dynamic fees

overview

Wick replaces static fee tiers with a dynamic fee algorithm that adjusts in real-time based on market conditions. LPs are protected during volatile periods; traders get better execution when markets are calm.

The cost of providing liquidity is not constant. It rises when markets move quickly, toxic flow is more likely, and LPs face more adverse selection. It falls when conditions are calm and flow is mostly organic. Fees should reflect the cost of providing liquidity at any given moment. On wAMM pools, fees compound automatically into positions; see concepts for the theory behind fee-to-volatility targeting.

how it works

Wick's algorithm adjusts fees continuously to match the cost of providing liquidity, widening when risk rises, compressing when markets calm.

fee-volatility mismatch

LP risk moves with the market. A static fee line can't follow it; a dynamic fee can.

Static fee tiers charge the same rate whether the market is crashing or trading sideways. The result is the same fee-volatility mismatch in both directions: LPs are underpaid when risk is high and traders are overcharged when it isn't.

Wick's algorithm tracks volatility live and closes this gap continuously.

Wick vs static fee

Wick monitors DEX and CEX feeds to price risk before arbitrage arrives, adjusting fees continuously. Residual spread the fee barrier does not catch is recovered through Wick arbitrage at 0% internal pool fee.

The chart below compares Wick against fixed 0.30% and 1.00% tiers over 24 hours. Fees compress during calm windows and spike when volatility hits:

Traders pay less when markets are calm; LPs earn more protection when volatility hits. A static tier can't do both at once.

fee response

The comparison above is a daily snapshot. In practice, Wick adjusts continuously, widening the no-arb band as volatility rises and narrowing it as conditions stabilize. Spike and decay speed is tuned per pool category.

market response

When volatility spikes, fees ramp to protect LPs from toxic flow, reclaiming 86–95% of value that would otherwise be extracted. When markets are calm, fees compress to stay competitive and capture organic volume.

predictive, not reactive

Wick uses a predictive fee model: unlike reactive fee systems that adjust after volatility appears in pool metrics, Wick monitors external CEX and DEX feeds (prices, cross-venue volume, on-chain signals) and runs adjustments as frequently as every 30 seconds. When a CEX move signals the pool is about to become a target, fees are already elevated by the time toxic flow hits.

What higher fees actually do is shift who gets paid when prices move, not whether arbitrage happens. They don't reduce how much total value arbitrage pulls out of a pool over a trading window. They shift the split: a larger slice comes back to the LP as fee revenue, a smaller slice gets kept by the arbitrageur. That is why Wick talks about "recapture" rather than "reduction". The share-not-total result is worked through on the concepts page.

Wick targets a fee-to-volatility ratio of roughly 10:1: the swap fee is about ten times the typical per-block price move, so LPs recover most of what would otherwise leak to arbitrageurs. For how recovery scales across fee levels and why that band matters, see fee-to-volatility ratio.

LP protection

An LP position leaks value when the pool is slow to reprice against external markets. Arbitrageurs buy the underpriced side, sell the overpriced side, and keep the spread. Wick cannot remove the directional risk of a two-sided LP position, but dynamic fees reduce how much value leaks to arbitrageurs when prices move.

Each arbitrage event splits into fee revenue for LPs and profit kept by the arbitrageur. The dynamic fee algorithm is tuned to keep that split as favorable as possible, reclaiming 86–95% of extraction during normal trading when volatility is priced correctly.

Dynamic fees are the first line of defense. Residual spread that still crosses the fee barrier is handled by Wick arbitrage. For the formal split and fee-to-volatility math, see fee-arb decomposition and fees redistribute, they don't reduce.

fee ranges

Wick's fee algorithm operates within configurable ranges depending on the pool type:

The base fee is the minimum fee during calm conditions. The fee cap is the upper bound during extreme volatility. The algorithm moves continuously between these bounds based on real-time signals.

Different pool categories sit within these ranges. Wick tunes spike and decay behavior per category:

volatile pools

Pools like LIT/USDC or BTC/USDC experience sharp, frequent price movements. The algorithm uses aggressive scaling: fees ramp up quickly at the first sign of volatility and decay at a controlled rate to avoid premature relaxation.

stable pools

Stablecoin pools (USDC/USDT, DAI/USDC) trade in tight ranges with rare depegs. The algorithm uses tight ranges around the base fee, only spiking during genuine depeg events. This keeps fees low during normal operation, making Wick competitive for stablecoin routing.

LST pools (wLIT/LIT) share the same low-fee baseline during normal exchange-rate accrual. When redemption carries a known cost (a flat fee, a cooldown window, etc.), the pool fee matches that economics so swapping is not the cheaper exit. Without that alignment, holders drain LP instead of redeeming. Genuine volatility (liquidity stress, depeg risk) still triggers a fee spike; toggle to LST on the chart to see redeem-cost matching vs a real vol event.