Pool Fee

A pool fee is the small percentage charged on every swap through a liquidity pool, paid by the trader and distributed to the pool's liquidity providers as compensation for supplying their assets. It is the core economic engine of automated market makers: fees are what make it worthwhile to deposit tokens that traders can swap against, and what offsets the impermanent loss providers may suffer.

A concrete example: Uniswap v3 offers several fee tiers per token pair — commonly 0.05 percent, 0.3 percent, and 1 percent, plus a 0.01 percent tier for stablecoins. A trader swapping 10,000 USDC through a 0.3 percent pool pays 30 USDC in fees, which accrue to the providers in that pool proportionally to their share of the liquidity. Stable pairs like USDC/USDT use the lowest tiers because prices barely move and volume competition is fierce; volatile or exotic pairs use higher tiers to compensate providers for greater risk.

A common misconception is that the pool fee is the only cost of a swap — traders also pay network gas and often lose more to slippage and price impact than to the fee itself, especially in shallow pools. Some protocols additionally switch on a protocol fee, diverting a slice of pool fees to the protocol's treasury rather than to providers, which is a recurring governance debate.