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
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)
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.
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%)
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.
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: https://api.tracer.finance/trs/mlp 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.
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.