# Overview

### Introduction

Gradient’s fee model is designed to align incentives across all participants—buyers, sellers, market makers, and the platform—while maintaining predictable, non-predatory fees.

At the core of this model is a **structured spread-based system** that ensures seamless trade execution, liquidity efficiency, and fee transparency.

***

### Fixed Execution Spread

Rather than charging variable, unpredictable fees, Gradient operates using a fixed execution spread.

|                     | Buyers                                          | Sellers                                         |
| ------------------- | ----------------------------------------------- | ----------------------------------------------- |
| **Gradient**        | 0.25-1.5% buy-side spread                       | 0.25-1.5% sell-side spread                      |
| **Traditional AMM** | Variable slippage + LP fees (typically over 6%) | Variable slippage + LP fees (typically over 6%) |

This mechanism allows the platform to:

* **Guarantee** execution at predictable price points
* **Incentivize** protocol participation via the distribution of fees
* **Maintain** a sustainable, transparent, and scalable foundation for fee collection

***

### Fee Distribution at a Glance

How the 0.5-3% spread-based fee is distributed depends on how the trade was fulfilled.

#### Filled Using Market Maker Liquidity

If the trade is filled using liquidity from a Gradient market maker pool:

* 50% of the fee is distributed to market makers in that specific token’s liquidity pool.
  * Distribution is proportional to each individual’s share of the pool.
* 10% is distributed proportionally to market makers platform wide.
* 40% is classified as platform earnings.

#### **Peer-to-Peer Match (Direct Counterparties)**

If the trade is fulfilled directly between buyers and sellers:

* 100% of the fee is classified as platform earnings.
* No portion is routed to any Market Maker pool.

<details>

<summary>What is a spread?</summary>

A fixed difference between buy and sell prices. In Gradient, this is a deliberate 0.5-3% spread (0.25-1.5% on each side), transparently split between liquidity providers and the platform.

</details>

<details>

<summary>What are LP fees?</summary>

A fixed, protocol-defined charge paid to liquidity providers or collected by trading platforms on each trade, regardless of price movement.

</details>

<details>

<summary>What is slippage?</summary>

Variable, often unpredictable cost from liquidity constraints or volatility.

Slippage is especially problematic in micro-cap tokens, where liquidity is shallow and volatility is high. Traders frequently suffer major execution losses—even on relatively small orders—due to the inability of AMMs to absorb volume efficiently.

</details>


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