How Do Automated Market Makers (AMMs) Determine the Trading Fees for LPs?
AMMs typically charge a small percentage fee on every trade that occurs within the liquidity pool. This fee is then distributed proportionally among all liquidity providers based on their share of the total pool.
The specific fee percentage (e.g. 0.05%, 0.3%, 1%) is usually set by the protocol or a governance vote.
Higher trading volume leads to higher fee accrual for LPs.
