Hey, a short temp check to see what the community feels about increasing the swap fee to 1% in Arbitrum for SWPR-WETH pair. The LPs are getting a lot of impermanent loss and I think the increase in the swap fee might alleviate some of the impermanent loss. Plus, the LPs are moving to Uniswap at a 1% fee tier and are performing a bit better compared to Swapr, even though Swapr makes a ton of volume. This will be followed by a snapshot vote in a couple of days.
Saw this a little late, sorry. I am not sure about it. As long as Swapr isn’t traded very much it seems reasonable to raise the fees. But I hope for more volume (which could be seen during the last days), therefore 0.6 seems enough to me, don’t like to scare away the few traders.
And btw, what is our snapshot space or do we have two?
At the moment, I’m biased toward higher fees for LPs because liquidity is low, but there is a point where LPs would get less fees overall because there would be so much less volume.
With the current fee at 0.25%, would raising the fee to 1% be at least 1/4 of the volume as it is now? I think so? But not entirely sure.
It’s worth noting that DXdao has raised fees for DXD pairs before. Gnosis Chain is 0.6% and Mainnet is 0.5%. Mainnet was changed in August, but this did not have a material effect on volume. Prior to the fee raise, mainnet averaged 25% and since the LP fee raise, mainnet’s market share has averaged 45% (from DXD trade volume, which can be found at the most recent DXD Monetary Policy meeting) Of course, there were a lot of other factors so we cannot draw a definitive conclusion, but definitely points to doing more experiments with fees - especially since the higher fees help LPs avoid impermanent loss.
Regardless, we should check back in one month to see how that has affected volume.
I’d be in favor of more dynamic fee setting on Swapr. Strategically speaking, it can also be a way to attract other projects as I think Swapr is the only Uniswap v2 fork that can adjust fees? I could imagine other smaller projects wanting a 0.5% fee or something tailored to their needs.
I don’t think this decrease will be anywhere close to linear. The reason being that Swapr on Arbitrum is the only real venue for price discovery of the SWPR token, with the only other venues being Swapr on mainnet and gnosischain (with almost no liquidity and a difficult crosschain arb). I assume that there will be almost no arbitrage on this pool and most volume will be traders or investors taking opinionated positions. Given how impactful slippage (really price impact) is on low liquidity pools, 0.75% is easily made up by additional depth that reduces price impact. Higher fees should attract more liquidity and improve trading conditions for both LPs and traders.
Given the recent twitter posts I have seen, people buying swapr are looking for moonshots (50%+ returns) and so will be far less price sensitive on fees, but definitely limited by slippage. So finding that sweet spot where we can get maximal liquidity without giving away free money or deterring trading should be the goal that is tracked.
The bump to 1% is a good step toward figuring this out.