Token swaps on Loop DEX are a simple way to trade one Terra Network CW20 token for another via automated liquidity pools.
When you make a token swap (trade) on the exchange you will pay a 0.30% trading fee, which is distributed as follows:
75% - Returned to Liquidity Pools in the form of a fee reward for liquidity providers.
25% - Sent to LOOP stakers.
Liquidity pools charge commission fees when swaps are made from one asset to another within the pool. The commission fee is fixed and paid outside of the spread, which is determined by algorithmic price-making (see DEX overview). It is deducted from a trader's received asset during the swap transaction.
Additionally, if the traded asset is a native token such as UST, the Terra network will incur a tax on the transfer.
= tokens removed from liquidity pool (tokens received by user)
= liquidity provider fee, 0.3% of swap value
= Terra Network tax
The commission fee from each swap is added back into the corresponding liquidity pool. Liquidity providers can withdraw their share of the fees by burning LP tokens.