Levana Estimated Fee Comparisons
Levana vs other platforms
Levana has taken the best parts of GMX, GNS, and other similar networks and integrated them into the Levana platform while working to improve the areas identified as weaknesses. Levana aims to be the “GMX” of COSMOS.
In decentralized finance, perpetual swaps are becoming increasingly popular among traders. However, comparing fees between different perps platforms can be challenging. This blog post will dive deep into the estimated fees of various popular perps products, including GMX, dYdX, GNS, Apex, Perpetual Finance, and Levana Perps.
To give you a general idea, if you open a long perps position with $100 USD of collateral and leave that position open for seven days, the actual cost of opening such a position could range from $2-$20, depending on various market conditions and historical funding rates/borrow fees.
One of the main goals of Levana Perps is to provide decentralized access to perps swaps at a competitive rate. However, it’s worth noting that the fee estimates for Levana Perps are based on assumptions that will need to be confirmed after its mainnet launch. In contrast, the fee estimates for other platforms were calculated by opening actual positions.
So, why do we suspect that Levana Perps will offer competitive fees compared to other perps products? Let’s break it down.
GMX has borrowing fees but no funding fees, while order book perps like dYdX, Apex Pro, and GNS have funding fees but no static borrow fees. Levana Perps, on the other hand, has both. How can the sum be lower for Levana Perps?
For one, Levana Perps allows a fraction of the full position size (which is scaled with leverage) to be borrowed from LPs by limiting the maximum gains. This can lower the borrow fees in some cases and is especially useful for high-leverage positions where the fees are most hurtful and far away take profit prices are rarely needed.
Another critical factor is the utilization ratio of the funds in the liquidity pool. Unutilized funds need to be paid for from the borrow fees of the utilized part. A low utilization ratio makes fee rates higher than necessary. On GMX, utilization ratios of 10%-20% on BTC and ETH (in sideways markets) can be seen, which is wasteful. In bull markets, the opposite is seen, high BTC and ETH utilization, and low USDC utilization (10–20%). The system is designed to always have a side underutilized.
In contrast, Levana Perps’ borrow fee rate changes based on the utilization ratio, not the fee rate itself, making the borrow fees more sticky and allowing for a high target utilization ratio.
Funding fees are a critical factor in order book perps because the protocol and traders’ funds’ solvency depend on the open interest balance. As a result, funding rates can swing widely, and there is often no or a high cap on funding rates to prevent asset price meltdown. This stings for the losing side in the perps.
On the other hand, GMX doesn’t have funding fees, offloading the risks to liquidity providers, but the borrow fees will be higher to cover the risk premium.
Levana Perps takes a middle-ground approach by setting the sensitivity and rate cap of funding rates low enough to make the fees smaller and more predictable but high enough to lower the liquidity provider’s net exposure.
Additionally, artificial slippage, defined by the net open interest, takes a lot of the burden away from funding rates to balance the net open interest, making trades that cause an inbalance in the protocol pay up instead of just passively open positions.
Finally, Levana Perps has a separate risk structure between the listed trading pairs. This is important to prevent the risks of some assets from spilling into the rest of the system.
Risks, and fees go hand in hand; by lowering protocol risk, you can reduce fees!
Read more about Levana’s plans for 2023 here
