back06 Sep 20232 min read
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Adaptive Pricing for Decentralized Trading with HMX on Arbitrum I Consumer Spotlight

HMX stands as a pioneering decentralized perpetual protocol operating on the Arbitrum network.

HMX is on a mission to craft a platform that boasts an unparalleled UX/UI design by championing cross-margin functionality and extensive multi-asset collateral support.

HMX has achieved no short number of notable milestones including $2B in traded volume and close to $1M in fees. The wide asset coverage and gas efficiency of Pyth Price Feeds enable HMX’s competitive product set, and therefore warrant a closer study. Let’s dive in.


At the heart of HMX is two distinct products:

Leveraged Trading (Cross-Margin Multi-Collateral Management)

Leveraged trading on HMX allows users to trade with up to 1,000x leveraged leverage across cryptocurrencies, FX, and commodities. HMX embraces various crypto assets as collateral, underpinned by cross-margin collateral support.

HMX offers the 'Adaptive Pricing' mechanism, designed to dynamically align long and short open interest. It accomplishes this by providing a more favorable entry price to orders that contribute to improving the open interest balance while offering less favorable prices to those that exacerbate the imbalance.

Leveraged Market Making

HMX also offers a product called HLP Vault for seamless market making. Users can deposit assets into the HLP vault to market make on both HMX and GMX simultaneously. Vault participation entails compounded yields from GMX and with additional fees from HMX, maximizing real yield generation for its depositors.

Approach to Incentivization

HMX has deployed a number of incentive programs to bootstrap activity:

  • Trade-to-earn campaign through Traders’ Loyalty Credit, distributes ~$230K of esHMX weekly to users based on their trading volume.
  • Open Position Incentive Rewards to enable “traders’ positions to work for them”, with esHMX rewards tied to active leveraged positions.
  • Protocol fees sharing and esHMX emission rewards to stakeholders (traders, LPs, referrers) based on how they participate in the platform.

Powering HMX with Pyth Price Feeds

The HMX trading engine and HLP vault leverage the Pyth Network’s low-latency pull oracle: more specifically, HMX’s Adaptive Pricing mechanism actively calls the Pyth Price Feeds to value assets and calculate the premiums or discounts to apply to trades.

If the quantity of long open interest surpasses that of short open interest, HMX applies a premium to the asset price. Conversely, if the short open interest exceeds the long open interest, the protocol applies a discount to the oracle price. The adjustment made through the Adaptive Pricing mechanism serves as an incentive or penalty for traders to initiate either long or short positions on the asset. This mechanism dynamically balances long and short open interests for HMX’s trading assets.

You can fully experience HMX and Pyth Network’s collaboration by visiting their website.

We can’t wait to hear what you think! Feel free to join the Pyth Discord and Telegram, follow Pyth on Twitter, and be the first to hear about what’s new in the Pyth ecosystem through our newsletter. You can also learn more about Pyth here.

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