How do activated protocol fees influence liquidity provider rewards?

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In v2 pools, LPs earn 0.25% per trade, with 0.05% redirected to protocol fees. In v3, governance can take 1/4 or 1/6 of LP fees depending on the tier. Advanced users can arbitrage fee-free periods via Protocol Fee Discount Auctions and optimize LP positions based on expected fee accrual vs burn impact to maximize net yield.

[Abdul Khan]

Protocol fees directly affect APRs — more fees, more LP retention.

[Rimon Khan]

It’s a balancing act — too high a fee can hurt trading volume. ️