Fees
Last updated
Last updated
Futureswap charges a configurable 0.05% trade fee. There is also a 0.05% Uniswap v3 trade fee that is factored into the execution price. The total trade fee combined will be just under 0.1% due to the ordering of when they are charged.
Futureswap LPs are making the most profit if their liquidity is backing a vastly larger outstanding interest. In order to do so, the total longs have to be closely matched by the total shorts. To incentivize this matching, a funding rate is charged: if there are more longs than shorts, longs pay asset to shorts and vice versa. This payment happens continuously in each time interval.
The rate at which an asset is transferred is proportional to the imbalance between longs and shorts, i.e. if longs and shorts open interest is perfectly balanced, then no rate is charged; if there are too many shorts, shorts pay longs, and vice versa. Furthermore, the amount of asset a position pays is linear in its size. Effectively, longs pay shorts an amount that is
The funding rate is charged on every contract interaction.
The goal of the time fee is to charge an interest rate like component to open trades. The time fee will initially be set to near zero but can be turned on via a governance vote. The time fee is a fee paid by both longs and shorts and is earned 100% by the LPs. The goal here is to charge an interest rate on the open interest of the exchange that is earned by LPs.
Time fees are paid in asset. For example, if there are 10 asset long, -12 asset short, and a 1% time fee needs to be charged, the long asset will become 9.9 (10 (1 - 0.01)) and the short will become -12.12 (-12 (1 + 0.01)).
The reason that longs become less long is that the asset is their equity (positive value for the traders) and the shorts get more short because the negative asset is the short traders' debt. So by going more short but not increasing the amount of stable for the shorts owned, you effectively charge them a fee because they need to pay back the full debt amount using their stable equity.
To understand debt and equity of trades, read:
FS liquidity (not the Uniswap liquidity) has a fee on exit, paid by the LP withdrawing their liquidity and earned by the rest of the LPs who are still in the pool. This fee should be around the deviation amount of the on-chain oracle to avoid a potential front-run attack.
