Types of fees on Terra

There are three kinds of fees present within the Terra ecosystem. The first type of fee, namely gas fee, which is used to cover the cost of a transaction. If a user tries to make a transaction but has not enough liquidity to cover the gas fee, the transaction will not go through. For every whole block, all of these gas fees are summed together and are distributed to validators, who then distribute them further to delegators in the form of staking rewards.

The second kind of fee is Tobin Tax, also known as a swap fee, which is a fixed percentage fee that is added on top of any market swap between Terra stablecoin denominations. In a similar way to the gas fees, collected Tobin tax fees are sent to the Oracle reward pool and are then sent to validators who report correct exchange rates. Validators then distribute these fees to delegators, in the form of staking rewards.

Lastly, the third kind of fee is the Spread fee, which is added to any market swap between Terra and Luna (minimum 0.5%). In the case of extreme volatility within the Terra ecosystem, the spread fee is adjusted to maintain a constant product between the size of the Terra pool and the fiat value of the Luna pool, which ensures stability in the protocol. Once the pools reach an equilibrium, the spread fee can return back to its original value. What happens to the collected spread fees is the same as the procedure with Tobin Tax (firstly sent to the Oracle reward pool, then to validators and lastly to delegators in the form of staking rewards).

How UST transaction volume relates to fees paid to stakers

From the first paragraph, it is clear that the more transactions there are, the more fees will be collected, whether in the form of gas fees, swap fees or spread fees due to an increased volatility within the ecosystem.

For each block, the fees are summed together and distributed to delegartos, meaning that staking rewards would increase in times of higher transactional volume. However, it is important to keep in mind that transaction fees that are distributed to each validator are proportional to their staked amount.

The graph shown above presents all of the swap fees that took place between November 2020 and March 2022. We can see the daily amount of fees traded, which allows for a clear idea of when the biggest volumes have been traded. For example, the biggest spike has occurred between November 9th and November 20th 2021, when the most amount has been traded, resulting in the biggest sum of fees.

This graph presents all of the fees that have been traded since the beginning of the Terra network. We can see a few spikes in the biggest volumes, for example on March 17th 2021. The other important information that can be analysed from the graph is the fact that most of the fees have been in ukrw, uusd and a smaller proportion of uluna. Lastly, we can see that there has been a linear growth of the volume traded since around September of 2021.

This final graph shows the amounts of rewards that have been withdrawn by various validators. We can see that the biggest volume withdrawn was on April 30th 2021, which was of a total amount of over 2.6 Million $. Hovering over the graph allows us to clearly see what Validators have withdrawn their rewards on each specific day.