# Risks

## Fees

### Liquidity provider fees[​](https://docs.uniswap.org/protocol/V2/concepts/advanced-topics/fees#liquidity-provider-fees) <a href="#liquidity-provider-fees" id="liquidity-provider-fees"></a>

There is a **0.3%** fee for swapping tokens. **0.05%** to Nexus Diffuser **0.25%** directly to providers. **This fee is split by liquidity providers proportional to their contribution to liquidity reserves.**

Swapping fees are immediately deposited into liquidity reserves. This increases the value of liquidity tokens, functioning as a payout to all liquidity providers proportional to their share of the pool. Fees are collected by burning liquidity tokens to remove a proportional share of the underlying reserves.

Since fees are added to liquidity pools, the invariant increases at the end of every trade. Within a single transaction, the invariant represents `token0_pool / token1_pool` at the end of the previous transaction.

## Understanding Returns

Nexus incentivizes users to add liquidity to trading pools by rewarding providers with the fees generated when other users trade with those pools as well as an extra incentive of NEXU token from the Nexus Generator. Market making, in general, is a complex activity. There is a risk of losing money during large and sustained movement in the underlying asset price compared to simply holding an asset.

## Learn More About The Risks

To understand the risks associated with providing liquidity you can read <https://medium.com/@pintail/uniswap-a-good-deal-for-liquidity-providers-104c0b6816f2> to get an in-depth look at how to conceptualize a liquidity position.


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