Mycelium’s Fee Update: Driving volume to drive rewards

Transparent, Cheap Perpetual Swap Trading CostsMycelium’s Fee Update: Driving volume to drive rewards

Trade with liquidity, leverage, low fees and now, no spread. Trade with Mycelium.

We’re updating our fee structure to make our trading costs more transparent for traders.

We’re dropping the spread for BTC, and ETH.

Traders will only pay the fixed entry/exit fee + one of the cheapest borrow rates on the market, so they can bake in the cost of trading before opening a position.

Out with the old fees, in with the new and improved

We’re going to switch up our fee structure to better balance the goals of our LPs and Traders.

Traders = Cheap and Transparent Fee Structure

LPs = More traders generating volume and MLP returns

MYC Stakers = Higher % share of Treasury distributions

Here are some changes we are going to make over the next few days to help attract and retain traders:

✅ Remove spread for ETH and BTC and replace with an increased entry and exit fee

✅ Decrease borrowing fees for a given asset utilisation

✅ Concentrate trading rewards around the top 5% of traders

✅ Decrease the spot swap fees

Fee Distribution

We’re turbocharging our rewards distribution to incentivise our top traders.

Initially 10% of protocol revenue was being distributed to our top 50% of traders. This has resulted in immaterial rewards, with traders in the 30th to 50th percentile claiming less than a dollar.

By concentrating the rewards distribution so that the top 5% earn 5% of protocol fees, the best traders will extract more of the value they’re generating on the platform.

Additionally, it means that Mycelium can reallocate the other 5% to deliver more robust returns to MYC Stakers via the Mycelium Treasury.

Mycelium’s renewed protocol revenue is split on the following basis:

70% to liquidity providers

5% to our top traders

25% to MYC treasury (15% of which is distributed to the MYC Staking Program)

The rationale

Our initial fee-structure including a bid-ask spread for BTC, and ETH was implemented to protect LPs from CEX price arbitrage. We introduce a spread where our competitors didn’t to allow more flexibility to increase and decrease spread, as well as allow for auto-compounding of MLP returns. This spread introduced confusion for both liquidity providers and traders. Additionally, it created the perception of ‘hidden’ and costly fees. The solution is to simplify the fee structure that will align incentives between traders and LPs.

Our rationale for changing borrow and spot/swap fees is to keep fees in line with protocol liquidity and trade sizes. This change makes trading on Mycelium Perpetual Swaps the most cost-effective venue for perps trading.

As a result of reducing the fee parameters mentioned above, we have increased the entry/exit fee as a clear 0.09% fee incurred that is up-front and easy to calculate when sizing a trade.

Breakdown of changes per fee-type

Spot Swap Fees

Mycelium is lowering the base spot swap fee from 30 bps to 20 bps and the spot swap fee sensitivity parameter from 50 bps to 40 bps.

A large amount of traders use spot swaps when trading to convert their margin in and out of the required base asset when entering and exiting a long position. This usually applies to the larger algorithmic traders that use stablecoins as their reserve currency. Thus, having a low spot swap fee is crucial to drive trading volume.

Currently, Mycelium has spot swap fee parameters that are in line with competitors. However, due to the smaller sized liquidity pool, fees are more for large traders as large swaps draw the assets’ weighing significantly away from their target weighting. Mycelium is lowering these fees to become more attractive to traders.

Bid-Ask Spread

Mycelium is decreasing the spread of all assets by 6 bps, resulting in 0 spread for ETH and BTC. Removing spread will also allow us to implement a more aggressive referrals program as it allows more flexibility of fee distribution.

The spread for longer tail assets will be:

LINK & UNI: 0.44% (PREV. 0.56%) CRV, FXS, & BAL: 0.88% (PREV. 1.00%)

Entry/Exit fee

We are increasing the entry and exit fee of trading by 6 bps. This would result in an entry and exit fee of 9 bps. By increasing the entry/exit fee traders will encounter less hidden or dynamic fees, which have been inhibiting their ability to accurately price in the cost of trading on Mycelium Perpetual Swaps.

Borrowing Fees

Mycelium is decreasing borrowing fees from Utilisation * 0.01% per hour to Utilisation * 0.005% per hour.

Similar to spot swap fees, due to our relatively smaller liquidity pool, the borrowing fee is much higher for large traders, entering positions with a high notional value. This may lead to larger average open interests for long and short positions, skewing LP exposure. LPs can use the proportionalExposure or deltaPerDollar endpoints here: to see their exposure to each asset in the pool (accounting for pool holding and trader open interest) and thus adjust or hedge their exposure accordingly.

Risk mitigation

Recently, another Perpetual Swap protocol on Arbitrum encountered an exploit due to price manipulation of CEX liquidity. We responded at the time and confirmed with our community that our users funds were not exposed to the same risk, namely due to the fact our bid-ask spread was inversely correlated to CEX liquidity depth. [Full post is here] The cost to trade different assets still remains inversely correlated to CEX liquidity depth, just with a different split of fees and spread.

Additionally, decreasing spot swap fees introduces the risk of pricing arbitrage bringing the pool out of balance. However, this risk is significantly mitigated by leaving the fee sensitivity moderately high, using a small price update threshold of 0.1% and using websockets to continuously poll centralised pricing. We are confident that lowering spot swap fees won’t lead to an unhealthy level of price arbing.

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All of Mycelium’s products are hosted on Ethereum Layer 2, Arbitrum. Users will need to bridge their assets to Arbitrum in order to trade Perpetual Swaps, Perpetual Pools, or Lend via MYC Lending.

Arbitrum is a secure, low-cost scaling solution that ensures our users can access low-cost derivatives in a safe, simple, and speedy environment.

If you need assistance bridging your assets, our team has prepared a guide here.

Mycelium Perpetual Swaps is a decentralised derivative platform, which allows users to open leveraged long and/or short positions on crypto-assets.

Perpetual Swaps are similar to a Future where traders can take a position based on the future price of an asset, the key difference being Perpetual Swaps mechanisms allows traders to take this position at an unspecified point in the future, making it ‘perpetual’ or unable to expire. Mycelium Perpetual Swaps allows traders to take a position on digital assets such as Bitcoin and Ethereum.

Mycelium Perpetual Swaps doesn’t use an order book model for leveraged trading. Rather, all traders trade against the Mycelium Liquidity Pool (MLP). The MLP is a basket of blue-chip assets and stablecoins pooled together (ETH, BTC, LINK, UNI, BAL, CRV, FXS, FRAX, USDT, DAI, USDC) which acts as a global AMM for leveraged trading. Liquidity providers can deposit any whitelisted asset into the MLP pool in return for MLP tokens, which represent the LPs share in the diversified liquidity pool. By acting as a universal counterparty (AMM) to traders, meaning that it agrees to be the counterparty to any long or short trade at the given price, for an asset it holds, until it runs out of said asset.

In exchange for providing liquidity to the Mycelium Liquidity Pool (MLP), liquidity providers earn rewards. Primarily, MLP holders earn 70% of fees generated on the platform, which is distributed fortnightly in ETH and or esMYC.

  • ETH Rewards: The MLP pool earns 70% of fees generated from swaps and leveraged trading. These fees are converted to ETH, before being continuously distributed to MLP stakers.
  • Escrowed MYC Rewards: These are rewards in the form of a token which has the right to vest into $MYC when staked in the esMYC vesting vault.

The trading fees that make up this revenue are entry/exit fees, borrowing fees, and or a spot trading fees. For a full overview of the trading fees, visit this page.

Additionally, LPs earn rewards from a small bid/ask spread that is charged on long-tail assets (there is no spread on BTC or ETH). These rewards accrue as MLP, shown on our front-end as Market Making APR. These rewards can be redeemed at any time, in any asset form within the MLP basket of assets.

Yes. Perpetual Pools are a marketplace for leveraged tokens, while perpetual swaps simulate spot trading with margin. They are both derivatives, but Perpetual Pool tokens act most like a leveraged ETF, where positions are transferable.

Mycelium Staking is a program established by Mycelium to give utility to our governance token. MYC holders can stake their $MYC to earn ETH rewards. MYC Stakers effectively enter a loan agreement with the Mycelium Treasury to lend their MYC. The Loan Cycles occur fortnightly, meaning deposits and withdrawals are processed at the beginning/end of each cycle. Stakers can request withdrawals throughout the cycle, noting the withdrawal will be processed and distributed at the end of the cycle.

Don’t worry, you are earning rewards! The rewards only show at the end of the 14 day loan cycle.

The way the Perpetual Pool market calculates how much money to move from the losers to the winners prevents the loser from ever losing 100% of their money. The pool does this by, in extreme scenarios, sacrificing some of the gains of the winners in order to protect the losers from losing everything. This is why we say Perpetual Pool positions cannot be liquidated.

However; this does not mean you cannot lose money by trading with Perpetual Pools.

In August 2022, TracerDAO voted to transition and rebrand to core service provider Mycelium, and $MYC as the native token. All TCR holders are entitled to change their token 1:1 to MYC via this site:

The majority of TCR holders have migrated to MYC, but the site will remain active for approx. 3 years to ensure all TCR holders have the opportunity to migrate.

When a trader enters a short position, the liquidity pool will fully collateralise the position with stablecoins. For short positions, the liquidity pool is essentially a market maker that takes the opposite side of the position, increasing the long exposure of the pool. If the price of the base asset depreciates, the trader receives stablecoins from the liquidity pool. If the price of the base asset appreciates, the liquidity pool receives a portion of the user’s margin as compensation.

At close, the trader will only have to return the USD value of the initial notional value to the liquidity pool. Thus, the trader is effectively entitled to the inverse of the future “PnL” (Profit and Loss) of an asset.

With Perpetual Pools v2, users can deposit any sort of collateral for maximal optionality. Additionally, there is no minimum-commit size.

On Mycelium Perpetual Swaps traders can access up to 30x Leverage. On Mycelium Perpetual Pools traders can access up to 10x Leverage.

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