Fees

1. Swap Fees

Swap fees on KoalaSwap are distributed to liquidity providers whose positions are active (in-range) at the time of the swap. If the current price moves out of a position’s range, that liquidity stops earning fees until the price moves back into the range.

Unlike some other protocols, swap fees on KoalaSwap are not automatically reinvested into the pool. Instead, they are collected separately, and liquidity providers must manually claim their fees when they’re ready.

1. Pool Fee Tiers

KoalaSwap allows multiple pools for each token pair, each with a different swap fee. Currently, you can create pools with three fee levels: 0.05%, 0.3%, and 1%. These tiers help cater to different types of assets and trading needs.

Thanks to concentrated liquidity, splitting pairs into multiple pools doesn’t hurt traders. It reduces price impact by letting liquidity providers focus their funds in specific price ranges, making swaps more efficient for everyone.

1. Finding the Right Pool Fee

Different assets tend to work better with specific fee tiers, depending on their volatility and trading frequency:

• Low-volatility assets (like stablecoins) often use the lowest fee tier (0.05%), as the risk for liquidity providers is minimal, and traders want prices as close to 1:1 as possible.

• High-volatility or exotic assets usually gravitate toward higher fees (like 1%), as liquidity providers need to offset the risk of holding these assets.

1. Protocol Fees

KoalaSwap includes a protocol fee mechanism that can be activated in the future through governance. This allows flexibility in deciding how much of the swap fees go to the protocol itself.

In-range liquidity refers to positions that cover the current price of the token pair.