Financials: Fees, APR, Understanding Returns
Fees
aeSwap charges transaction fees for swaps and liquidity provision. These fees compensate liquidity providers for supplying capital and taking on the risk of impermanent loss. Fees are set as a percentage of the trade value and are directly added to the liquidity pool, proportionally benefitting all liquidity providers.
The fees breakdown is as follows: 0.25% for liquidity providers (LP), and a variable fee ranging from 0.1% to 0.25% for Archethic transactions, culminating in a total fee range of 0.35% to 0.5%.
The fees section will be updated soon with more detailed information.
APR and Understanding Returns
The Annual Percentage Rate (APR) represents the rate of return on liquidity provision and farming over a year without accounting for compounding interest. It offers a straightforward picture of potential earnings from liquidity and farming activities. aeSwap's APR calculation takes into account the distribution of rewards and the impact of trading fees, providing a clear measure of profitability. Returns from liquidity provision come from trading fees and potentially, farming rewards.
Liquidity providers must be aware of impermanent loss, a unique risk where the value of deposited assets could diverge from holding them outside the pool. Understanding these elements is crucial for assessing the overall profitability of participating in aeSwap.
The returns on aeSwap are dynamic, depending on the yield farming activities and the amount in the liquidity pool. It is important to note that the APR is calculated from second to second, ensuring even the smallest units of time are considered in the profitability analysis.