Uniswap Labs has launched a new fee structure tool for stablecoin trading pools on Uniswap and v4. The first batch has been launched on Ethereum with two pools: USDC / USDT and USDC / USDG. Unlike common fixed fees, this mechanism dynamically adjusts the transaction fees received by liquidity providers based on the degree of deviation from the anchored price and the direction of the transactions.

The first batch covers two pools.

This time, the scope of implementation is relatively small, starting with stable coin pairs that are closest to a 1:1 trading ratio. Uniswap Labs believes that such pools are more suitable for testing dynamic fees, as prices usually fluctuate slightly around the anchor point, making it easier to quantify both the degree of deviation and the direction of correction.

• The pools that have been launched are USDC / USDT and USDC / USDG.
• The deployed network is the Ethereum mainnet.
• The function operates on the Uniswap v4 architecture.

Uniswap Labs indicates that the exchange of stablecoins has become one of the most active types of transactions on the platform. The company stated that in the second quarter of this year, the trading volume of stablecoin-to-stablecoin transactions on Uniswap reached 43.4 billion US dollars, which is higher than the total of the next three on-chain trading venues combined.

The rate varies with the degree of deviation.

The core of this mechanism is to set a reference exchange rate and a relatively narrow price range for each pool. Whenever a transaction occurs, the system will recalculate the fees that liquidity providers should be charged by taking into account the current pool price, the extent to which the pool price deviates from the reference value, and which direction the transaction will push the price in.

When the price remains within the set range, the quotes from both the buying and selling sides will try to remain consistent. When the price is exactly at the reference point, the fees for both directions are the same. As the price approaches the edge of the range, the fees for transactions that push the price towards the edge will gradually decrease, while the fees for transactions that pull the price back to the middle will increase.

Corrected transactions adopt a decreasing fee rate.

When the pool price completely exceeds the set range, the fee structure will change further. If a transaction continues to push the price away from the reference value, the system will not charge a handling fee; however, if the direction of the transaction helps to pull the price back towards the anchor point, the system will initially apply a higher fee rate, which will then gradually decrease with each block until there is an arbitrageur willing to take over that transaction.

The purpose of this design is to allow the pool itself to capture a portion of the arbitrage spread, rather than giving all the opportunities to external traders. Uniswap also mentioned that this does not mean that price shocks are eliminated. Since the fees do not vary with the size of the transactions, large transactions may still be executed along the pool's pricing curve and result in a worse average price.

Governable adjustable parameters

Currently, only Uniswap Labs is able to use StablePair Hook to create new pools. However, the fee curve and other pool parameters can still be adjusted through Uniswap. Liquidity providers do not need to migrate to new pools due to parameter modifications.

This means that the fee models for the two pools, USDC / USDT and USDC / USDG, are not set once and remain unchanged for a long time. If early transaction data indicates that the range width or the rate of decrease needs to be adjusted, the governance process can directly modify the relevant parameters.

Additional information:Uniswap Labs indicates that StablePair Hook is its first upgradable dynamic fee rate. According to data disclosed by the company, Uniswap on v4 has processed over $38 billion in transaction volume, of which about $32 billion since the beginning of this year. More than 90,000 Hook have been initialized on 20 chains.