[BIP-893] Reconfigure the Protocol Swap Fee for the ReCLAMM Pool Type

PR with Payload

https://github.com/BalancerMaxis/multisig-ops/pull/2555

Summary

This proposal aims to decrease the protocol swap fee for pools of the type “Readjusting Concentrated Liquidity AMM” (ReCLAMM).

Introduction

The ReCLAMM pool type was launched in July 2025. Several pools of this type have been deployed since launch. The dynamics of this pool type have been the subject of intense internal investigation, carried out both through simulation and analysis of real-world data. Comparing the evolution of deployed pools with simulations allowed us to validate the simulator as an accurate tool for interpreting live pool activity. The most salient observation at this early stage is that the protocol fee severely harms the LP positions.

Motivation

Currently, the protocol retains 50% of the swap fees. Compared to a scenario without protocol fees, our projections suggest that, in most cases, ReCLAMM LPs may be facing an annual cost of between 5% and 10%, with potentially higher costs for highly volatile pairs. For the sake of maintaining reasonable fees and ensuring the long-term sustainability of the ReCLAMM pool type, the Balancer DAO should reduce the protocol fee parameter for ReCLAMM pools from the current 50% to a significantly lower value. This modification will allow LPs to make their positions profitable, thus incentivizing liquidity provision and creating a positive feedback loop.

See this technical report for a quantitative analysis, and the following two examples.

Examples

1. AAVE/ETH simulation.

One example from the technical report is a simulation for the pair AAVE/ETH during the period 2024-01-01 / 2025-10-01. We simulate four positions:

1. ReCLAMM, 10% p-fee (with parameters optimized for LPs performance) 2. ReCLAMM, 0% p-fee (using the same parameters as position 1). 3. Weighted, 50% p-fee. 4. Weighted, 0% p-fee.

The simulations perform arbitrage swaps only, according to the price history. We can visualize the results with the following chart.

The difference between the positions 1 and 2 represents the impact of the 10% protocol fee on the ReCLAMM pool, while the difference between the positions 3 and 4 represents the impact of the 50% protocol fee on the weighted pool. By analyzing the data, we observe that the first difference corresponds to 1.2% annually, while the second amounts to 2.1% annually. For other pairs, such as ETH/USDC or GNO/ETH, these two values are closer to each other, and close to 2%.

2. WXPL/USDT0 live pool alongside simulation.

The following chart represents the evolution of the value of an LP token from the WXPL/USDT0 ReCLAMM pool in Plasma chain (red line), alongside three simulated positions: two ReCLAMM pools with same configuration, with and without the protocol fee activated (orange and blue respectively), and a feeless weighted pool (green). The plot on the right shows the values relative to the blue line, for easier visual comparison.

The proximity between the red and orange lines throughout the entire period indicates that the simulation fits the real-world evolution well. The final relative value of the red line is 0.938, meaning that the impact of the protocol fee on this pool has been approximately 6.2% over just 35 days, which is equivalent to almost 50% annual depreciation. This resulted from the pair’s extreme volatility during this period, combined with an inappropriate protocol swap fee value. The technical report presents the results of applying this method to other pools, with varying outcomes.

Proposal

Based on the quantitative technical report, we propose setting 25% as a tentative default protocol swap fee for every ReCLAMM pool with a price_ratio less than or equal to 6. This policy should apply to both existing and future pools. After implementation, we will continue monitoring the pools’ evolution to assess whether these values are satisfactory or require adjustment.

Technical Specification

Pool list: visit this notion page

The Balancer DAO Omni-sig at 0x9ff471F9f98F42E5151C7855fD1b5aa906b1AF7e will interact with the ProtocolFeeController at 0x212f884252792ebaaa811fb0678444b21c7c2879 and call setProtocolSwapFeePercentage with input values: pool = each pool address, newProtocolSwapFeePercentage = 25 * 10^16, corresponding to 25% protocol fees on swaps.

Edit:

Originally, the proposed protocol-fee parameter for ReCLAMM pools was 10%. After some discussions, the author considered 25% to be a more cautious value, mainly for two reasons: -For some use cases, the trading volume is expected to be fundamentally limited by the market, which imposes a bound on protocol-fee collection. -To avoid an overly drastic modification.