Dynamic Fee Hooks: -> its a type of hook that allows you to modify the swap/LP fees at any time you want

Core Idea: -> as gas price increases onchain, decrease swap fees -> as gas price decreases onchain, increase swap fees

around some "base" swap fees

|MIN_FEE<-------------------|BASE_FEE|------------------->MAX_FEE|

we're gonna keep it simple, we're gonna keep it as a proof of concept

TL;DR

lpFee is managed through Pool.State.Slot0

Two ways to override this:

1. If you are updating the fees once-per-block or less, use updateDynamicLPFee
2. If you are updating for each swap, use beforeSwap override fee return argument

For Case (1), PoolManager has a function called updateDynamicLPFee that is only callable by the attached hook and only if pool has been set up to use dynamic fees (i.e. has the magic value set in the PoolKey.fee during initialization)

Hook can call this function at any point:

• in beforeSwap to charge a different fees for every swap action
• periodically at a fixed interval based on reaction to offchain data

For Case (2), the beforeSwap hook can return an optional third argument (default value 0 if not using) that can override LP fee for that particular swap only

Requirement: 23rd bit of the returned value must be set to 1 for it to count and consider it a valid value. Fairly simple to do using a constant provided through LPFeeLibrary.sol

example:

uint24 someFees = calculateFeesForSwap();
uint24 feesWithFlag = someFees | LPFeeLibrary.OVERRIDE_FEE_FLAG;

return (this.beforeSwap.selector, BeforeSwapDeltaLibrary.ZERO_DELTA, feesWithFlag);

1. there's no concept of fetching "average" gas price on a network directly onchain
2. we'll create a simple "average gas price" measurement tracker, we'll update this and recalculate the average during every swap

NOTE: This isn't a "true" average gas price We are only updating it for every swap action you can make it more accurate by implementing every single hook function and updating average gas price regardless of what the action is. you can update it during addLiquidity or removeLiquidity

3. if current gas price > 110% of average gas price -> charge base fees * 2 else if current gas price < 90% of average gas price -> charge base fees / 2 else charge base fees

MA = 0 n = 0

1. v = 10

MA = ((MA * n) + v) / (n + 1) n++;

MA = ((0 * 0) + 10) / (0 + 1) = 10 n = 1

2. v = 15

MA = ((10 * 1) + 15) / 2 = 12.5 n = 2

• Initially, new pool is deployed with this hook attached (dynamic fee flag is enabled) -> let's say this happens at a gas price of 10 gwei -> MA = 10 gwei

• 500 swaps happen -> MA = 20 gwei

• 501st swap that takes place -> gas price here = 25 gwei -> 25 > (1.1 * 20) -> 501st swap will pay BASE_FEES/2 (0.25% in swap fees)

  • MA = 20...

1. LP Fees -> this is a % cut from the input amount during swaps that swappers pay to LPs for providuing liquidity this is how LPs make yield on their liquidity positions

2. Protocol Fees -> this is a cut taken from swaps that goes out to Uniswap (the organization)

3. Custom Fees (returnDelta hooks a.k.a. NoOp Hooks - this will be covered starting next to next week) -> fees that the HOOK is charging and keeping for itself in exchange for whatever services the hook is providing -> e.g. limit orders the hook can charge a platform fee

When we talk about dynamic fee hooks we're specifically talking about dynamic LP FEE hooks

Fill out workshop feedback form - https://atriumacademy.typeform.com/to/Z7Ad4he6