MIN-Based Liquidity Provider (LP) Fee Discount

Proposals
1

[MIP] MIN-Based Liquidity Provider (LP) Fee Discount

  • Status: Proposed / Draft

  • Proposer: [alilolgranny/Community Member]

  • Type: Constitutional (Protocol Parameter Change)

  • Date: January 2026

1. Summary

This proposal suggests implementing a 5% discount on the Liquidity Provider (LP) fee for any swap performed on Minswap, provided the user elects to pay the swap fee using the MIN token. This change aims to increase the utility of MIN, drive consistent buy pressure, and offer a more cost-effective trading experience for MIN holders and power users.

2. Background

Currently, Minswap V2 employs a flexible fee structure where the standard fee is typically 0.30%. This fee is split:

  • 0.25% to Liquidity Providers (LPs).

  • 0.05% to the “Fee Switch” (redistributed to MIN stakers).

While MIN holders currently receive discounts on Batcher Fees (the fixed ADA cost for processing transactions), there is no native mechanism to discount the Swap/LP fees themselves. By allowing fees to be paid in MIN at a discounted rate, Minswap can align the interests of traders, LPs, and token holders more closely.

3. Detailed Justification

A. Driving Native Token Utility

The MIN token’s primary value currently stems from governance and staking rewards. Introducing a “Pay with MIN” fee option elevates it to a utility asset required for cost-efficient trading. This mirrors successful models in the industry (e.g., Binance’s BNB fee discount), which have proven to create strong ecosystem stickiness.

B. Sustained Buy Pressure

By incentivizing users to pay fees in MIN, the protocol creates a continuous demand for the token. Traders who frequently use the platform will be incentivized to hold or purchase MIN to lower their overhead, creating a “buy-and-hold” effect that stabilizes the token economy.

C. Competitive Advantage

As the Cardano DeFi landscape matures, fee optimization is a key factor for DEX selection. A 5% discount on the variable LP fee makes Minswap the most attractive destination for high-volume traders and arbitrageurs, potentially increasing the protocol’s overall Total Value Locked (TVL) and Volume.

4. Implementation & Mechanism

  • The Option: The Minswap UI will include a toggle: “Pay fees in MIN for 5% discount.”

  • Calculation: * If a trade has a 100 ADA LP fee, a user opting to pay in MIN would pay the equivalent of 95 ADA in MIN tokens.

    • The conversion would be calculated using the real-time MIN/ADA oracle price on the Minswap DEX.

  • LP Compensation: To ensure LPs are not negatively impacted, the discounted fee (95%) will still be deposited into the pool reserves. While the nominal fee is slightly lower, the expected increase in trading volume driven by the discount is projected to offset the 5% reduction, resulting in higher net APY for LPs.

  • Fee Switch: The 1/6th “Fee Switch” for MIN stakers remains intact, calculated based on the final fee paid.

5. Expected Impacts

Impact Area Change Result
Trading Volume Increase Lower fees attract high-frequency traders and larger swaps.
MIN Demand Increase Constant demand for MIN to cover trading costs.
LP Revenue Neutral/Positive Slight fee reduction per trade is offset by higher volume and higher pool velocity.
User Retention Increase Encourages users to keep MIN in their wallets for future trades.

6. Benefit to MIN Holders

  1. Direct Savings: Active traders save 5% on every swap, which compounds over time.

  2. Scarcity and Value Accrual: Increased demand for MIN tokens often leads to better price discovery and market stability.

  3. Governance Power: This mechanism encourages more users to hold MIN, which inherently distributes voting power to active participants in the ecosystem.

2 Likes
2

The discounted fee (95%) would still likely need to be converted back into ada to be deposited into the pool reserves, but the main goal of this proposal is to give people a reason to buy and hold min as a utility asset for their trades thus increasing token demand and creating a positive impact on token price. This mechanism will also act as a temperature check on the tokens strength, the more users that elect to pay the fees in min as a percentage of the overall swaps the more we can transition away from yields and rewards being paid in ada and move them to min because those people that pay their fees in min likely aren’t only buying enough min to cover the swap cost that they are doing at the time so that metric would likely corollate well with token strength.

Their is also room to take the reduction in the fee more out of the min stakers cut of the liquidity providers fee if we believe the LP providers will get hit too hard with this change.

Even if the users paying their fees this way only buys enough min to cover 2 swaps, we are swapping the cost of 5% of the swap fee to have 100% of the value of the swap fee in min sit in a wallet idle somewhere. You’re also going to create more token demand simply because the token utility is in front of them every time their about to make a purchasing decision (making a swap). That 5% discount on trades acts as a potential reason discard whatever purchase they were about to make and look into and buy min token instead.

2 Likes
3

First let me thank you for your proposal.

Personally I believe the technical costs of implementation are far too greater than the rewards for this one. But I am not a blockchain developer or anything, but I believe this would need a rewrite of the Smart Contracts to sustain this new functionality. Not only that, but I assume they would need to be audited again and so on… bringing the cost up.

I believe its something worth keeping in mind for whenever new contracts are written. Having this functionality built in them seems like a smart choice, and you can use it if you want. Again this may be totally wrong, because I am not a Blockchain developer and I haven’t read the contracts, they may support this already, I leave that to someone else.

Also regarding the current state of the batcher fee. I think this no longer is the case as you describe it. Batcher fees have been massively reduced after the discount was applied. Since now they are close to 0, I believe no discount is made.

Congrats on your first post, and hope it keeps comming,

2 Likes