Fee Distribution Mechanism

The fees collected within each pool are divided among liquidity providers and the protocol. The distribution mechanism is designed to ensure fairness and to incentivize long-term participation. Below is a detailed explanation of how the fees are distributed:

1. Liquidity Provider Fees:

   • A portion of the fees collected from each transaction is allocated to liquidity providers. This incentivizes users to contribute liquidity to the pool, ensuring that the pool remains active and liquid.

   • The distribution of fees is calculated using the Euler increment model discussed in the previous section, ensuring that each liquidity provider receives a fair share based on their contribution.

2. Protocol Fees:

   • The remaining portion of the fees is allocated to the protocol’s smart contract. These fees can be used for various purposes, including:

     • Staking Rewards: The protocol can reinvest these fees to fund staking rewards, further incentivizing participation.

     • Auto-Buy Mechanisms: The protocol can use these funds to automatically purchase tokens, thereby supporting the token price and creating a price floor.

     • Development and Marketing: A portion of the fees may be allocated to ongoing development and marketing efforts, ensuring the continuous growth and improvement of the platform.