《About the $jager Group LP Incentive Activity Fee Rate Selection》
• First, the conclusion: It is recommended that everyone create a pool with a 0.25% fee to maximize returns and catalyze the flywheel effect.
Many people do not know how to choose the pool fee rate; they either listen to others' suggestions or rely on their own intuition, falling into a misunderstanding.
1. Is a higher LP fee always better for returns?
• Under the same trading volume, it is true that a higher LP fee results in greater fee income. You can refer to the image; taking the jager USD1 pair as an example, on June 7, the fees for 0.25% and 1% pools, according to the ratio of TVLs (3.6k/1.1M), the 0.25% fee should yield 3.2% of the 1% pool's fee, which is 18.6u (even lower, since the rate is 0.25%), but the actual fee is 56u, making the profit about three times that of the 1% pool.
• Why? Because DEX prioritizes the path with the lowest overall cost when selecting paths, and when executing transactions, it will first choose to trade in the 0.25% pool. When the transaction amount is large, and the price difference in the 0.25% pool is significant and has not yet been balanced, it will only then substitute with the 1% pool. This means that the transaction frequency in the 0.25% pool is higher, resulting in greater fee income.
• A phenomenon observed is that many people prefer to choose the 1% fee pool when creating pools, because the fee is higher, and thus fee income is higher, believing that this leads to greater profits. In reality, it's quite the opposite; they think they are getting a bargain, but in fact, when the trading volume can be absorbed by the 0.25% pool, the 1% pool almost cannot earn any fees.
• In the wlfi competition, in addition to trading volume being an indispensable indicator, especially in the context of Binance Alpha trading volume activities, only by finding ways to increase trading volume, particularly for projects like #JAGER that require trading volume, can there be greater returns.
• Expanding the 0.25% pool to attract external Alpha trading volume is essential, as well as community support. I believe the community is participating in Binance's points activities. After the fee reduction, those participants will certainly be significant contributors to tomorrow's trading volume; at least I would be willing to trade.
• In summary, it is about expanding the cake, urging everyone to create a good 0.25% LP pool, to engage in higher return "profit-sharing" actions, encouraging more people to trade and buy $jager.
