Fees

Bluff's fee structure is divided into two categories: fees for market participation, which are handled by the ConditionalTokenMarket contract, and fees for trading, which are handled by the underlying Automated Market Maker (AMM) pool.

Market Participation Fees

These fees are applied when minting or redeeming full sets of outcome tokens.

• Minting Fee: 0% There is no fee to supply collateral and mint a complete set of outcome tokens.

• Redemption Fee: 2.5% A 2.5% fee (defined as REDEMPTION_FEE_BP = 250) is charged on the value of the returned collateral when a complete set of outcome tokens is redeemed before the market has settled.

Trading Fees

Trading fees are incurred when outcome tokens are swapped on the underlying AMM, which is built on Uniswap v4. These fees are implemented at the pool level using Uniswap v4 Hooks and are not defined in the core market contract.

All swaps are subject to a fee that is distributed among three parties:

• Protocol Fee: A fee collected by the Bluff protocol.

• Curator Fee: A fee paid to the creator of the prediction market.

• Liquidity Fee: A fee paid to the liquidity providers (LPs) in the AMM pool.

Separating market participation fees from trading fees allows for a more flexible and transparent economic model.

Stakeholder Value Capture

The fee structure is designed to distribute revenue among the key stakeholders who contribute to the platform's operation and growth.

• Empyreal (Protocol): Empyreal, the entity behind the Bluff protocol, captures value in two primary ways:

  • Protocol Fee: A percentage of every swap fee is allocated to the protocol.

  • Redemption Fee: The 2.5% fee on early redemptions serves as another revenue stream.

• Simmi (Curator & Market Maker): Simmi, as a key participant in the ecosystem, earns revenue through two distinct roles:

  • Curator Fee: For markets that Simmi creates, a curator fee is earned from every swap.

  • Liquidity Provider (LP) Revenue: By acting as a primary market maker, Simmi provides liquidity to various markets and earns fees from the resulting trading activity. This is a significant revenue source for active LPs.

Dynamic Fees

Bluff is designed to support dynamic fees that adjust based on market volatility. This feature is intended to better compensate liquidity providers for the increased risk of impermanent loss during periods of high volatility. By adjusting fees in response to market conditions, the system can also help to stabilize liquidity. This functionality is implemented using Uniswap v4's hook system.