Overview
A swap fee is the fee charged on each trade in an AMM, distributed to liquidity providers. It is the primary reward for providing liquidity. Fees vary by protocol and pool.
How It Works
Each trade pays a percentage fee that accrues to the pool and is distributed to LPs proportional to their share. Fees compensate for impermanent loss and capital lockup. The fee rate is set by the protocol or governance.
Why It Matters
Swap fees determine LP profitability and trader costs. They are the core economic engine of AMMs. Understanding them is key to evaluating DEXs.
Related Concepts
Swap fees relate to AMMs, Liquidity Pools, and Yield. They compensate Liquidity Providers for risk.