> For the complete documentation index, see [llms.txt](https://brownfi.gitbook.io/brownfi-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://brownfi.gitbook.io/brownfi-docs/brownfi-v3/architecture-overview/pricing-model.md).

# Pricing Model

Every swap price in BrownFi is the result of 03 layers applied in sequence:

* Layer 1 - Reference price: The starting point is the global market price from the Oracle Gateway, not the pool's internal ratio. If the pool is imbalanced, the price is nudged to incentivise rebalancing traders. In V3 this incentive is capped at the trading fee level (bounded skew), so LPs never over-subsidise rebalancing. If the model detects sustained one-sided flow, the price can also shift to defend the pool (adverse selection protection).
* Layer 2 - Bid-ask spread: A fixed spread provides a stable baseline margin on every trade. A dynamic spread widens automatically when oracle sources diverge, so LPs earn higher fees exactly when market conditions are most uncertain.
* Layer 3 - Price impact. Larger trades move the execution price more than smaller ones. The scale of this impact is controlled by Kappa (K): lower K = deeper liquidity = less impact per dollar traded.

Kappa is the dial that sets capital efficiency. At K = 2 the pool behaves like Uniswap V2 (full range). As K decreases, liquidity concentrates around the oracle price, each dollar provides more depth and captures more fees. Unlike Uniswap V3 range positions, BrownFi liquidity never goes out-of-range because the oracle continuously re-anchors it to the market.

In V3, Kappa is also asymmetric: separate values for sell trades (KB) and buy trades (KQ) let operators respond to one-sided flow without adjusting both directions.

<figure><img src="/files/f4Ej0GrBXYjksk1nIeu7" alt=""><figcaption></figcaption></figure>


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