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The Space Dynamic Fee Curve is designed as an incentive alignment mechanism for makers & takers which uses fee asymmetry in order to achieve the following:
  • Reward early participation, conviction and risk taking
  • Maintain orderly books
  • Reward makers for providing deeper liquidity (see: rewards)
  • Incentivize consistent, long term participation
  • Punish market manipulation
Traders adding liquidity to the order book via limit orders (makers) pay 0 fees. The below fees only apply to market orders that get filled instantly (takers)
  1. Buy Fee: when a market order position is opened, fees start higher during uncertain phases of the market where your odds are highest and gradually decrease as the market gains more certainty
Fbuy(p)=Fmin+(Fmax−Fmin)×(1−(p/100)α)F_{\text{buy}} (p) = F_{\text{min}} + (F_{\text{max}} - F_{\text{min}}) \times (1-(p/100)^{\alpha}) where
  • Fbuy(p)F_{\text{buy}} (p): Buy-side fee at probability p%p \%
  • Fmax=2.00%F_{\text{max}} = 2.00\%: Maximum fee at 0%0\% probability (highest uncertainty)
  • Fmin=0.02%F_{\text{min}} = 0.02\%: Minimum fee at 100%100\% probability (certainty)
  • α=1.3\alpha = 1.3: Curve-shape coefficient (controls smoothness of decline)

    Example:
    At p=20%p = 20\%, Fbuy(20)≈1.76%F_{\text{buy}}(20) \approx 1.76\% but you’re buying contracts that could pay out $1 (400% ROI) so your odds are better
    At p=80%p = 80\%, Fbuy(80)≈0.10%F_{\text{buy}}(80) \approx 0.10\% you’ll pay a 0.05% buy fee but your upside is smaller at $0.25 (25% ROI) as your odds are worse
  1. Sell Fee: if you wait until the market is resolved or you place a limit order to exit that doesn’t get triggered immediately you are a maker and therefore do not pay any fee. However, if you want to close your position early via a market order, you need to understand that fees peak near the midpoint (at 50% probably or $0.50) where uncertainty and volatility are highest; neither YES or NO sides have a clear informational advantage. This is the point where price manipulation and short-term flipping are most likely to occur therefore in order to protect market integrity and stabilize pricing, fees are highest (1%) and taper off towards either side as outcomes become more certain (0.02%). Fsell(p)=Fmin+(Fpeak−Fmin)×e−0.5(p−50σ)2F_{\text{sell}} (p) = F_{\text{min}} + (F_{\text{peak}} - F_{\text{min}}) \times e^{-0.5 (\frac{p-50}{\sigma})^2} where
    • Fsell(p)F_{\text{sell}} (p): Sell-side fee at probability p%p \%
    • Fpeak=1.00%F_{\text{peak}} = 1.00\%: Maximum fee at 50%50\% probability (maximum uncertainty)
    • Fmin=0.02%F_{\text{min}} = 0.02\%: Minimum fee at 100%100\% probability (certainty)
    • α=1.3\alpha = 1.3: Curve-shape coefficient (controls smoothness of decline)
    At $0.50 (50% probability) your sell fee is 1% At $0.20 (20% probability) your sell fee is approximately 0.12%

    Example:
    You wish to enter the trade below via a market order (if you entered via limit order you wouldn’t pay any fee).
Value
Order TypeMarket (fee applies; limit orders have no fee)
Market”Will BTC close above $150,000 this year?”
Current BTC Price$125,000
Current Market Probability30%
Shares to Buy1,000 YES shares at $0.30
1

Opening your position

  • Position size: 1,000 x $0.30 = $300
  • Buy fee ≈ 1.6% ($4.80)
  • Total cost: $304.80
2

If you wish to close your position, before market resolution

  • BTC rallies to $145 and market probability rises to 80%
  • Sell price: $0.80 x 1,000 = $800
  • Sell fee ≈ 0.04% ($0.32)
  • Net proceeds: $799.68
  • Net profit: $800 - $0.32 - $304.80 = $494.88 (162% ROI)
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