Jupiter Perpetuals Price Impact Fee Update and Additional Analysis
Summary
Gauntlet has conducted an in-depth analysis of Jupiter Perpetuals’ current fee structure and trading patterns to propose adjustments that aim to enhance the trading experience for users while optimizing revenue for JLP token holders. The proposed fee structure maintains the current impact fee component and increases the base fee to 0.07%. This adjustment ensures a more equitable distribution of fees based on trade sizes and is expected to have a positive impact on the majority of traders, with only 1.11% of users experiencing an increase in fees. The recommended fee APRs demonstrate the potential for enhanced revenue generation, particularly for Solana trading. Gauntlet believes that these recommendations will contribute to the long-term success and growth of Jupiter Perpetuals.
Introduction
Jupiter Perpetuals is committed to enhancing the trading experience for its users while optimizing revenue for JLP token holders. To achieve these goals, Gauntlet has conducted an in-depth analysis of the current fee structure and trading patterns on the platform. Based on this analysis, we propose an adjustment to the base fee that aims to benefit both traders and JLP revenue.
Proposed Fee Structure
Gauntlet recommends maintaining the current price impact fee structure that consists of two components: a base fee and an impact fee.
The base fee is a fixed percentage of the notional cost, regardless of the trade size, while the impact fee is a variable percentage that scales with the notional size of the trade. This structure aligns with leading centralized exchange values and ensures a more equitable distribution of fees based on trade sizes.
The proposed fee structure can be implemented using the following formulas:
trading_fee_coefficient = base_fee + trade_notional_size / impact_fee_scalar
trading_fee_usd = trading_fee_coefficient * trade_notional_size
Base Fee Adjustment
Gauntlet suggests decreasing the base fee to 0.07%, which is in line with the indicative rate across all markets on leading centralized exchanges. This adjustment will minimize the impact on traders while still contributing to improved JLP revenue. The incremental change will allow traders to adapt to the new fee structure more easily.
Impact Fee Methodology
The impact fee component remains unchanged, as it has been developed using liquidity models based on historical trade size distributions on Jupiter. These models generate a curve that scales the impact fee with the notional size of the trade. The variable fee component ensures that larger trades contribute more to JLP revenue, while smaller trades benefit from lower fees, encouraging increased trading activity and volume on the platform.
| Asset | Base Fee | Impact Fee Scalar |
|---|---|---|
| SOL | 0.07% | 1,000,000,000 |
| ETH | 0.07% | 5,000,000,000 |
| BTC | 0.07% | 8,000,000,000 |
A $1.5 million SOL trade will pay:
trading_fee_coefficient = .07% + 1,500,000/1,000,000,000 = .22%
trading_fee_usd= .22% * $1,500,000 = $3,300
A $100k SOL trade will pay:
trading_fee_coefficient = .07% + 100,000/1,000,000,000 = .08%
trading_fee_usd= .08% * $100,000 = $80
Impact on Traders and Volume Distribution
The proposed fee structure is designed to benefit the majority of traders on Jupiter Perpetuals. With a 7bps base fee, only 1.11% of users will experience an increase in fees, while 42.54% of traded volume, primarily from Solana, will contribute more to JLP revenue. This distribution ensures that the fee adjustments do not disproportionately impact smaller traders.
Furthermore, the average trade size on Jupiter Perpetuals is $23k, with 67% of the trading volume coming from trade sizes over $100k and 31.5% from trade sizes of $1m+. Gauntlet expects that the introduction of the new base fee will encourage users to optimize their trading strategies, leading to an increase in overall trading volume on the platform.
Asset-Specific Observations and Recommended Fee APR
The proposed fee structure will have varying impacts on different assets traded on Jupiter Perpetuals. Solana (SOL) stands out with the highest average trade size, total volume, and recommended fees. A significant portion of its volume currently pays more than the recommended fee, indicating that the new structure will be particularly effective in generating revenue from SOL trading.
In contrast, Bitcoin (BTC) and Ethereum (ETH) have similar fee structures, with no transactions currently paying more than the recommended fees. Under the new structure, trading these assets will generally become slightly more expensive, but the impact is expected to be minimal, and the trading experience for BTC and ETH traders will remain largely unchanged.
The recommended trading fee APR (APR coming only from open/close fees - without borrow fees, liquidations, trader PnL and etc.) for Solana will increase from 36.5% to 48.4%, signaling a more efficient fee generation for this asset. The total trading recommended fee APR will increase from 36.5% to 44.75%, demonstrating the overall effectiveness of the proposed base fee adjustment in enhancing JLP revenue.
Supporting Data
Conclusion
The proposed adjustment to Jupiter Perpetuals’ base fee is designed to strike a balance between improving the trading experience for users and increasing revenue for JLP token holders. By maintaining the current impact fee component and increasing the base fee to 0.07%, the platform can ensure a more equitable distribution of fees based on trade sizes, encouraging increased trading activity and volume. The asset-specific observations and recommended fee APRs demonstrate the potential for enhanced revenue generation, particularly for Solana trading. Gauntlet believes that this recommendation will contribute to the long-term success and growth of Jupiter Perpetuals.