vAMM fees - 0.18%
SpiritSwap V2 vAMM fees have been purposefully recalibrated to enrich our ecosystem with positive feedback loop mechanics.
Moving forward, SpiritSwap will be reducing fees from 0.3% to 0.18% for our classic vAMM while establishing an even more competitive fee for our new stable AMM at a respectable 0.01%.
The reason for this stems from the realization that it's better to capture a smaller slice of a bigger pie rather than trying to take the entire pie for ourselves. This update will see a more optimal pricing on trades, meaning that we capture a larger amount of aggregator traffic (fees that were previously being missed out on).
V2 fee structure thought process
For reference, the previous model allocated 0.3% fees as follows:
5 / 6 of fees are previously was given back to LP’s 1 / 6 of fees were previously used to buy back SPIRIT at market rate and distribute to inSPIRIT holders during our weekly reward distribution.
V2 vAMM fee structure:
Of the NEW 0.18% fee collected: 25 % will be distributed to “Base Fee” (inSPIRIT holders) 25% will be distributed to "Protocol Fee" 50% will be distributed to "Vote Fee" (inSPIRIT holders gauge specific)
Visualization of new fee structure allocation
The base fee is exactly the same as the previous inSPIRIT distribution. These are the SPIRIT rewards that ALL inSPIRIT holders collect at the end of each distribution epoch. It is pertinent to note that with the reduction in fee we are hopeful our routers will collect a higher volume of trade traffic from aggregators. Due to increased volume by virtue of a reduced fee, this increase in volume is expected to capture a higher distribution for inSPIRIT holders each week. The thought process here is; Less Fees = More Volume = More rewards.
The protocol reward fee model is a rebate to protocols who list LP’s with us, for example Liquid Driver. Out of all fees collected on Liquid Drivers Liquidity pools, 25% of these will be given back to the protocol who lists with us (in this example Liquid Driver). This incentive will be an enticement to new and emerging protocols looking to launch on FTM as well as rewarding those who have maintained loyalty to the SpiritSwap ecosystem from the get go. This fee reward should see SpiritSwap capture a much larger allocation of liquidity provision as this approach offers an extra revenue model for protocols. This incentivizes protocols to add MORE liquidity with SpiritSwap thus deepening liquidity. Deeper liquidity on the exchange means more optimal trade pricing. More optimal trade pricing means more trades going through SpiritSwap routers which in turn means more fees collected. This establishes a positive feedback loop of liquidity provided vs fees collected by the protocol. This positive feedback loop is further supercharged, as the 25% protocol reward fee distributed to each respective protocol could be used as protocol owned liquidity to farm more SPIRIT (given that these rewards are given in the form of LP’s). For example Liquid Drivers Protocol Reward Fee will be in the form of LQDR - FTM SPIRIT LP’s. Liquid driver will likely then use the SPIRIT farmed to lock up for inSPIRIT and use that inSPIRIT to further boost their gauges. This a win for the SpiritSwap ecosystem, a win for the protocols involved and a win for SpiritSwap users (due to deeper liquidity, increased volume and subsequent increase in fees captured). To collect this fee, each protocol who lists with SpiritSwap must reach out to establish a chain of communication and provide a multi-sig controlled wallet to accept this weekly fee. This system also helps add a layer of security for users, as it enables the SpiritSwap development team to establish a dialogue with protocols who are deploying liquidity.
Visualization of protocol fee engaging a positive feedback loop. Fee > Liquidity > Volume ∞
The voting fee model is inspired by the SOLIDLY model and applies it to SpiritSwaps metrics. Fees earned from this model are ONLY paid to people who voted on the gauges that this LP represents and rather than being distributed in SPIRIT tokens (like the base fee), are paid in the form of the LP directly.
For example, If you voted 100% of your gauge voting weight towards the LQDR - FTM gauge (which supports a pool with the top 10 highest volume on SpiritSwap), you will receive a 50% share of the fees collected on this pool specifically in proportion to your inSPIRIT position, divided by the total amount of inSPIRIT voted on this gauge.
To make it simple, here is a rundown. - You have 10 inSPIRIT and direct all of this voting weight towards the LQDR- FTM Gauge. - This Gauge receives 100 inSPIRIT votes total thus giving you a 10% share of the gauge’s “voting fees”. - The week following, this LQDR- FTM LP generates $100,000 in fees. 1. $25,000 of this fee would go to all inSPIRIT holders via the base fee 2. $25,000 would go to Liquid Driver (if they have registered to receive the Protocol Reward Fee) 3. $50,000 would go to the pool of vote fees. Because you have a 10% share of this pool, you would receive $5000 worth of LQDR - FTM LP tokens when you claim rewards from the new “Bribe & vote fee rewards” button. This button harvests both bribes and vote fees at the same time, as it uses the same contract.
The reason behind this upgrade is to try and distribute votes more evenly among critical LP’s that need good emission incentives in order to offer deeper liquidity for critical pairs like LQDR - FTM.
This controls concentrated emissions on low volume pairs as this is not beneficial to the protocol.