avatar of @miniature-tiger
1 min read

Thinking along similar lines.

Much as I hate fees (and think crypto should generally be designed to remove them wherever possible) the Uniswap system uses the fees for balance:

  • For liquidity providers: To compensate for the risk of impermanent loss.
  • For arbitrage traders: As a charge against (largely) risk-free arbitrage profits.

Without the fees:

  • The incentives would need to do the heavy lifting to compensate the liquidity providers. Which risks degrading the price of the incentives.
  • The arbitrage traders (bots) make bank.

I think. At least on the typical X * Y = K liquidity system.

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