# SCCP-169: Update Parameters of Dynamic fees

## Simple Summary

This SCCP proposes the following changes to Dynamic Fees parameters:

• Increase the exchangeDynamicFeeThreshold to 35 bp from 25 bp
• Lower the exchangeDynamicFeeRounds to 3 rounds from 10 rounds
• Decrease the exchangeDynamicFeeWeightDecay to 0.6 from 0.9

## Abstract

The parameters being updated are as follows:

• exchangeDynamicFeeThreshold is the minimum change in price above which dynamic fees are levied. A larger threshold leads to lower dynamic fees.
• exchangeDynamicFeeRounds is the length of the look-back window. The shorter the lookback window, the less is persistent the impact of historical price volatiltiy on dynamic fees.
• exchangeDynamicFeeWeightDecay is the coefficient applied on dynamic fees from the previous round. The lower the decay factor, the faster dynamic fees revert back to zero.

## Motivation

The primary motivation is to improve the trading experience without increasing the risk of oracle latency arbitrage significantly.

The below table showcases stats on the decrease in fees when moving from the previous dynamic fee configuration to the new one, as well as the average amount of time fees stay above a threshold:

Fee Ticker Mean Std > 50 bp > 75 bp > 100 bp
Previous Config. eth 44 bp 22 bp 1550 sec 792 sec 630 sec
btc 42 bp 19 bp 1384 sec 635 sec 256 sec
link 46 bp 19 bp 1350 sec 690 sec 546 sec
sol 43 bp 15 bp 1094 sec 350 sec 122 sec
New Config. eth 27 bp 7 bp 216 sec 203 sec 61 sec
btc 26 bp 5 bp 76 sec 59 sec 0 sec
link 26 bp 5 bp 181 sec 118 sec 0 sec
sol 26 bp 4 bp 117 sec 116 sec 0 sec

The below table showcases the change in oracle latency when moving from the old fee regime to the new one. As can be seen, the oracle latency does not exceed 50 bp in most extreme cases, with 50 bp being the cutoff needed by latency arbitragers that aim to cover the base fee of the round trip.

Oracle Latency Delta Ticker 99% 99.50% 99.90%
Previous Config. eth -4 bp 14 bp 45 bp
btc -2 bp 20 bp 58 bp
link -4 bp 14 bp 45 bp
sol -2 bp 20 bp 58 bp
New Config. eth 39 bp 53 bp 55 bp
btc 8 bp 32 bp 66 bp
link 11 bp 30 bp 62 bp
sol 33 bp 45 bp 61 bp

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