📊Fee Dynamics

The fee mechanism in Bariff is designed to create automatic market incentives that help balance the prices of CHINA and USA tokens. Here’s how it works in detail:

1. Base Condition (Equal prices)

When CHINA and USA prices are equal (priceDelta = 0), both tokens have a minting fee equal to the baseFee (default 1%). This creates a neutral state where neither token is preferred.

1. Imbalance Condition (Price Divergence)

When prices diverge, the fee mechanism creates economic incentives to try and restore the balance:

• The higher-priced token maintains the base fee (1%)

• The lower-priced token’s fee increases proportionally to the price difference

1. Fee Scaling System

• The fee for the lower-priced token is calculated using:

$$\text{scaledFee} = \text{baseFee} + \left(\text{cappedDelta} \cdot (\text{MAX\_FEE} - \text{baseFee})\right)$$

Where:

• baseFee is the minimum fee (1%)

• cappedDelta is the price difference percentage (capped at 100%)

• MAX_FEE is the maximum possible fee (90%)

• MAX_PRICE_DELTA is the maximum price delta to consider (100%)

1. Practical Example:

If USA price is 20% higher than CHINA:

• USA maintains a 1% base fee for minting.

• CHINA fee increases to approximately 18.1%

• This incentivizes users to mint USA (lower fee) rather than CHINA, which creates:

• Increased USA supply (potentially lowering price)

• Reduced demand for minting CHINA (potentially stabilizing price)

1. LP System at T=0

At T=0, the system is going to start with the baseCondition at 1% and both tokens will automatically create their own LPs paired with BERA, using V3 and single-sided liquidity.

On the other hand, the USA/CHINA LP will also be created and its main functionality is to be an Stabilizer Pool for the system.