There are a few different types of fees on Polaris Finance, each collected to support a healthy ecosystem. For example, Liquidity Providers collect swap fees as users trade with pools; this acts as an incentive for them to continue providing liquidity, which is useful to facilitate trades.

Polaris will accumulate 50% of the transaction fees charged in our pools for liquidity suppliers, while the rest will be accumulated as protocol fees.

Swap Fees

Traders pay swap fees when they trade with a pool. The fees ultimately go to Liquidity Providers in exchange for them putting their tokens in the pool to facilitate trades. Trade fees are collected at the time of a swap, and it goes directly into the pool, growing the pool's balance. As the pool collects fees, The Pool Tokens automatically collect fees because they represent a proportional share of the pool.

Protocol Fees

Protocol Fees are a percentage of swap fees collected by pools when making swaps. These go to the Treasury Reserves (DAO) to be used or held as seen fit. At deployment, Protocol Fees for swaps are set to be 20% upon deployment. These fees can be changed by governance votes in the future.

Protocol Fees for swaps are a percentage of the already collected swap fees; the traders would see no change in the amount collected. The Liquidity Providers, however, would see a small change. For example, if a pool has a 1% swap fee, and there was a 10% protocol swap fee, 0.9% of each trade would be collected for the LPs, and 0.1% would be collected to the protocol fee collector contract.

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