Fee Tier
The percentage fee charged on DEX trades, set by liquidity pools and distributed to liquidity providers, varying by pool type and volatility.
What is Fee Tier?
Fee tiers are predefined trading fee rates in DEX liquidity pools, compensating liquidity providers (LPs) for supplying digital assets. Uniswap V3 offers tiers like 0.05%, 0.3%, and 1%, chosen based on pair volatility (e.g., 0.05% for USDC/USDT, 1% for volatile altcoins). In 2025, Uniswap’s $4.5 billion TVL includes $2 billion in 0.3% fee pools, generating $6 million daily for LPs, per DeFiLlama. For a $10,000 swap, a 0.3% tier costs $30, fully allocated to LPs. Sushiswap’s 0.25% default tier yields 15% APY in high-volume pools. Incorrect tier selection risks low returns, as seen in a 2024 low-fee pool yielding 2% APY versus 10% in higher tiers. LPs select tiers via pool creation interfaces, balancing risk and reward in DeFi’s $22.7 billion DEX market.
Related Terms
ZK-Rollup
A ZK-Rollup is a layer-2 scaling solution for Ethereum that processes transactions off-chain and uses zero-knowledge proofs to validate them, posting compact data to the main chain for security and finality.
Dispersed Information (Prediction Market)
Knowledge scattered across individuals that prediction markets aggregate into a cohesive forecast.
Double Spend
Attempting to spend the same digital asset more than once in a blockchain network.
Incentive Mechanism (Prediction Market)
A system of rewards, typically financial, designed to encourage truthful participation in prediction markets.
Buy Side
The portion of the order book listing aggregated buy orders at various price levels.
Genesis Block
The initial block in a blockchain that establishes the foundation of the network and its digital asset.