tier. In contrast, pairs like ETH/USDC might lean towards the 0.25% fee, and more exotic assets could find the 1% swap fees more appropriate. If needed, governance can also introduce extra fee tiers.

-Trading Fees 0.008%: For stable pairs like USDT/USDC, where price stability is anticipated and impermanent loss is minimal, both traders and liquidity providers generally favor the lowest fee tier set at 0.008%.

-Trading Fees 0.045%: For assets with elevated impermanent loss or less stable liquidity, traders and LPs might opt for this higher fee tier. This approach provides increased fee revenue, incentivizing LPs to supply liquidity and, in turn, helps offset the impermanent loss. This fee tier is designed for assets that, while volatile, are still relatively well-traded or prone to higher impermanent loss.

-Trading Fees 0.25%: This tier caters to more exotic or less commonly traded assets. The elevated fee ensures traders can access these assets, while LPs can still accrue sufficient fee revenue.

-Trading Fees 1%: This is the pinnacle fee tier, geared towards assets that are seldom traded or exhibit a pronounced impermanent loss. It provides a substantial incentive for LPs to commit liquidity, counteracting the impermanent loss and simultaneously granting traders access to these assets.

It's crucial to emphasize that these fee tiers aren't mutually exclusive; each token pair can maintain a liquidity pool within every fee tier. Nonetheless, asset pairs will likely drift towards the fee tier where incentives for both LPs and traders best converge.

In essence, the varied fee tiers aim to strike a balance, allowing traders to benefit from the lowest possible fees while still offering the most attractive liquidity incentives for LPs.