So far any known to me CLMM, including Orca’s, collects fees in token in.
This is cleaner in terms of the swap and pool math, but creates a disadvantage for LPs: when a big price move happens, the whole fees are being collected in a (depreciating) token put in for the swap. Also, this effectively reduces the pool’s volatility, but, given the popularity of low fee tiers, negligibly.
In contrast to this, if fees are taken in token out, LPs are better positioned in trends, earning fees in an appreciating token and being less vulnerable to big price movements, since the DV is lower and the total penalty of repositioning a CLMM position in terms of liquidity is smaller.
This is specifically useful in conjunction with dynamic fees, which are already implemented.,
Yes, this implies that the liquidity will be used a bit more intensively, but this is not necessarily a bad thing, allowing for more arbirtrage opportunities and reducing the price sensitivity in trends.
This could be a huge product advantage for Orca’s CLMM. Please consider implementing.
Please consider implementing.