What are fee tiers, and how do you choose the right fee tier?

When you provide liquidity, you can select from several different trading fees (0.01%, 0.05%, 0.3%, and 0.1%) for the same token pair.

For example, for SEI-USDT, there is a 0.25% fee tier, which means that a 0.25% trading fee is charged for each transaction. However, some liquidity providers may choose to provide liquidity for the SEI-USDT trading pair at a 0.05% rate to offer better quotes and attract more trading volume.

There is no "correct" answer for which trading fee tier to choose. It depends on the tokens within the trading pair. Generally, tokens with high volatility should have higher trading fees to better compensate for the impermanent loss caused by the volatility. On the other hand, tokens like stablecoins, which have smaller price fluctuations and lower impermanent loss, should have lower trading fees.