Full Sail is a decentralized exchange protocol. Its interface allows users to interact with smart contracts for token swaps, liquidity, and governance. Swaps are executed through automated market maker (AMM) pools, where liquidity is provided by users and priced according to established formulas. The system incorporates several enhancements to improve pricing, capital efficiency, and execution quality.

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Return on Emissions (ROE)

ROE, invented by Serious People, is Full Sail’s core metric for evaluating whether token emissions are generating productive value for the protocol. It serves as a feedback loop that guides efficient emissions. ROE compares the total economic value returned to the protocol against the value of oSAIL emitted.

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ROE Formula

ROE=(TDVR−TDVETDVR)+1\text{ROE} = \left( \frac{\text{TDVR} - \text{TDVE}}{\text{TDVR}} \right) + 1 Formula Explanation:
  • TDVE (Total Dollar Value Emitted): The dollar value of oSAIL emissions allocated to a pool.
  • TDVR (Total Dollar Value Returned): The total value generated in return, including trading fees and exercised oSAIL revenue.
If RoE is greater than 1, emissions are generating a net gain for the protocol. This means more fees, more sticky liquidity, and stronger long-term value. If RoE is less than 1, emissions are generating less value than what was emitted. This indicates a value leak and an inefficient use of incentives. RoE gives a clear, objective signal of pool performance and helps ensure emissions flow to pools that contribute most to protocol health. The goal is to eventually reach an ROE greater than 1.

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Concentrated Liquidity

Pioneered by Uniswap V3, liquidity in Full Sail is deployed within defined price ranges, rather than uniformly across the full constant product price curve. By concentrating liquidity near the active market price, the protocol increases capital efficiency and reduces slippage for traders. This structure also improves execution quality, as liquidity is deeper where trades are most likely to occur. Positions outside the selected range do not participate in swap execution and therefore do not accrue fees or trading volume.

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Dynamic Swap Fees

Swap fees on Full Sail adjust dynamically based on trading volume and observed volatility within each liquidity pool. When activity increases, fees may rise to better compensate liquidity providers and attract deeper liquidity. During periods of low volume and stability, fees decrease to encourage trading and maintain cost efficiency. This ensures fees remain responsive to market conditions while balancing the needs of both traders and LPs. This dynamic structure also helps Full Sail remain competitive for order flow from routing aggregators. By adjusting fees based on liquidity and volatility, the protocol can frequently offer better execution paths, increasing its likelihood of being selected by third-party routers and boosting swap volume. Full Sail’s dynamic fee model is inspired by the mechanism introduced by Algebra Finance, combining sigmoid-based response curves and real-time volume-to-liquidity ratios to regulate fee adjustments. The formula below outlines the fee function used in the protocol for volatile pairs: Fee(t)=feebase+(α1+eβ−volatility(t)γ)⋅(11+eβr−I(t)γr)\text{Fee}(t) = \text{fee}_{\text{base}} + \left( \frac{\alpha}{1 + e^{\frac{\beta - \text{volatility}(t)}{\gamma}}} \right) \cdot \left( \frac{1}{1 + e^{\frac{\beta_r - I(t)}{\gamma_r}}} \right) For stable pairs, the dynamic fee model uses a price-deviation-based fee to keep fees low near the peg and increase them if depegging occurs. The formula below outlines the fee function used in the protocol for stable pairs: price_diff={1price,if price>1price,otherwisefee=min⁡(base_fee+{price_diff⋅diff_multiplier,if price_diff<1−threshold0,otherwise,max_fee)\text{price\_diff} = \begin{cases} \frac{1}{\text{price}}, & \text{if } \text{price} > 1 \\ \text{price}, & \text{otherwise} \end{cases} \\ \text{fee} = \min\left( \text{base\_fee} + \begin{cases} \text{price\_diff} \cdot \text{diff\_multiplier}, & \text{if } \text{price\_diff} < 1 - \text{threshold} \\ 0, & \text{otherwise} \end{cases}, \text{max\_fee} \right) This design allows the protocol to optimize for both capital efficiency and execution quality under varying market conditions.

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Fee Distribution

95% of the trading fees generated by each pool are distributed to veSAIL voters who voted for that pool, based on how accurately their predictions matched the actual trading volume. Voters whose predictions are closer to real outcomes earn a larger share of the distributed fees. The remaining 5% of all trading fees is allocated to the protocol’s Insurance Fund. This fund is designed to enhance long-term sustainability, provide coverage for unexpected risk events, and may also be used for strategic purposes such as protocol-owned liquidity (POL) or buybacks to generate yield and reinforce value accrual.

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Routing and Execution

Full Sail supports intelligent routing for trade execution across multiple pools. The system evaluates available paths to determine the most cost-effective route. Multi-hop swaps are supported, allowing tokens to be exchanged through intermediary assets when it results in a better effective rate. Execution is optimized for price impact and gas efficiency, with routing logic applied automatically at the protocol level.