1.5 KiB
| type | domain | description | confidence | source | created |
|---|---|---|---|---|---|
| claim | internet-finance | The fee structure creates asymmetric costs where active trading is expensive but passive provision is profitable | experimental | MetaDAO proposal CF9QUBS251FnNGZHLJ4WbB2CVRi5BtqJbCqMi47NX1PG | 2026-03-15 |
High fee AMMs 3-5 percent deter wash trading manipulation while incentivizing passive liquidity provision
The proposal specifies 'by setting a high fee (3-5%) we can both: encourage LPs, and aggressively discourage wash-trading and manipulation.' This creates a cost asymmetry: wash traders attempting to manipulate the liquidity-weighted price metric must pay 3-5% on each trade, making repeated manipulation expensive, while liquidity providers earn these fees passively. The mechanism addresses the CLOB vulnerability where 'VWAP can be manipulated by wash trading' by making the cost of manipulation proportional to trading volume. A manipulator moving price through wash trades pays cumulative fees that LPs capture, creating a profitable defense opportunity similar to the general futarchy property that 'attack attempts create profitable opportunities for defenders.'
Relevant Notes:
- high-fee-amms-create-lp-incentive-and-manipulation-deterrent-simultaneously-by-making-passive-provision-profitable-and-active-trading-expensive.md
- liquidity-weighted-price-over-time-solves-futarchy-manipulation-through-wash-trading-costs-because-high-fees-make-price-movement-expensive.md
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