🎦Dynamic fees

Potential Gas Fee Scenarios: Is It Free Money?

You might wonder, "If gas prices are currently high but expected to drop soon, can I make easy money?" Or, "Gas is so cheap right now, and a major minting event is on the horizon—does this mean easy profits?"

In reality, markets always have differing perspectives, and it’s rarely as simple as it appears. When an opportunity seems too clear-cut, dynamic fees come into play. These fees are essentially Gas Bet Protocol's version of funding rates, designed to keep the system balanced.

The Role of Dynamic Fees

Dynamic fees are essential for preventing the depletion of collateral during gas fee spikes or downturns, and they also serve as a defense against malicious attacks. They discourage redemptions during under-collateralization spikes and limit excessive borrowing when the collateralization ratio is high.

When there’s significant demand for either the collateral or the BaseFee token—especially when the trade seems obvious—dynamic fees are triggered. These fees reduce potential profits until the once-obvious trade becomes costly enough to dissuade new users from redeeming or borrowing during these events.