Triangle Fees

06/29/2023

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by   Rithvik Rao, et al.

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Triangle fees are a novel fee structure for AMMs, in which marginal fees are decreasing in a trade's size. That decline is proportional to the movement in the AMM's implied price, i.e. for every basis point the trade moves the ratio of assets, the marginal fee declines by a basis point. These fees create incentives that protect against price staleness, while still allowing the AMM to earn meaningful fee revenue. Triangle fees can strictly improve the Pareto frontier of price accuracy versus losses generated by the status quo of constant fee mechanisms.