Dynamic Fee Mechanism

Understanding Dynamic Fee Mechanism

Pangolin V3 implements dynamic trading fees across all pools, rather than a static fee rate. Fees are adjusted based on prevailing market conditions. During times of high volatility or large price swings, the Pangolin Team can increase fees (within set parameters) to compensate LPs for the greater risk of impermanent loss and encourage liquidity stability. Conversely, in stable conditions, fees may decrease to offer traders better rates. This dynamic fee model aligns fees with liquidity conditions in real time, creating a fairer value exchange between LPs and traders. It ensures optimal trading experiences by charging higher fees during large arbitrage trades (protecting LPs from excessive impermanent loss) and lower fees when markets are calm. Unlike many other concentrated liquidity DEXs that rely on fixed fee tiers, Pangolin V3’s fees are flexible and can change at any time to reflect market needs.