Fee Tier
The percentage fee charged on DEX trades, set by liquidity pools and distributed to liquidity providers, varying by pool type and volatility.
What is Fee Tier?
Fee tiers are predefined trading fee rates in DEX liquidity pools, compensating liquidity providers (LPs) for supplying digital assets. Uniswap V3 offers tiers like 0.05%, 0.3%, and 1%, chosen based on pair volatility (e.g., 0.05% for USDC/USDT, 1% for volatile altcoins). In 2025, Uniswap’s $4.5 billion TVL includes $2 billion in 0.3% fee pools, generating $6 million daily for LPs, per DeFiLlama. For a $10,000 swap, a 0.3% tier costs $30, fully allocated to LPs. Sushiswap’s 0.25% default tier yields 15% APY in high-volume pools. Incorrect tier selection risks low returns, as seen in a 2024 low-fee pool yielding 2% APY versus 10% in higher tiers. LPs select tiers via pool creation interfaces, balancing risk and reward in DeFi’s $22.7 billion DEX market.
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