Fees
Sumero Protocol Fees
Last updated
Sumero Protocol Fees
Last updated
Sumero collects fees in order to support a healthy decentralized ecosystem. For example, Liquidity Providers collect trading fees as users trade with SumSwap pools; this acts as an incentive for them to continue providing liquidity, which is required to facilitate trades.
SumSwap traders pay swap fees when they trade with a pool. For SumSwap pools, fees are set by the protocol at 0.3%.
The fees ultimately go to liquidity providers in exchange for them putting their tokens in the pool to facilitate trades. Trade fees are distributed pro-rata to all liquidity providers at the time of the trade. Trade fees are collected at the time of a swap, and they go directly into the pool, growing the pool's balance. For a trade with a given and , the amount collected by the pool as a fee is . As the pool collects fees, Sumero pool token holders automatically accrue fees relative to their share of the pool which is represented by their pool token balance.
Let's say Alice, Bob, Chuck, and Diana all provide liquidity in the same pool starting out with a total value of $100. After some time, the pool has collected many trade fees and is now worth $200. The pool itself grows while the Liquidity Providers' proportional shares stay the same.
Person
Proportional Share
Initial Value
Value After Trading
Alice
50.0%
$50
$100
Bob
25.0%
$25
$50
Chuck
12.5%
$12.50
$25
Diana
12.5%
$12.50
$25
The liquidation penalty (or reward rate for liquidators) is paid out to liquidators as an incentive to begin the process of liquidating open synth positions that meet the liquidation threshold. The liquidation fee/reward rate for each synthetic asset is set by the protocol.
Gas fees are not set by Sumero. Gas fees are determined by the Ethereum blockchain and fluctuate based on network participant behaviour. Wallet providers will automatically set a recommended transaction fee (base fee + recommended priority fee) to reduce the amount of complexity burdened onto their users.
Gas is essential to the Ethereum network. It is the fuel that allows it to operate in the same way that a car needs gasoline to run.
Gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network.
Since each Ethereum transaction requires computational resources to execute, each transaction requires a fee. Gas refers to the fee required to conduct a transaction on Ethereum successfully.
Gas fees are paid in Ethereum's native currency, ether (ETH). Gas prices are denoted in gwei, which itself is a denomination of ETH - each gwei is equal to 0.000000001 ETH (10-9 ETH). For example, instead of saying that your gas costs 0.000000001 ether, you can say your gas costs 1 gwei. The word 'gwei' itself means 'giga-wei', and it is equal to 1,000,000,000 wei. Wei itself (named after Wei Dai, creator of b-money) is the smallest unit of ETH. For more information on Ethereum's gas fees, please see the Ethereum Docs.
