Fee Structure

Tapio’s fee structure and safety mechanisms i.e Buffer system ensure the long-term sustainable and efficient pools. Fees incentivize liquidity providers while discouraging destabilizing trades, and the buffer system adds an extra layer of protection for the protocol.

Fee Structure

Fees in Tapio are designed to optimize liquidity provision and maintain pool stability. All collected fees are converted to SPA tokens, with a configurable percentage allocated to the protective buffer system and the remainder distributed to SPA holders through rebasing. There are three primary types of fees:

Mint Fee

A fee applied when users add liquidity to a Tapio pool.

• Deducted from the deposited assets before they are added to the pool

• Helps ensure fair and balanced entry conditions for all participants

Swap Fee

A fee charged on token swaps within Tapio pools.

• Serves as the primary source of ongoing yield for SPA holders

• Rewards liquidity providers and incentivizes deep, stable liquidity

Redeem Fee

A fee incurred when users withdraw liquidity from a pool.

• Discourages short-term behavior and frequent exits

• Helps protect pool stability and remaining participants from sudden outflows

Fee Adjustment & Governance:

Swap fees are adjustable through governance to optimize the balance between liquidity provider rewards and maintaining low trading costs that encourage active usage.

Fee Adjustment Mechanisms

Dynamic Fee: Off-Peg Fee Multiplier

When assets in a pool deviate significantly from their expected peg relationships, an additional fee multiplier is automatically applied to help restore balance and maintain pool stability. The fee increases based on the pool's imbalance and is influenced by the off-peg fee multiplier.

How it works:

• Dynamic Fee Adjustment: Pool operations such as swaps that push the pool further off-balance incur progressively higher fees, discouraging large destabilizing trades

• Balance Restoration: Higher fees for imbalanced trades encourage corrective trading that brings the pool back toward its target ratios

• Automatic Protection: The system responds immediately to imbalances without requiring manual intervention

The Off-Peg Fee Multiplier discourages trades that push the pool further out of balance, helping to maintain target ratios across assets.

Volatility Fee

When Asset’s internal exchange rate (exchange rates between pool assets) change suddenly, Tapio applies an additional volatility fee to protect SPA holders from potential market exploitation during unstable conditions. This rate shock protection is a Tapio-specific mechanism that helps maintain pool stability.

Key features:

• Rate comparison: System compares current asset’s internal exchange rates with the last recorded rates for each token

• Threshold-based activation: If the rate change exceeds a certain threshold, the fee multiplier is raised

• Linear decay: The increased multiplier decays gradually over a configurable time period, returning to base value

• Inactivity reset: Multiplier resets to base value if the pool is inactive for a certain period of time, preventing penalization of users after idle periods

• Configurable sensitivity: Governance can adjust how aggressively the system reacts to rate changes

The Volatility Fee acts as a safeguard during sudden rate changes, discouraging potentially harmful trades during unstable market conditions.