A fee tier is the percentage of each swap that is collected as a trading fee within a specific liquidity pool. Fee tiers are set at pool creation and vary by DEX and pool type.

Common fee tiers on Solana DEXs range from 0.01% for stablecoin pairs (where prices rarely diverge) to 1% or higher for volatile or exotic token pairs (where liquidity providers face greater impermanent loss risk). Higher fee tiers compensate providers for higher risk.

Fee tiers directly affect LP returns. All trading fees collected in a pool are distributed proportionally to liquidity providers based on their share of the pool. Choosing the right fee tier involves balancing fee income against impermanent loss exposure.