Every AMM pays the same silent tax. When the price moves elsewhere, the pool is briefly stale, and whoever trades first against it collects the difference and walks. SIPHON charges for that privilege and pays the charge to the liquidity providers.
When an asset's price moves on a real exchange, the AMM's price is briefly stale. A searcher trades against the pool at the old price and pockets the gap. The pool ends up correctly rebalanced — and the profit from rebalancing it leaves with the bot that took it.
This is loss-versus-rebalancing. On many pairs it is larger than the fees LPs earn. The LP never sees an invoice and there is no line item; the position simply underperforms holding the two assets, block after block.
A v2 or v3 pool is a fixed function. It charges the same fee on a calm Tuesday and during a violent repricing. It cannot look at who is trading or when, because there was nowhere to put that logic.
Plugging the leak required the pool to act on something it knew about a trade before the trade executed. v4 hooks are the first time that has been possible.
The first swap of a block is the one that captures the pool's LVR — it corrects the stale price and collects the gap. SIPHON prices that slot. The first trade of each block pays a surcharge; every trade behind it pays the ordinary rate.
The arbitrage still happens and the pool still gets corrected. The profit from correcting it no longer walks out the door.
On every swap the rate also carries a term proportional to how much this pool has actually been moving — a decayed average of the tick change each swap leaves behind.
No keeper, no oracle call. Fee income rises precisely when flow is most likely to be toxic, which means LPs are compensated for the risk they are actually carrying instead of being picked apart at the moment they are most exposed.
This is not a redistribution from new depositors to old ones and it does not depend on anyone buying a token. It is paid by the searchers and informed traders who were already extracting this value.
The yield exists because the leak was always there. SIPHON turns the pipe around. If nothing is being extracted, there is nothing to recapture and nothing to distribute — the reward compresses toward zero on its own.
// the schedule, as the pool reads it fee = baseFee + min(movement * 100, MAX_STALENESS_FEE) // realised |Δtick|, decayed + (firstSwapOfBlock ? arbFee : 0) // the toll // and the split // the whole fee accrues to in-range LPs. // the protocol's cut is taken from the toll alone.
Into a pool running the SIPHON hook. Nothing is wrapped, nothing is staked, nothing is locked. It is an ordinary v4 position.
The first swap against the pool is the one that corrects the stale price. The hook prices that slot instead of giving it away.
As the pool's own LP fee — so it accrues to in-range positions by the same path their ordinary fees do. There is nothing to claim.
On every swap the rate carries a term proportional to how far this pool has actually been moving. Violent repricing costs more to trade into.
A capped slice of the toll only, never of an ordinary swap. It goes to $SIPH stakers.
LP APR rises without a single token being printed. If nothing is being extracted, nothing is recaptured, and the reward is zero.