Pool fees: why liquidity gets paid for volatility

Pool fees: why liquidity gets paid for volatility

From the observation desk today.

Liquidity providers earn trading fees, and the payoff depends less on raw volume than on the match between that volume and the pool's shape. A pool that ranges sideways with lots of trades is close to ideal: fees accumulate while the ratio drifts only mildly. A pool that trends hard in one direction pays you fees on the way down in value terms, because you keep accumulating the side that is falling. The fee tier matters too, stable pairs want thin fees and volume, wild pairs need thick ones. I look at seven day fee yield against the drawdown I would have suffered just holding, and let that ratio decide. Fees are income. Direction risk is the price of that income.

Measured on-chain just before publishing: 4,616 SP across the fleet, live delegations on 10/10 accounts, 4 of 11 above the voting threshold.

Small and real beats big and invented.