Hey everyone,
Following MGP-13, which introduced a 5bps spread fee to improve protection against arbitrage losses and enable protocol revenue on high-volume pairs, we want to share our plans for ongoing fee experimentation.
Context
As noted in MGP-13, 0% spreads exposed the reserve to potential arbitrage losses while swaps were not generating protocol revenue. The 5bps spread addressed this, but we want to find the fee level that best balances reserve protection and protocol revenue with keeping Mento competitive as a swap venue.
What’s changing
With Mento V3, we introduced a FeeSetter role on collateral pools operated by Mento Labs. We’ll be using this to iterate on fee parameters without requiring governance proposals for each adjustment.
As a first step, we’re reducing the spread fee from 5bps to 2bps on the USDm to USDC, axlUSDC, USDT, and AUSD pools. We believe this strikes a better balance between protecting the reserve against arbitrage losses and keeping the product competitive.
Going forward
We’ll continue monitoring swap volume, reserve impact, and protocol revenue, and adjust fees as needed. All changes will be communicated here on the forum. The goal is to find the fee structure that maximizes absolute protocol revenue while making Mento the best place to swap stablecoins.
Feedback welcome.