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Directional & Dynamic Volatility Fees
V3 introduces a fee structure that adapts to the underlying market volatility, resulting in significant efficiency gains. The protocol dynamically adjusts the fees for each liquidity pool based on the prevailing volatility, enhancing fee generation and trade volume.
One of the notable aspects of this feature is the ability to set distinct volatility-based fee ranges for both buy and sell directions. As a result, each liquidity pool can offer highly tailored fee structures that cater to specific market conditions. This customization leads to increased fees and trading volume as fees more accurately reflect the market's risk profile.
During periods of low trading volume, the fees automatically adjust downwards, ensuring that users are not overburdened with high fees in quieter market conditions. Conversely, when the market experiences heightened volatility, the fees proportionally increase to account for the increased risk.