> ## Documentation Index
> Fetch the complete documentation index at: https://docs.skatechain.org/llms.txt
> Use this file to discover all available pages before exploring further.

# Fee mechanism

> Skate AMM LP mechanics

## Efficient LP via Skate AMM

In traditional multi-chain ecosystems, liquidity is fragmented across networks — each AMM on each chain maintains its own reserves, positions, and fee accruals.

This fragmentation lowers **capital efficiency**: liquidity often sits idle on quieter chains, and the same price ranges must be funded multiple times across networks.

Skate AMM removes this inefficiency through a **unified liquidity state** hosted on the hub chain.

When liquidity is added on any periphery chain, it becomes part of the **same global pool**, contributing to the shared price curve that governs all connected markets.

As a result, LP capital is utilized across chains rather than confined to one.

### How Efficiency Improves

1. **Global utilization of liquidity**\
   Liquidity provided on one chain earns from trading activity on all chains.\
   Even if local volume is low, that liquidity remains productive as part of the global pool.

2. **Reduced redundancy**\
   Instead of replicating depth at the same price points on multiple networks, Skate aggregates all positions into one canonical price curve.\
   This means less total liquidity is required to achieve the same effective slippage and price stability.

3. **Smoothed fee income**\
   Global fee sharing distributes trading fees from the entire network to all active LPs, reducing income variance and keeping capital yield more consistent.

4. **Range-based precision retained**\
   LPs still define custom price ranges for their positions, maintaining Uniswap V3-style control — but those ranges now participate in cross-chain price discovery and fee accrual.

### Capital Efficiency Comparison

| Feature                              | **Siloed AMMs (per-chain)**        | **Skate AMM (unified)**                            |
| ------------------------------------ | ---------------------------------- | -------------------------------------------------- |
| **Liquidity scope**                  | Confined to a single chain         | Shared across all connected chains                 |
| **Price curve**                      | Independent per network            | Canonical global curve on hub                      |
| **Fee accrual**                      | Local only                         | Aggregated and distributed globally                |
| **Idle liquidity risk**              | High — unused on low-volume chains | Low — all liquidity contributes to global activity |
| **Effective depth per unit capital** | Moderate                           | Higher, via aggregated tick bitmap                 |
| **Income volatility**                | Dependent on local chain demand    | Smoothed by network-wide fee sharing               |
| **Capital efficiency**               | Fragmented                         | **System-wide and optimized**                      |

## Fee Accrual

As swaps occur across chains, trading fees accrue globally and are distributed **pro-rata** to all active LPs based on their position size and range.

## Displayed APY

The displayed **APY** reflects the **aggregated yield from all connected networks** — not just the local chain.

This means liquidity provided on one chain earns from **cross-chain trading activity**, thanks to Skate’s Unified Liquidity Model.