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What Are Fees And How Do They Work?


There is a 0.30% total fee for swapping tokens, which consists of 0.25% for poolers and 0.05% for the HumbleSwap protocol. The 0.25% fee is split by liquidity providers' pro-rata for their investment in the pool based on the fees accrued after the liquidity tokens are received.  When a swap is made, the 0.30% fee is immediately deposited into the liquidity pool, which increases the value of the liquidity tokens and functions as the payout to the pool providers. Likewise, any fees received thereafter are accrued pro-rata.  For example, if you add to a pool, you will receive your share of fees from this point in time onwards.

Fees are collected by redeeming liquidity tokens, effectively burning them, which removes a proportional share of the initial pool deposits. When you burn your liquidity pool tokens, you redeem your earned 0.25% fees pro-rata, and also the 0.05% protocol fee is paid.  Because fees are added to the liquidity pools, the constant k increases at the end of every trade, where the token A pool/token B pool changes with every trade.