Customizing Your Fee Experience: Making the Most of Multiple Fee Levels on Veax
In the ever-evolving landscape of decentralized finance (DeFi), Veax stands out as a cutting-edge decentralized exchange (DEX) that leverages the power of multiple fee levels (MFL) to create an efficient and competitive trading environment. In this article, we’ll delve into Veax’s approach to multiple fee levels and explore how it innovatively serves both liquidity providers (LPs) and traders.
Understanding Veax’s Multiple Fee Levels
Unlike traditional DEXs that might rely on fixed or dynamic fees, Veax has pioneered a unique feature allowing LPs to select from eight different fee levels: 0.01%, 0.02%, 0.04%, 0.08%, 0.16%, 0.32%, 0.64%, and 1.28%. Each level is a separate subpool, with its own spot price, and the entire system is designed to achieve a balance between LPs and traders.
How Multiple Fee Levels Work on Veax
When LPs open a liquidity position, they choose the fee level that aligns with their strategy. A chart assists in visualizing the liquidity distribution across levels. The system performs a swap gradually, scanning fee levels for available liquidity from lowest to highest. The spot price grows, and the swap might eventually engage all fee levels, thus allowing traders to obtain the most advantageous prices.
Advantages of Multiple Fee Levels on Veax
For Liquidity Providers:
- Control Over Fee Rates: LPs can choose the fairest fee level for their pool.
- Competition Among LPs: The system encourages LPs to compete, leading to a “fee equilibrium” that depends on various market factors.
- Increased Profits: Veax’s unique approach avoids suboptimal local extremes and leads to more profits for LPs.
For Traders:
- Best Swap Conditions: Veax ensures the best possible swap price by utilizing multiple fee levels within the same pool.
- Cost-Effective: Veax’s unified smart contract management reduces transaction costs, further facilitated by building on the Near Protocol.
Veax vs Uniswap V3: Multiple Fee Level Implementation
Uniswap V3’s approach to multiple fee levels involves creating multiple pools for each liquidity pair with a unique fee percentage. This method leads to LPs often providing liquidity to the most popular pool, limiting their control over fees.
Veax’s innovation lies in offering eight different fee levels within the same pool. This approach provides LPs with more control and guarantees the best swap price for traders.
Choosing a Fee Level on Veax
The competition between LPs leads to a fee equilibrium influenced by various factors, including long-tail pairs, popular stablecoin pairs, strong buy trends, and more. LPs must weigh the pros and cons of setting high or low fee levels:
- Low fee level: Attracts more activity but results in less ROI.
- High fee level: Yields higher relative profits but may decrease utility.
The fee tier of an existing position is immutable, so to change fee tiers, LPs must close and reopen positions.
Conclusion
Veax’s introduction of multiple fee levels significantly advances the DeFi landscape. By offering accurate fee levels within each pool and combining concentrated liquidity with multiple fee levels, Veax avoids higher impermanent loss and reduces processing time and fees. The intricate balance between traders and LPs, combined with innovative technology, makes Veax one of the market’s most efficient and affordable DEX implementations.
Here you can read more about MFLs and other cool features we provide:
