BAL Hookathon - Volatility Fee Hook

[t-phoenix]

🪝Volatility Fee Hook

A dynamic Swap Fee hook based on volatiltiy of the pool. The Hook calculates utilization ratio based on Amount of Token Out and Balance of Token Out in the pool, and charges higher fee when the utilization ratio increases.

🔑Key Advantages

• Increased Protection during Volatility
• Smoother Market Conditions
• Disincentivizes Pool Exploits
• Customisable Fee Logic
• Reduction in Impermanent Loss for LPs

⭐️Volatility Fee Hook v1

was developed simply to discretely distinguish fee ranges:
Technicals:

1. Utilization Ratio > 10%, pool/hook will charge x5 the staticSwapFee
2. Utilization Ratio > 20%, pool/hook will charge x10 the staticSwapFee
3. Utilization Ratio > 30%, pool/hook will charge x20 the staticSwapFee
4. Utilization Ratio > 40%, pool/hook will charge x50 the staticSwapFee

Developers can update the fee charge ranges in function _calculateSwapFee.

• Hook.sol: packages/foundry/contracts/hooks/VolatiltiyFeeHook.sol
• Test.t.sol: packages/foundry/test/VolatilityFeeHook.t.sol

✨Volatility Fee Hook V2

v2 is developed on a continuous exponential curve for charging Swap Fee.
The core equation behind charging these swap fee is:

feeMultiplier = 1 + (utilization Ratio^2 * 99)

multiplying by 99 ensures that at max utilization the fee multiplier reaches 100x

• Hook.sol: packages/foundry/contracts/hooks/VolatiltiyFeeHookV2.sol
• Script.s.sol: packages/foundry/scripts/08_DeployVolatiltiyFeePool.s.sol

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