DAMM v1 Fee and APY Calculation

Documentation Index

Fetch the complete documentation index at: https://docs.meteora.ag/llms.txt

Use this file to discover all available pages before exploring further.

DAMM v1 LP returns can come from several sources, so APY needs to be read carefully. A pool may show fee performance, base APY, Dynamic Vault yield, and farming incentives. These are related, but they are not the same thing. This page explains how to think about the metrics at a product level.

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Total trading fee

Every swap can charge a trading fee. The trading fee is calculated from the input amount: $$\text{trading fee} = \text{input amount} \times \frac{\text{trade fee numerator}}{\text{trade fee denominator}}$$ The LP-relevant portion of the fee remains with the pool and increases the value backing LP tokens. In practice, LPs do not need to manually collect this fee from a DAMM v1 LP-token pool. The fee is reflected in pool share value.

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Protocol fee

DAMM v1 can also charge a protocol fee: $$\text{protocol fee} = \text{total trading fee} \times \frac{\text{protocol fee numerator}}{\text{protocol fee denominator}}$$ The protocol fee is separate from the LP value. Depending on pool configuration, protocol, host, and partner fee settings can determine how swap fees are split.

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Constant Product pools

• Standard Pools: 20% Protocol Fee, 80% LP Fee (0.25% trade fee)
• Launch Pools: 20% Protocol Fee, 80% LP Fee (customizable trade fee)

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Stable Swap pools

• 0% Protocol Fee, 100% LP Fee (0.01% trade fee)

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Swaps

Swap hosts can include a host fee account in the swap transaction to receive 20% of the protocol fee. For LPs, the key question is: what portion of the trading fee remains in the pool and increases LP token value?

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Host and partner fee routing

DAMM v1 also has fee routing logic for partner fee arrangements. A configured partner can accrue up to 50% of protocol-side fees after any host fee routing. This does not change the core LP concept: LPs evaluate the net value accruing to the pool after applicable fee splits.

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Base APY

Base APY measures how much the value of a pool share has increased over a period, annualized. $$\text{base APY} = \left(\left(\frac{\text{Virtual Price}_{2}}{\text{Virtual Price}_{1}}\right)^{\frac{\text{1 year}}{\text{timeframe}}} - 1\right) \times 100$$ Where:

• Virtual Price 1 is the older virtual price.
• Virtual Price 2 is the newer virtual price.
• timeframe is the measurement period.

Virtual price is: $$\text{virtual price} = \frac{D}{\text{LP token supply}}$$ D is the curve invariant computed from the pool’s token amounts after converting vault LP shares into underlying token balances. For constant-product pools, D = sqrt(x * y). For stable pools, D comes from the stable-swap invariant. Virtual price can rise because of:

• Swap fees.
• Eligible Dynamic Vault yield.
• Any value that increases pool assets relative to LP token supply.

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365-day fee over TVL

This metric annualizes recent swap fee generation against pool liquidity: $$\text{365d fee / TVL} = \frac{\text{24h fees} \times 365}{\text{pool TVL}}$$ Where:

• 24h fees is the fee value generated over the last 24 hours.
• pool TVL is the current value of liquidity in the pool.

This is useful for comparing how efficiently different pools are generating trading fees. A smaller pool with heavy volume may show a high fee-over-TVL number. A large pool with quiet volume may show a lower number.

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Dynamic Vault yield

Some DAMM v1 pools can earn additional yield through Dynamic Vaults. This yield comes from eligible idle assets being allocated to supported external strategies. Vault yield can contribute to base APY because it can increase the value backing the pool’s vault LP positions. The important distinction:

• Trading fee yield comes from swaps.
• Vault yield comes from eligible vault strategies.
• Farm APR comes from reward token emissions.

These can all appear in the LP return profile, but each has different drivers and risks.

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External farm APR

External liquidity mining APR estimates the annualized value of farm rewards relative to farm TVL: $$\text{LM APR} = \left(\left(1 + \frac{\text{farm reward per day}}{\text{farm TVL}}\right)^{365} - 1\right) \times 100$$ Where:

• farm reward per day is the daily value of reward emissions.
• farm TVL is the value of LP tokens staked in the farm.

Farm APR is only relevant if LPs stake LP tokens in the separate farm program. LP tokens sitting unstaked in a wallet still own pool liquidity, but they do not earn farm rewards from that farm.

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Reading a DAMM v1 pool return stack

When comparing DAMM v1 pools, break the displayed return into layers:

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1. Organic trading demand

Does the pair have real swap volume? High trading volume can generate sustainable fees.

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2. Pool depth

How much TVL is competing for those fees? More TVL can reduce slippage, but it also spreads fee revenue across more LP capital.

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3. Vault yield eligibility

Does one side or both sides of the pool connect to Dynamic Vault yield? If yes, what are the supported assets and risk assumptions?

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4. Farm incentives

Is there an active farm? What reward token is emitted? How long does it last? How much LP liquidity is staked?

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5. Asset risk

A high displayed APY does not offset all asset risk. LPs still face price movement, depeg risk, smart contract risk, and incentive changes.

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Practical example

A DAMM v1 stablecoin pool might have:

• Low but steady trading fees.
• Eligible Dynamic Vault yield on one or both stable assets.
• A temporary partner farm.

The combined displayed return may look attractive, but each component behaves differently. Trading fees depend on volume. Vault yield depends on external strategy rates and risk. Farm APR depends on reward funding and how many LP tokens are staked. A healthy LP decision looks at all three instead of chasing the largest number on the screen.