Dynamic Fee Hook using Directional Fee

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Set up

requires foundry

forge install
forge test

Directional Fee

• A uniswap hook to adjust fee based on change in pool price at t and t-1 block.
• Original formula proposed by Nezlobin,

δ=cΔ, for some c>0.

δ represents change in fees, increase the fee for buys and lower the fee for sales δ for price change Δ.

With this implementation and simulation environment with limited dataset, we saw some improvements varying where fees collected by LPs were increased by 0.2 to 0.05% than normal pool.

The simulation in following results

• Set 1
• Set 2

However, we can iterate on the above idea and improve several aspects of it to make more profitable for LPs and fair for swappers.

• One such improvement can be the implementation of anti fragile fees, inspired by Anti Fragility coined by Nassim Taleb.

• Value of c can also be made dynamic but further research is required to determine which factors should be considered in determining a new value of c that will change the fees.