# Lynx Finance: full published context > Consolidated machine-readable text for Lynx Finance, including all published updates, learning guides, and glossary entries. - Website: https://lynx.finance/ - Live application: https://app.lynx.finance/leverage - Protocol documentation: https://lynx-finance.gitbook.io/lynx-finance - Compact LLM index: https://lynx.finance/llms.txt - Notice: Educational material is general information, not financial advice. Live product configuration can change; verify current parameters in the application and protocol documentation. --- # Introducing Lynx Arcade > Meet Lynx Arcade, where Gridy, Uppy, and Quicky turn live crypto prices into fast multiplayer rounds configured from the live lobby. - Canonical page: https://lynx.finance/updates/introducing-lynx-arcade/ - Published: 2026-07-31 - Updated: 2026-08-13 - Category: Product - Version: Arcade - Keywords: Lynx Arcade, crypto arcade games, multiplayer crypto games, Gridy, Uppy, and Quicky Lynx Arcade turns live crypto prices into short multiplayer rounds. Its lobby can surface Gridy, Uppy, and Quicky rooms from live configuration, with a connected wallet and a shared game-room balance. Choose a room, pay its listed entry, and play for credits during a timed round. The player with the most credits when the round ends wins the pot. ## The market, made multiplayer The Lynx Terminal asks you to manage a position over time. Arcade gives the same moving market a different shape: a fixed entry, a visible clock, a defined finish, and other players in the room. The price feed still matters, but each game asks a smaller question. You are not opening a leveraged position. You are making decisions inside a round with its own rules and score. For comparisons with other formats and leveraged trading, see [what a crypto price prediction game is](https://lynx.finance/blog/crypto-price-prediction-game/). ## Three multiplayer game types The lobby can surface three multiplayer formats. Each uses the same room entry and credit structure, but asks the player to read price differently. ### Gridy Gridy turns the chart into a field of price cells. Place a bet on a cell before betting closes. If the market reaches that cell during the round, its multiplier adds credits to your score. ### Uppy Uppy asks for a direction. Choose up or down and a bet duration; the entry and available settings come from the room. A bet settles in credits when its time window closes. ### Quicky Quicky is a race between coins. Pick a coin before the short round begins; when time runs out, the coin with the highest percentage price change wins. As with every format, room availability comes from the live lobby. ## Live prices, fast rounds, one wallet Arcade starts with a connected wallet. After signing in, you can deposit crypto into the shared game-room balance, then use that balance to chip into an available room. Every player in a room pays the same entry and starts with equal credits. Credits are the score for that round; they are not a separate token or a claim on the game-room balance. Room availability, networks, and entry amounts come from the live Arcade service. They can change without a site update, so the lobby is the source of truth. ## Arcade alongside Terminal Arcade does not replace the Lynx Terminal. They are two ways to approach the same market. Terminal is built for reading charts, sizing positions, managing [leverage](https://lynx.finance/glossary/leverage/), and following a trade. Arcade is built around an entry, round credits, and a clear finish. Move between them whenever the way you want to engage with the market changes. ## Enter the Arcade Open the lobby and connect a wallet to see the rooms available on the selected network. Review the entry, timer, payout, and game rules before you chip in. Arcade uses real crypto. An entry can be lost, so choose an amount you understand and verify every wallet action before authorizing it. [Open Lynx Arcade](https://app.lynx.finance/arcade) --- # Crypto liquidation explained: what happens and who gets the money > What liquidation means in crypto perpetuals, step by step: margin, liquidation price, what happens to your funds, who receives them, and how to reduce the risk. - Canonical page: https://lynx.finance/blog/crypto-liquidation/ - Published: 2026-07-31 - Updated: 2026-08-05 - Author: Lynx - Category: Learn - Reading time: 5 min - Keywords: crypto liquidation, what does liquidation mean in crypto, what happens when you get liquidated crypto, who gets the money when you get liquidated in crypto, how is liquidation price calculated perpetual futures A leveraged position can close before the chart ever touches its displayed liquidation price, and two venues can return different amounts of collateral from the same losing trade. Neither outcome is a bug. Crypto liquidation is the forced reduction or closure of a leveraged position after its equity falls below a venue's required threshold. The mechanism is a shared risk control; the trigger, execution, fees, and money flow behind it are venue-specific, which is where both surprises come from. ## What liquidation means in crypto A leveraged position controls more exposure than the [collateral](https://lynx.finance/glossary/collateral/) supporting it. As losses and fees reduce equity, the position eventually reaches the venue's liquidation condition. Liquidation is especially visible in [perpetual futures](https://lynx.finance/glossary/perpetual-futures/), where positions have no expiry. The concept is shared across venues; the calculation and settlement path are not. ## The two margin thresholds Many derivatives venues use two thresholds. **Initial margin** is the equity needed to open or increase exposure. **Maintenance margin** is the minimum equity needed to keep it open. Equity changes with [unrealized profit and loss](https://lynx.finance/glossary/realized-and-unrealized-pnl/), funding, fees, deposits, and withdrawals. When eligible equity crosses the venue's threshold, liquidation can begin. The [initial and maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/) entry explains the common model. Some protocols, including Lynx, express the trigger through a different risk formula rather than a generic maintenance-margin schedule. ## How the liquidation price is calculated The liquidation price estimates the market level at which the position will meet its liquidation condition. In a simple isolated-margin model for a long position, the relationship is approximately: ```text price drop to liquidation ≈ (1 / leverage) − maintenance margin rate ``` With a `0.5%` maintenance rate, a `10×` long has roughly `9.5%` between entry and liquidation before fees and funding. This is an illustration, not a portable venue formula. The estimate can move as funding, fees, collateral, position size, or shared account equity changes. Margin tiers and cross-margin rules can change it too. [Hyperliquid's liquidation documentation](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/liquidations), for example, states that funding and unrealized PnL in other cross-margin positions can change the displayed estimate. ## Why the chart never touched your price Some venues trigger liquidation with a [mark price](https://lynx.finance/glossary/mark-price/) rather than the last traded price. A mark can combine an external [index price](https://lynx.finance/glossary/index-price/) with local market data. The chart may show last trades while the risk engine watches the mark. If those series diverge, the liquidation trigger can be reached even when the visible candle does not show the same price. This is one venue design, not a universal rule. Read which price drives PnL, stops, and liquidation before opening a position. ## What happens at the trigger Once a position becomes eligible, the venue may close it through an order book, transfer it to a liquidator, reduce it in stages, or settle it against a liquidity pool. A fee or penalty may apply. If equity remains after realized losses, funding, trading costs, and liquidation charges, the venue may return it to the trader. The exact result depends on the venue's rules and execution price. For a concrete comparison, Hyperliquid attempts order-book liquidation first and may leave remaining collateral with the trader. Its backstop path behaves differently. This is why generic claims about “what liquidation takes” are unreliable. ## Who gets the money There is no universal recipient. The answer depends on the venue's counterparty and backstop design. On an order-book venue, realized losses are reflected in fills against other traders or market makers. A separate liquidation penalty may fund a liquidator, insurance fund, protocol reserve, or several recipients. On a pool-counterparty venue, the trader's PnL settles against the pool. [Lynx's isolated-pool documentation](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/core-design/isolated-liquidity-pools) says trader losses enter the pool and trader profits are paid from it. If a venue can incur losses beyond available collateral, its insurance, backstop, or auto-deleveraging rules determine who absorbs the shortfall. Those rules should be evaluated separately from the normal liquidation fee. On-chain records can make parts of this flow inspectable, but transparency varies. A protocol may still rely on off-chain price data, privileged roles, or components that are not obvious from one transaction. ## How liquidation works on Lynx Lynx does not use the generic `0.5%` maintenance-rate example above. Its risk model measures Net PnL against the collateral assigned to a position and settles the result in that collateral asset. Lynx uses Pyth-supplied prices for trade entry and exit, according to the [Lynx trader documentation](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders). A swing in the collateral token's own market price does not, by itself, change that position's health. At liquidation, losses and accumulated fees are deducted from position collateral and attributed to the corresponding isolated liquidity pool. Any remaining collateral is handled under Lynx's current liquidation-fee rules. Risk parameters can change as the protocol evolves. Use the live trade summary and current protocol documentation rather than copying a historical percentage into a risk plan. ## Reducing the risk No practice removes liquidation risk from a leveraged position. Position size, leverage, holding costs, and exit execution all matter. Start with an acceptable loss and invalidation price, then derive notional exposure. The [leverage, margin, and position size guide](https://lynx.finance/blog/leverage-margin-position-size/) walks through that arithmetic. Keep room between a planned stop and liquidation. A stop is not guaranteed to fill at its trigger price, and fast markets can produce slippage or gaps. For a compact definition, see the [liquidation glossary entry](https://lynx.finance/glossary/liquidation/). The [on-chain perpetual futures guide](https://lynx.finance/blog/onchain-perpetual-futures-explained/) connects liquidation with funding, margin, and pricing. ## Sources - [Lynx: Traders](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders) — Lynx collateral, oracle pricing, and liquidation mechanics. - [Lynx: Isolated Liquidity Pools](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/core-design/isolated-liquidity-pools) — Lynx counterparty and PnL settlement design. - [Hyperliquid: Liquidations](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/liquidations) — one documented order-book and backstop liquidation model used as a venue-specific comparison. This guide is educational and does not provide financial advice. Verify the current rules of the venue you use before trading. --- # What is a crypto price prediction game? > What crypto price prediction games are, how PvP up-or-down rounds work on-chain, and how winnings settle from live market prices. - Canonical page: https://lynx.finance/blog/crypto-price-prediction-game/ - Published: 2026-07-31 - Updated: 2026-08-05 - Author: Lynx - Category: Arcade - Reading time: 4 min - Keywords: crypto price prediction game, up or down crypto game, PvP crypto price prediction game, bitcoin up or down game Call a market up or down, commit an entry before the round locks, and let a short stretch of live price action settle who wins. That is a crypto price prediction game at its simplest: a timed competition whose outcome depends on recorded market prices, with fixed rules that convert the price path or final price into a result. This is different from a long-term “price prediction” article. It is also different from opening a leveraged perpetual position. ## The core loop Most price-based games need four elements: 1. A defined market-price source. 2. An entry window that closes before the result is known. 3. A fixed rule for direction, range, path, or relative performance. 4. A settlement rule for payouts, ties, failed price updates, and canceled rounds. The price feed is an input, not an infallible referee. A complete game also needs freshness checks and failure rules for delayed or unavailable data. [Pyth documents](https://docs.pyth.network/price-feeds/core/how-pyth-works) how its oracle aggregates publisher prices and confidence intervals for applications that consume market data. ## The common formats Price prediction games commonly ask one of three questions. The most common is direction: will the settlement price finish above or below a reference price? Range and path games ask instead whether price enters, crosses, or stays inside a defined area during the round. A third family scores relative performance, rewarding whichever asset moves the most or whichever player produces the highest score from several choices. The format label does not determine the payout. Two direction games can use different tie rules, fees, entry windows, and prize allocation. ## What playing with real crypto changes Using crypto changes the stakes and the transaction flow. Entries and payouts can have real value, so repeated short rounds can create substantial losses even when each entry is small. A wallet connection does not prove funds remain in the wallet. A game may use approvals, a contract deposit, or an internal game-room balance controlled by the connected wallet. On-chain transactions can make deposits, entries, and payouts inspectable. Price construction, game servers, operators, and front-end availability may still include off-chain components. Entry amounts, fees, timing, supported assets, eligibility, and cancellation rules vary. The live room rules are the authoritative source for a specific round. ## Prediction games vs leveraged trading The two share a price feed and little else, and the differences are worth laying out plainly: | | Price prediction game | Leveraged perpetuals | | ---------------------------- | ------------------------------------------------------------- | --------------------------------------------------------------------------- | | Loss shape | Usually limited by the committed entry under the game's rules | Losses consume margin; position can be [liquidated](https://lynx.finance/glossary/liquidation/) | | Position management | None; commit and wait for settlement | Continuous: margin, funding, exits | | Duration | Fixed, short rounds | Open-ended, trader-controlled | | Sizing decisions | One: the stake | Several: notional, [leverage](https://lynx.finance/glossary/leverage/), collateral | | What you must be right about | One outcome by one deadline | Direction _and_ path, surviving the moves in between | A prediction round does not create the same open-ended margin process as a leveraged position. But the maximum loss still depends on the actual game rules, fees, and whether the player makes repeated entries. For persistent positions, read the [on-chain perpetual futures guide](https://lynx.finance/blog/onchain-perpetual-futures-explained/) and the [leverage guide](https://lynx.finance/blog/leverage-margin-position-size/) before using a [perpetual](https://lynx.finance/glossary/perpetual-futures/). ## How Lynx Arcade works [Lynx Arcade](https://app.lynx.finance/arcade) is a multiplayer interface built around timed rooms and live crypto prices. The application supports Uppy, multiplayer Gridy, and Quicky room types, with availability set by live configuration. Uppy is a direction game. Gridy is a price-grid game. Quicky is a race between coins, won by the largest percentage move. Every advertised room is built from live server configuration, so room names, entry amounts, networks, and availability can change without an article update. Players deposit crypto into a shared game-room balance. For each room, players pay the same listed entry and begin with equal round credits. The player with the highest credits at the end takes the room's pot under the displayed rules. Credits are round score, not a separate token balance. Funds move when a player deposits, enters a room, wins, or withdraws according to the app's current flow. The [Lynx Arcade introduction](https://lynx.finance/updates/introducing-lynx-arcade/) explains the product structure. The live lobby remains the source of truth for rooms and terms available now. ## Before entering a round Check the entry amount, fee, timer, payout, tie rule, price source, supported network, and cancellation behavior. Confirm which wallet approval or deposit is being requested. Treat an entry as money at risk, not as an investment. A fixed round does not remove loss risk, and quick settlement can make repeated entries feel smaller than their combined cost. ## Sources - [Lynx: Introducing Lynx Arcade](https://lynx.finance/updates/introducing-lynx-arcade/) — first-party description of the lobby, shared balance, credits, and multiplayer rooms. - [Lynx Arcade](https://app.lynx.finance/arcade) — live room availability, entry terms, and game rules. - [Pyth: How Pyth Works](https://docs.pyth.network/price-feeds/core/how-pyth-works) — oracle publishers, price aggregation, and confidence intervals. This guide is educational and does not provide financial advice. Product availability and room configuration can change; check the live interface before depositing or entering. --- # Leverage, margin, and position size in crypto perpetuals > How leverage, margin, notional value, and position size relate in perpetual futures, with worked examples for sizing a trade with a liquidation buffer. - Canonical page: https://lynx.finance/blog/leverage-margin-position-size/ - Published: 2026-07-31 - Updated: 2026-07-31 - Author: Lynx - Category: Learn - Reading time: 4 min - Keywords: trade crypto with leverage, notional value vs margin, how much margin for 10x leverage, perpetual futures trading `$100` at `20×` creates roughly `$2,000` of market exposure before venue fees and adjustments. The margin is `$100`; the position size is about `$2,000`; the leverage is the ratio between them. That relationship is the foundation of leveraged trading. Risk comes from the exposure, the market move, the exit, and the venue's rules—not from the leverage label alone. ## Three numbers, one relationship **Position size**, or notional value, is the full market exposure. A position in `0.1 BTC` at `$50,000` has `$5,000` of notional exposure. **Margin** is the eligible [collateral](https://lynx.finance/glossary/collateral/) assigned to support that exposure. It absorbs losses and fees under the venue's risk model. **Leverage** is position size divided by margin. `$5,000` of exposure supported by `$1,000` of margin is `5×` leverage. Fix any two values and the third follows. The [position size and notional value](https://lynx.finance/glossary/position-size-and-notional-value/) entry gives more examples. ## Notional vs margin: which one is "your trade"? Notional determines directional exposure. A `1%` move on `$2,000` of notional changes gross [unrealized PnL](https://lynx.finance/glossary/realized-and-unrealized-pnl/) by about `$20` before fees and other adjustments. Margin determines how much equity supports that move. Losing `$20` consumes `20%` of `$100` margin but only `2%` of `$1,000` margin. Fees, funding, borrow charges, and [price impact](https://lynx.finance/glossary/slippage-and-price-impact/) vary by venue. Some use notional; others apply charges to a different base. Read the venue's formula instead of assuming one universal stack. ## How much margin do you need for 10× leverage? In a simple model, initial margin equals notional divided by leverage. `$10,000` of exposure at `10×` uses `$1,000` of margin; at `5×`, it uses `$2,000`. That is only the opening arithmetic. A venue may deduct an opening fee first, apply margin tiers, or calculate position size from post-fee collateral. The table below isolates the directional effect of a market move. It excludes trading fees, funding, borrow charges, price impact, and liquidation rules. | Leverage on `$5,000` notional | Simplified margin | Move causing `$250` gross loss | Gross loss as % of margin | | ----------------------------- | ----------------- | ------------------------------ | ------------------------- | | `2×` | `$2,500` | `5%` | `10%` | | `5×` | `$1,000` | `5%` | `25%` | | `10×` | `$500` | `5%` | `50%` | | `20×` | `$250` | `5%` | `100%` | The same market move creates the same gross loss at every row because notional is fixed. Higher leverage means less margin is available to absorb it. Liquidation may occur before margin reaches zero. The actual threshold comes from the venue's [initial and maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/) or other risk model. ## Sizing from risk, not from the slider One sizing method starts with an acceptable loss and an invalidation point. If the acceptable gross loss is `$150` and the planned exit is `3%` from entry, the simplified notional is `$150 / 3% = $5,000`. Next choose enough margin to keep the venue's liquidation condition beyond the planned exit. Then calculate the resulting leverage. This method is incomplete without slippage. A stop is an instruction to exit, not a guaranteed price. Fast markets, thin liquidity, or network delays can produce a larger loss than the calculation assumes. ## Why equal leverage is not equal risk Equal leverage does not mean equal risk. Volatility, liquidity, holding time, fees, funding, margin mode, and liquidation rules all change the result. Collateral treatment also differs. Some venues revalue volatile collateral against the settlement asset. Others isolate the accounting from the collateral token's external price. The [crypto liquidation guide](https://lynx.finance/blog/crypto-liquidation/) explains how those venue rules affect the close. ## How position sizing works on Lynx Lynx calculates position size from collateral after the opening fee is deducted. The [Lynx fee documentation](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) gives this example: ```text 100 DAI initial collateral × 20 leverage = 2,000 DAI pre-fee size 2,000 DAI × 0.10% opening fee = 2 DAI fee 98 DAI post-fee collateral × 20 leverage = 1,960 DAI position size ``` On Lynx, the selected collateral asset determines the isolated liquidity pool and the asset used for PnL and fees. Its external token price does not change position health, according to the [Lynx trader documentation](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders). That behavior differs from venues that continuously revalue collateral in a common quote currency. It is why a generic margin calculator should not be treated as a Lynx liquidation calculator. For the wider system, read the [on-chain perpetual futures guide](https://lynx.finance/blog/onchain-perpetual-futures-explained/). For compact definitions, start with [leverage](https://lynx.finance/glossary/leverage/) in the glossary. ## Sources - [Lynx: Fees](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) — opening-fee and position-size calculations. - [Lynx: Traders](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders) — collateral, settlement, pricing, and liquidation behavior. - [Hyperliquid: Margining](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/margining) — one documented initial, maintenance, cross-margin, and isolated-margin model used for comparison. All examples are simplified and educational. They are not financial advice. Verify current fees, risk parameters, and execution rules before trading. --- # What is a perp DEX? Decentralized perpetual exchanges explained > What a perp DEX is, how decentralized perpetual exchanges execute and settle trades, and how they differ from centralized futures venues. - Canonical page: https://lynx.finance/blog/what-is-a-perp-dex/ - Published: 2026-07-31 - Updated: 2026-08-05 - Author: Lynx - Category: Learn - Reading time: 5 min - Keywords: what is a perp dex, perp dex, decentralized perpetual exchange, perp dex vs cex futures Two venues can both call themselves a perp DEX while sharing almost nothing under the hood: one matches an order book on its own chain, another fills trades from a liquidity pool at oracle prices. What they share is the definition. A perp DEX is a decentralized venue for trading [perpetual futures](https://lynx.finance/glossary/perpetual-futures/), using blockchain-based settlement or accounting for leveraged contracts that track a market without a scheduled expiry. The label names a category, not an architecture. Custody, matching, pricing, liquidation, and transaction fees differ substantially between venues, and most of the practical questions in this guide live inside those differences. ## What "decentralized" changes On a perp DEX, a wallet authorizes trading actions. Funds may remain in the wallet, move into a smart contract, or appear in a protocol account controlled by wallet signatures. This is not the same as saying no account exists. Some protocols use subaccounts, vault balances, or bridged receipt assets while remaining non-custodial under their stated design. The venue may publish positions, collateral, liquidations, and contract parameters on-chain. That improves inspectability, but it does not make every dependency decentralized or every risk visible in one transaction. [Leverage](https://lynx.finance/glossary/leverage/) still increases exposure. [Funding](https://lynx.finance/glossary/funding-rate/) still changes holding cost, and [liquidation](https://lynx.finance/glossary/liquidation/) still enforces the venue's solvency rules. ## How perp DEXes execute trades Perp DEX execution can use an order book, an oracle-priced pool, an automated market maker, or a hybrid of those components. **Order-book venues** match bids and offers. Price forms from resting orders, and execution depends on available depth. Traders can experience spread and [slippage](https://lynx.finance/glossary/slippage-and-price-impact/). [Hyperliquid documents](https://hyperliquid.gitbook.io/hyperliquid-docs) a fully on-chain order book on its own L1. Other order-book venues may use off-chain matching with on-chain settlement. **Oracle-priced pool venues** execute against a liquidity pool using external market data. The protocol may apply a spread or price-impact adjustment to the oracle value. Oracle-priced designs depend on data freshness, confidence rules, and failure handling. [Pyth's architecture](https://docs.pyth.network/price-feeds/core/how-pyth-works) aggregates prices and confidence intervals from multiple publishers for consuming applications. **AMM and hybrid venues** use curves, virtual liquidity, or combinations of books, pools, and oracles. The label “perp DEX” alone does not reveal which model is underneath. ## Who is your counterparty? On an order-book venue, the immediate counterparty is the trader or market maker on the other side of the fill. On a pool-based venue, liquidity providers may collectively back trader PnL. Trader losses can accrue to the pool, while trader profits are paid from it. That makes liquidity provision a counterparty-risk position, not a passive deposit. The protocol's reserve, utilization, withdrawal, and insolvency rules matter to both traders and liquidity providers. ## Perp DEX vs CEX futures An honest comparison cuts both ways: | Dimension | Perp DEX | Centralized exchange | | --------------- | ------------------------------------------------------------ | ---------------------------------------------------- | | Custody | Wallet- or contract-controlled; model varies | Exchange-controlled account balance | | Authorization | Wallet signatures or transactions | Exchange credentials and account controls | | Price formation | Order book or oracle-priced pool | Central limit order book | | Counterparty | Traders, market makers, or liquidity pool | Traders, market makers, and exchange backstops | | Costs | Venue fees, funding, spread or impact, possible network fees | Venue fees, funding, spread or impact | | Failure modes | Contract, oracle, bridge, network, and liquidity risk | Custody, operational, liquidity, and withdrawal risk | | Transparency | Some state and transactions can be inspected | Mostly internal, with selective disclosure | Neither category is universally better. Compare the specific venue's custody path, execution quality, liquidation model, costs, legal availability, and operational dependencies. ## The fee stack, spelled out A perp DEX may charge opening or closing fees, [funding payments](https://lynx.finance/glossary/funding-rate/), borrow or utilization fees, spreads, price impact, liquidation fees, and network costs. Not every venue charges every item, and not every interaction requires the trader to pay gas directly. Some protocols sponsor transactions or accept signed intents that another party submits on-chain. Compare the estimated all-in cost over the intended holding period. A low trading fee may be outweighed by funding, borrow charges, or poor execution. ## Evaluating a specific venue Ask five questions before using a perp DEX: 1. Which price drives execution, PnL, stops, and liquidation? 2. Who is the counterparty, and what capital backs profitable positions? 3. Which [mark price](https://lynx.finance/glossary/mark-price/) or risk rule triggers liquidation? 4. What is the total cost over the expected holding period? 5. Which contracts, operators, bridges, or networks can interrupt access or settlement? The [liquidation guide](https://lynx.finance/blog/crypto-liquidation/) explains what happens after a position crosses its risk threshold. ## How Lynx fits the perp DEX category Lynx is an oracle-priced, pool-counterparty perpetual venue. Its [isolated-pool documentation](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/core-design/isolated-liquidity-pools) says each collateral asset has a pool that settles trader PnL. Lynx currently uses Pyth prices for trade entry and exit. The selected collateral asset determines the pool and settlement asset, while the token's external price does not change position health. Lynx also uses an intent-based transaction flow. Funding an account requires an on-chain transaction, while later interactions from supported origin chains can be submitted as signed intents without the trader paying gas directly. The [Lynx transaction-flow documentation](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/cross-chain-perpetuals/transaction-flow) documents an exception. Users connected directly to an engine chain submit regular gas-consuming transactions. For the mechanics behind a position, read the [on-chain perpetual futures guide](https://lynx.finance/blog/onchain-perpetual-futures-explained/). The [perpetual futures glossary entry](https://lynx.finance/glossary/perpetual-futures/) contains the compact definition. ## Sources - [Lynx: Isolated Liquidity Pools](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/core-design/isolated-liquidity-pools) — Lynx counterparty and settlement design. - [Lynx: Transaction Flow](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/cross-chain-perpetuals/transaction-flow) — Lynx account funding, intents, and engine-chain transactions. - [Lynx: Traders](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders) — collateral and Pyth pricing behavior. - [Hyperliquid documentation](https://hyperliquid.gitbook.io/hyperliquid-docs) — one documented on-chain order-book architecture. - [Pyth: How Pyth Works](https://docs.pyth.network/price-feeds/core/how-pyth-works) — oracle publication, aggregation, and consumption. This guide is educational and does not provide financial advice. Verify the current rules, availability, and risks of a specific venue before trading. --- # Why funding rates go negative (and what it tells you) > Why perpetual futures funding rates turn negative, what the mechanics reveal about market positioning, and how to read a negative rate before trading. - Canonical page: https://lynx.finance/blog/why-funding-rates-go-negative/ - Published: 2026-07-31 - Updated: 2026-08-05 - Author: Lynx - Category: Learn - Reading time: 4 min - Keywords: negative funding rate, why do funding rates go negative crypto, negative funding rate meaning Traders often read a negative funding rate as a bearish crowd paying to stay short, and sometimes it is exactly that. The safe starting point is narrower: a negative rate usually means short positions pay long positions under that venue's sign convention, and it says nothing about which formula produced it. Some venues derive funding from the perpetual's premium or discount to an index. Lynx derives it from the imbalance between long and short open interest. The sign is useful only after the venue's method is known. ## What a negative funding rate means, precisely Perpetual futures have no scheduled expiry. Venues use [funding rates](https://lynx.finance/glossary/funding-rate/) to create a recurring cost or payment that discourages one-sided positioning or persistent price divergence. On a premium-based venue, a perpetual below its reference [index price](https://lynx.finance/glossary/index-price/) commonly produces negative funding, so shorts pay longs. [Hyperliquid's funding documentation](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding) is one example. Its formula combines a premium component with a fixed interest component and settles funding hourly. Other venues use open-interest skew, inventory, utilization, or a hybrid formula. Settlement interval, caps, sign display, payment base, and recipients can all differ. ## What pushes a perpetual below its index On a premium-based market, selling pressure can push the perpetual below its index. That pressure may come from directional shorts, hedgers, basis traders, liquidations, or thin liquidity. A spot holder may short a perpetual as a hedge without expressing a bearish view on the combined position. A basis trader may hold spot and short the perpetual to capture a spread or funding payment. After a decline, long liquidations and new short positions can also leave a market one-sided. In a thin order book, modest flow may move the premium more than it would in a deep market. On a skew-based venue, the perpetual does not need to trade below an index for funding to turn negative. A larger short side can be enough under the venue's formula. ## Is negative funding bullish? Negative funding is a financing condition, not a price forecast. It can coexist with a continuing decline, a flat market, or a rebound. Crowded shorts can contribute to a squeeze if price rises and positions close. But a short can remain profitable while paying funding if the directional gain exceeds the financing cost. Read funding beside [open interest](https://lynx.finance/glossary/open-interest/), price, and volume. Negative funding with rising open interest is consistent with new short exposure, but it does not prove who opened it or why. Negative funding with falling open interest may be consistent with deleveraging. Again, it is evidence to interpret, not a complete signal. ## What it does to an open position Funding changes the equity of an open position according to the venue's settlement rules. A position paying funding loses equity; a position receiving it gains equity before other fees and PnL. For a short on a conventional negative rate, funding is a recurring cost. For a long, it is a receipt. The payment can affect the liquidation buffer when it is added to or deducted from position equity. Funding is separate from entry price. It should be included in expected holding cost, especially for positions kept through several settlement periods. ## Reading the number correctly Normalize the interval first. `-0.01%` per hour and `-0.01%` per eight hours are not comparable without converting them to the same period. Treat annualized funding as an extrapolation, not a promised yearly return. The underlying rate can change before the next settlement. Check the formula, payment base, caps, and settlement timing. Confirm whether a [mark price](https://lynx.finance/glossary/mark-price/), index premium, or open-interest skew drives the calculation. Different venues can show different funding for the same market because their prices, positions, formulas, and intervals differ. ## How negative funding works on Lynx Lynx calculates funding from the imbalance between long and short open interest. Its [fee documentation](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) calls that imbalance the skew. When long open interest is larger, longs pay and shorts receive. When short open interest is larger, shorts pay and longs receive. The larger side is charged to encourage more balanced exposure. This means negative funding on Lynx should not be described simply as “the perpetual is below the index.” It indicates the payment direction produced by Lynx's skew-based model. The Lynx [glossary](https://lynx-finance.gitbook.io/lynx-finance/community/glossary) describes part of funding entering a reserve, with the remainder going to traders on the less exposed side. Check the current interface and documentation for the active model. The [funding glossary entry](https://lynx.finance/glossary/funding-rate/) gives the compact definition. The [on-chain perpetual futures guide](https://lynx.finance/blog/onchain-perpetual-futures-explained/) places funding inside the wider [perpetual](https://lynx.finance/glossary/perpetual-futures/) system. ## Sources - [Lynx: Fees](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) — Lynx funding skew, payment direction, and displayed rates. - [Lynx: Glossary](https://lynx-finance.gitbook.io/lynx-finance/community/glossary) — Lynx funding definition and reserve treatment. - [Hyperliquid: Funding](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/funding) — one documented premium-based funding model used for comparison. This guide is educational and does not provide financial advice. Funding formulas and rates can change; verify the current venue rules before trading. --- # On-chain perpetual futures, explained > How perpetual futures work without an expiry date, what funding and liquidation do, and what changes when execution moves on-chain. - Canonical page: https://lynx.finance/blog/onchain-perpetual-futures-explained/ - Published: 2026-07-30 - Updated: 2026-08-05 - Author: Lynx - Category: Learn - Reading time: 5 min - Keywords: on-chain perpetual futures, perpetual futures explained, decentralized perpetuals, crypto leverage trading Every dated futures contract eventually expires and settles. A perpetual future never does: it is a derivative with no scheduled expiry that gives a trader long or short price exposure without transferring ownership of the referenced asset. Most of the machinery in this guide, funding included, exists to manage that missing expiry. An on-chain perpetual uses blockchain-based contracts or accounting for part of that trade lifecycle. Funding, margin, pricing, execution, and liquidation still depend on the venue's specific design. ## Perpetuals, spot, and dated futures A spot purchase exchanges payment for an asset. A perpetual position references an asset's price but remains a contract governed by the venue. A dated future has an expiry or settlement date. A perpetual does not, so venues use recurring incentives and risk controls instead of relying on expiry to resolve price differences. No expiry does not mean the position remains open indefinitely. A trader can close it, and the venue can [liquidate](https://lynx.finance/glossary/liquidation/) it when the applicable risk threshold is reached. ## Why funding exists Perpetual venues use a [funding rate](https://lynx.finance/glossary/funding-rate/) to discourage persistent imbalance. The formula is not universal. Premium-based venues compare the contract with a reference [index price](https://lynx.finance/glossary/index-price/). When the perpetual trades above the index, longs commonly pay shorts; below the index, shorts commonly pay longs. Skew-based venues instead use the imbalance between long and short exposure. Lynx follows this model, according to its [fee documentation](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees). Funding changes incentives but does not predict the next market move. Compare rates only after normalizing their intervals and checking the formula. The negative case is covered in [why funding rates go negative](https://lynx.finance/blog/why-funding-rates-go-negative/). ## Leverage starts with position size and collateral [Position size](https://lynx.finance/glossary/position-size-and-notional-value/) is the exposure. [Collateral](https://lynx.finance/glossary/collateral/) supports that exposure. [Leverage](https://lynx.finance/glossary/leverage/) is the ratio between them. `$5,000` of notional exposure supported by `$1,000` of collateral is `5×` leverage. A `4%` adverse move creates a simplified `$200` gross directional loss before funding, fees, and execution effects. Leverage on its own is not a complete risk score. The same multiple plays out differently depending on how volatile the market is, how long the position stays open, and how the venue prices collateral, charges fees, and triggers liquidation. The [leverage and position-size guide](https://lynx.finance/blog/leverage-margin-position-size/) turns those definitions into a sizing method. ## Margin and liquidation [Initial margin](https://lynx.finance/glossary/initial-and-maintenance-margin/) is the equity required to open or increase exposure in a common margin model. Maintenance margin is the minimum needed to keep it open. If eligible equity falls below maintenance, liquidation can begin. Other protocols define an equivalent trigger through Net PnL or a different risk formula. Some venues use a [mark price](https://lynx.finance/glossary/mark-price/) for margin checks rather than the last trade. [Hyperliquid's documentation](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/robust-price-indices) gives one concrete mark-price design. Liquidation estimates can move with funding, fees, collateral, account equity, and position changes. They are not substitutes for a planned exit. [Crypto liquidation explained](https://lynx.finance/blog/crypto-liquidation/) covers the trigger, execution, and money flow. ## What moves on-chain “On-chain perpetual” describes a family of architectures. Custody, accounting, matching, pricing, and settlement can each sit on-chain or depend on external infrastructure. Common on-chain considerations include: - **Authorization.** The trader signs transactions, messages, or delegated permissions. - **Price data.** Contracts need a source, freshness rule, and failure path for external market prices. - **Execution timing.** The market can move between a quote, signature, transaction, and settlement. - **Contract risk.** Code, privileged roles, configuration, and integrations create non-market risks. - **Network risk.** Congestion, fees, bridge status, and chain availability can affect access. Public state can make transactions and parameters inspectable. It does not guarantee that every dependency is on-chain or that the system is risk-free. For execution models, counterparties, and fee structures, see [what a perp DEX is](https://lynx.finance/blog/what-is-a-perp-dex/). ## Execution still determines the result The displayed quote is not always the final execution price. [Price impact and slippage](https://lynx.finance/glossary/slippage-and-price-impact/) can change entry or exit. [Unrealized PnL](https://lynx.finance/glossary/realized-and-unrealized-pnl/) remains an accounting value while exposure is open. Realized results include the close plus applicable trading fees, funding, borrow charges, and liquidation costs. When evaluating a venue, ask: 1. Which price sources drive the index, mark, execution, and liquidation calculations? 2. How are position size, fees, price impact, and funding shown before signing? 3. Is margin isolated per position or shared across an account? 4. What exactly occurs during partial or full liquidation? 5. Which contracts, networks, bridges, operators, and privileged roles does the system depend on? ## Where Lynx fits Lynx prices trades from an oracle and uses liquidity pools, not an order book, as the counterparty. [Isolated liquidity pools](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/core-design/isolated-liquidity-pools) settle trader PnL in the selected collateral asset. Lynx currently uses Pyth for trade prices. Pyth aggregates publisher prices and confidence intervals, as described in [Pyth's architecture](https://docs.pyth.network/price-feeds/core/how-pyth-works). Position health is measured in that collateral asset, so a move in the token's external price does not push a position toward or away from liquidation. The token determines the pool and settlement asset, according to the [Lynx trader documentation](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders). Lynx uses long-versus-short open-interest skew for funding. It also deducts the opening fee before applying leverage to post-fee collateral. Supported origin-chain users can submit later interactions through signed intents after funding an account. Users connected directly to the engine chain submit regular transactions, according to the [transaction-flow documentation](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/cross-chain-perpetuals/transaction-flow). These details are specific to Lynx. They should not be projected onto every on-chain perpetual venue. ## Sources - [Lynx: Traders](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders) — collateral, Pyth pricing, and liquidation behavior. - [Lynx: Fees](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) — position size, funding skew, borrow rate, and fee calculations. - [Lynx: Isolated Liquidity Pools](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/core-design/isolated-liquidity-pools) — pool counterparty and settlement design. - [Lynx: Transaction Flow](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/cross-chain-perpetuals/transaction-flow) — account funding, intents, and engine-chain transactions. - [Pyth: How Pyth Works](https://docs.pyth.network/price-feeds/core/how-pyth-works) — oracle publication, aggregation, and consumption. - [Hyperliquid: Robust Price Indices](https://hyperliquid.gitbook.io/hyperliquid-docs/trading/robust-price-indices) — one documented index and mark-price model used for comparison. Perpetual futures are complex and leveraged trading can produce rapid losses. This guide is educational and does not provide financial advice. Verify current protocol rules before trading. --- # Perpetual futures > A perpetual future is a derivative contract that follows the price of an underlying asset without a fixed expiration date. Traders take long or short exposure without owning the asset itself. Margin supports the position, funding helps keep the contract near its reference market, and losses can trigger liquidation. - Canonical page: https://lynx.finance/glossary/perpetual-futures/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Contract mechanics - Also known as: perpetuals, perps, perpetual swaps - Related terms: [Funding rate](https://lynx.finance/glossary/funding-rate/), [Leverage](https://lynx.finance/glossary/leverage/), [Initial and maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/), [Liquidation](https://lynx.finance/glossary/liquidation/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [What is a perp DEX? Decentralized perpetual exchanges explained](https://lynx.finance/blog/what-is-a-perp-dex/) ## In plain English A perpetual future lets you express a view on an asset’s price without buying that asset and without choosing an expiry date. A long position gains when its closing price is above its entry price; a short position gains when the relationship is reversed. Costs and losses still apply while the position remains open. The word _perpetual_ describes the contract schedule, not a guarantee that a position can stay open forever. A trader must continue to satisfy the venue’s margin rules. ## How it works A venue defines a market that references an underlying asset such as BTC or ETH. Traders post [collateral](https://lynx.finance/glossary/collateral/), choose a direction and position size, and receive derivative exposure rather than ownership of the referenced token. Because the contract has no settlement date pulling it toward spot, perpetual venues use a [funding mechanism](https://lynx.finance/glossary/funding-rate/) or an equivalent design to discourage persistent differences between the contract and its reference price. The exact funding interval, price sources, margin model, and liquidation process vary by venue. ## Why it matters Perpetuals combine continuous exposure with [leverage](https://lynx.finance/glossary/leverage/). That makes them flexible, but it also introduces mechanics that do not exist in an ordinary spot purchase: funding payments, maintenance margin, liquidation, and venue-specific pricing rules. A useful trade plan accounts for the whole path from entry to exit, not only the expected price direction. ## Worked example Suppose a trader opens a long position equivalent to `0.10 BTC` at an entry price of `$60,000`. The position’s notional value is `$6,000`. If the trader closes at `$61,200`, the price change is `$1,200` per BTC. The simplified trading profit is `0.10 × $1,200 = $120`. Fees, funding, price impact, and any change in collateral value must still be included to find the net result. ## How it works on Lynx Lynx perpetuals are synthetic exposures backed by isolated, single-asset liquidity pools. The traded instrument and the collateral or settlement asset can differ: a trader can reference one market while settling fees and PnL in another token. The underlying traded token does not change hands. Profitable PnL comes from the relevant pool and trader losses are added to it, so Lynx does not behave like a spot trade or a conventional order-book future in every respect. ## Common misconception > A perpetual is not a spot asset financed by a simple loan. It is a derivative position governed by the venue’s contract, margin, pricing, and settlement rules. ## Sources - [Futures Glossary](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm) — U.S. Commodity Futures Trading Commission (regulatory) - [How perpetual futures stay in line with the index price](https://help.coinbase.com/en/international-exchange/perpetual-futures-basics/how-do-perpetual-futures-stay-in-line-with-index-price-of-the-underlying-spot-asset) — Coinbase International Exchange (primary) - [Isolated Liquidity Pools](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/core-design/isolated-liquidity-pools) — Lynx Finance (primary) --- # Funding rate > The funding rate is a periodic rate used by many perpetual futures markets to encourage the contract price to stay near its reference price. A payment normally moves between long and short position holders: when the rate is positive longs commonly pay shorts, while a negative rate commonly reverses that flow. - Canonical page: https://lynx.finance/glossary/funding-rate/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Contract mechanics - Also known as: perpetual funding, funding fee - Related terms: [Perpetual futures](https://lynx.finance/glossary/perpetual-futures/), [Position size and notional value](https://lynx.finance/glossary/position-size-and-notional-value/), [Mark price](https://lynx.finance/glossary/mark-price/), [Index price](https://lynx.finance/glossary/index-price/), [Open interest](https://lynx.finance/glossary/open-interest/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Why funding rates go negative (and what it tells you)](https://lynx.finance/blog/why-funding-rates-go-negative/) ## In plain English Without an expiry date, a perpetual contract needs another force to keep it connected to the underlying market. Funding creates that force by making one side of the market periodically pay the other. The prospective payment can make an expensive side less attractive and the receiving side more attractive. Funding is not automatically a fee paid to the venue. In the common peer-to-peer design, it transfers value between long and short position holders, although implementation and deductions vary. ## How it works A venue compares its perpetual market with a reference such as an [index price](https://lynx.finance/glossary/index-price/). When the perpetual trades above that reference, the rate is commonly positive and longs pay shorts. When it trades below, the rate is commonly negative and shorts pay longs. The displayed rate is incomplete without its interval. A rate charged hourly cannot be compared directly with an eight-hour rate until both are converted to the same period. Venues may also cap, smooth, or combine components when calculating the rate. ## Why it matters Funding changes the cost of holding a position. A small recurring payment can become meaningful when notional value is large or the position stays open across many funding intervals. Receiving funding can help a result, but it does not remove directional risk and should not be treated as guaranteed yield. ## Worked example Assume a long position has a `$20,000` [notional value](https://lynx.finance/glossary/position-size-and-notional-value/) when a funding rate of `0.01%` is applied for one interval. The simplified payment is `$20,000 × 0.0001 = $2`. Under the common positive-rate convention, the long pays `$2` and the short receives `$2`, before any venue-specific adjustments. If the same rate applied for ten intervals, the simple total would be `$20`, provided notional and the rate did not change. ## How it works on Lynx Lynx funding is driven by the imbalance between long and short [open interest](https://lynx.finance/glossary/open-interest/), rather than by a perpetual-versus-spot premium formula. The side with more open interest pays; part of that payment goes to the protocol reserve and the rest goes to the less exposed side. Lynx displays funding as an annualized rate and an eight-hour equivalent. Its borrow rate is a separate cost tied to liquidity-pool utilization. ## Common misconception > Positive funding does not predict that price must fall. It describes a payment convention and market imbalance, not a standalone directional signal. ## Sources - [What is the funding rate?](https://help.coinbase.com/en/international-exchange/funding/what-is-the-funding-rate) — Coinbase International Exchange (primary) - [Funding rates for international derivatives](https://help.coinbase.com/en/coinbase/derivatives/funding-rate) — Coinbase (technical) - [Fees](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) — Lynx Finance (primary) --- # Collateral > Collateral is the asset value committed to support a leveraged position and absorb its losses and costs. It helps a venue enforce margin requirements without requiring the trader to pay the position’s full notional value. Collateral may be isolated to one position or shared across positions, depending on the venue’s margin model. - Canonical page: https://lynx.finance/glossary/collateral/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Capital and risk - Also known as: margin collateral, position collateral - Related terms: [Leverage](https://lynx.finance/glossary/leverage/), [Initial and maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/), [Liquidation](https://lynx.finance/glossary/liquidation/), [Realized and unrealized PnL](https://lynx.finance/glossary/realized-and-unrealized-pnl/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Leverage, margin, and position size in crypto perpetuals](https://lynx.finance/blog/leverage-margin-position-size/) ## In plain English Collateral is the financial buffer behind a derivatives position. Gains can increase that buffer and losses, fees, or funding payments can reduce it. If the remaining eligible value becomes too small for the venue’s maintenance requirement, the position or account can enter liquidation. Collateral is related to margin but the words are not always interchangeable. Collateral is the asset value supplied; margin is the required amount or ratio the position must satisfy. ## How it works In isolated margin, a specified pool of collateral supports one position. In cross margin, eligible account collateral supports multiple positions together. Cross margin can use gains or spare equity elsewhere in the account, but a loss in one market can also endanger other positions. Venues decide which assets qualify, how they are valued, and whether a haircut is applied. A volatile token worth `$1,000` at one moment may provide less than `$1,000` of eligible collateral value. ## Why it matters Position size should follow the amount a trader can put at risk, rather than starting from the maximum [leverage](https://lynx.finance/glossary/leverage/) offered by an interface. The collateral asset also creates its own exposure. A trader can be directionally correct on the perpetual and still lose support if non-stable collateral falls in value. ## Worked example A position begins with `$1,000` of eligible collateral. It has a `$150` unrealized trading loss, has paid `$8` in funding, and has accrued `$2` in fees. Ignoring other adjustments, its remaining collateral equity is `$1,000 - $150 - $8 - $2 = $840`. Whether `$840` is healthy depends on the venue’s current [maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/), not on the starting collateral alone. ## How it works on Lynx On Lynx, the selected collateral asset is also the settlement asset and identifies the isolated liquidity pool behind the trade. Fees and PnL are paid in that token, even when the traded instrument references a different asset. Lynx does not use the collateral token’s external market price to determine position health. A move in the collateral token alone therefore does not move an otherwise unchanged position toward liquidation. ## Common misconception > Collateral is not automatically the maximum possible loss. Some venue designs, account models, market gaps, or liquidation outcomes can create losses or obligations beyond the amount initially assigned to one position. ## Sources - [Futures Glossary](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm) — U.S. Commodity Futures Trading Commission (regulatory) - [Liquidation management for international derivatives](https://help.coinbase.com/en/coinbase/derivatives/intx-derivatives-liquidation-mgmt) — Coinbase (primary) - [Frequently Used Terms in Lynx](https://lynx-finance.gitbook.io/lynx-finance/community/glossary) — Lynx Finance (primary) --- # Leverage > Leverage describes how large a trading position is relative to the capital supporting it. A $5,000 position backed by $1,000 of collateral has 5× leverage. Leverage magnifies the effect of price changes, fees, and funding on that collateral, but it is not a complete measure of a position’s risk. - Canonical page: https://lynx.finance/glossary/leverage/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Capital and risk - Also known as: leverage ratio, leveraged exposure - Related terms: [Collateral](https://lynx.finance/glossary/collateral/), [Initial and maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/), [Liquidation](https://lynx.finance/glossary/liquidation/), [Position size and notional value](https://lynx.finance/glossary/position-size-and-notional-value/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Leverage, margin, and position size in crypto perpetuals](https://lynx.finance/blog/leverage-margin-position-size/) ## In plain English Leverage compares exposure with the capital committed to support it. It lets a trader obtain a larger market position than the collateral alone would buy in a spot market. The same relationship also makes a modest move in the underlying price produce a much larger percentage change in the trader’s collateral. No separate lender needs to hand the trader the full notional amount for the ratio to exist. A derivatives venue creates exposure through its contract and controls risk through margin and liquidation rules. ## How it works For a simple isolated position, leverage can be expressed as: `leverage = position notional value ÷ collateral` The relationship can change after opening. Unrealized losses reduce the equity supporting a position and therefore increase effective leverage; unrealized gains can do the reverse. Cross-margin accounts use portfolio-level equity, so their displayed leverage may follow a different calculation. ## Why it matters Higher leverage generally leaves less room for an adverse move before [maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/) is breached. Yet two positions with the same leverage can have different risk because volatility, liquidity, collateral type, funding, fees, and stop execution also affect the outcome. ## Worked example A `$5,000` position supported by `$1,000` of collateral begins at `5×` leverage. If the underlying market moves `4%` against the position, the simplified directional loss is `$5,000 × 0.04 = $200`. That is a `20%` loss relative to the starting collateral before funding and fees. A `4%` favorable move would produce a `$200` gain before costs. This symmetry describes PnL, not the venue’s exact liquidation boundary. ## How it works on Lynx On Lynx, documented position size equals position collateral multiplied by leverage. The opening fee is deducted from the deposited collateral first, so the final position collateral—and the position size produced from it—can be lower than a simple pre-fee estimate. Lynx calculates position health from the traded instrument and position accounting. A price move in the collateral token itself does not change the position’s leverage or liquidation health. ## Common misconception > Ten-times leverage does not mean a trader automatically loses everything after exactly a 10% adverse move. Maintenance margin, fees, funding, price calculation, and liquidation execution all affect the actual threshold. ## Sources - [Futures Glossary](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm) — U.S. Commodity Futures Trading Commission (regulatory) - [Economic purpose of futures markets and how they work](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/economicpurpose.html) — U.S. Commodity Futures Trading Commission (regulatory) - [Fees](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) — Lynx Finance (primary) --- # Initial and maintenance margin > Initial margin is the minimum eligible equity a venue requires to open or increase a leveraged position. Maintenance margin is the lower ongoing threshold required to keep that exposure open. When account or position equity falls below the applicable maintenance requirement, the venue can reduce or liquidate exposure according to its rules. - Canonical page: https://lynx.finance/glossary/initial-and-maintenance-margin/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Capital and risk - Also known as: initial margin, maintenance margin, IM and MM - Related terms: [Collateral](https://lynx.finance/glossary/collateral/), [Leverage](https://lynx.finance/glossary/leverage/), [Liquidation](https://lynx.finance/glossary/liquidation/), [Position size and notional value](https://lynx.finance/glossary/position-size-and-notional-value/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Crypto liquidation explained: what happens and who gets the money](https://lynx.finance/blog/crypto-liquidation/), [Leverage, margin, and position size in crypto perpetuals](https://lynx.finance/blog/leverage-margin-position-size/) ## In plain English Initial margin is the admission requirement for new exposure. Maintenance margin is the safety floor after the position exists. A trader can therefore have enough equity to keep an existing position open but not enough to make it larger. Margin rules manage the venue’s exposure to loss; they do not describe the trader’s preferred risk limit. Waiting until the maintenance threshold is reached hands control to an automated liquidation process. ## How it works Venues commonly express requirements as a percentage of notional value, a tiered schedule, or a risk model. Larger or less liquid positions may carry a higher rate. Cross-margin systems calculate requirements across a portfolio, while isolated systems focus on the collateral assigned to a position. Account equity changes with [unrealized PnL](https://lynx.finance/glossary/realized-and-unrealized-pnl/), collateral value, fees, and funding. When equity falls below initial margin, new risk is usually restricted. When it falls below maintenance margin, liquidation rules can activate. ## Why it matters The distance between current equity and maintenance margin is a more useful warning than the headline leverage limit. Funding costs, adverse price moves, or a falling collateral asset can consume that buffer even if the trader does not change the position. ## Worked example Assume a venue requires `10%` initial margin and `6%` maintenance margin for a `$20,000` position. Opening it requires `$2,000` of eligible equity. Keeping it open requires `$1,200`. If losses and costs reduce position equity to `$1,150`, it is `$50` below the simplified maintenance requirement. The venue may begin reducing or liquidating exposure. The example excludes tier changes and venue-specific buffers. ## How it works on Lynx Lynx does not describe position risk through a conventional initial-margin and maintenance-margin schedule. A trader chooses position collateral and leverage, while the documented liquidation boundary is based on Net PnL losses and accumulated fees reaching 85% of that position collateral. The generic IM/MM model is useful for comparing venues, but on Lynx the relevant interface values are position collateral, leverage, accumulated costs, Net PnL, and the estimated liquidation level. ## Common misconception > Maintenance margin is not extra money charged when a position loses. It is the minimum equity threshold the position or account must continue to satisfy. ## Sources - [What are margin requirements and how do they apply to liquidations?](https://help.coinbase.com/en/international-exchange/margin-requirements/what-are-margin-requirements-and-how-do-they-apply-to-liquidations) — Coinbase International Exchange (primary) - [Economic purpose of futures markets and how they work](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/economicpurpose.html) — U.S. Commodity Futures Trading Commission (regulatory) - [Traders](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders) — Lynx Finance (primary) --- # Liquidation > Liquidation is the venue-controlled process of reducing or closing leveraged exposure after its supporting equity no longer satisfies required risk thresholds. It is intended to limit further losses to the trader and market, but can involve fees, partial or full closure, unfavorable execution, and outcomes that differ from the displayed estimate. - Canonical page: https://lynx.finance/glossary/liquidation/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Capital and risk - Also known as: forced liquidation, auto-liquidation - Related terms: [Initial and maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/), [Collateral](https://lynx.finance/glossary/collateral/), [Leverage](https://lynx.finance/glossary/leverage/), [Mark price](https://lynx.finance/glossary/mark-price/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Crypto liquidation explained: what happens and who gets the money](https://lynx.finance/blog/crypto-liquidation/) ## In plain English A leveraged position cannot be allowed to accumulate unlimited losses against limited support. When its margin condition crosses a venue-defined boundary, the venue takes over and reduces risk. Depending on the design, it may cancel orders, close part of the position, close all positions, convert collateral, or use additional backstop mechanisms. Liquidation protects the market’s accounting system. It is not a trader-selected stop order and it is not guaranteed to execute at one exact price. ## How it works The venue continuously or periodically compares eligible equity with its [maintenance margin](https://lynx.finance/glossary/initial-and-maintenance-margin/) requirement. Many venues use a [mark price](https://lynx.finance/glossary/mark-price/) rather than the last trade to reduce the effect of a single abnormal print. When the threshold is breached, automated rules begin. The process can include liquidation fees and price impact. Cross-margin liquidation may consider multiple positions and collateral assets, while isolated liquidation generally focuses on the assigned position. ## Why it matters A displayed liquidation price compresses several moving inputs into one estimate. Funding, added or removed collateral, fees, position changes, collateral valuation, and risk-parameter changes can move it. Traders should manage risk before liquidation becomes the exit plan. ## Worked example Consider a `$10,000` position supported by `$1,000` of eligible collateral with a simplified `$500` maintenance requirement. After a `$550` unrealized loss, the remaining equity is `$450` before other costs. Because `$450` is below `$500`, the position breaches the simplified maintenance threshold. The venue can begin liquidation even though `$450` of equity appears to remain. Real calculations can include several additional inputs. ## How it works on Lynx Lynx documentation currently describes liquidation when Net PnL losses and accumulated fees reach 85% of the position’s collateral. The remaining collateral is taken as the liquidation fee, and the position’s losses and fees flow to its corresponding liquidity pool. This is not the same as crossing a generic maintenance-margin percentage. Traders should use Lynx’s displayed liquidation level and current protocol parameters rather than importing a threshold from another venue. ## Common misconception > A liquidation price is not the same as a stop-loss price. A stop is a trader instruction subject to execution conditions; liquidation is a venue risk action triggered by margin rules. ## Sources - [Liquidation management for international derivatives](https://help.coinbase.com/en/coinbase/derivatives/intx-derivatives-liquidation-mgmt) — Coinbase (primary) - [What happens if my positions are automatically liquidated?](https://help.coinbase.com/en/international-exchange/liquidations/what-happens-if-my-positions-are-automatically-liquidated) — Coinbase International Exchange (technical) - [Traders](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders) — Lynx Finance (primary) --- # Index price > The index price is a reference value intended to represent the external spot price of the asset underlying a derivative. A venue may combine prices from multiple exchanges or oracle publishers, apply weights, and remove stale or abnormal inputs. The index can inform funding, marking, settlement, and other risk calculations. - Canonical page: https://lynx.finance/glossary/index-price/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Pricing and execution - Also known as: spot index, reference price - Related terms: [Mark price](https://lynx.finance/glossary/mark-price/), [Funding rate](https://lynx.finance/glossary/funding-rate/), [Perpetual futures](https://lynx.finance/glossary/perpetual-futures/), [Liquidation](https://lynx.finance/glossary/liquidation/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Why funding rates go negative (and what it tells you)](https://lynx.finance/blog/why-funding-rates-go-negative/) ## In plain English No single exchange owns the one true price of BTC, ETH, or another traded asset. Prices can differ slightly across markets. An index applies a published method to turn selected observations into one reference value for a derivatives contract. A robust index tries to remain useful when one source is stale, unavailable, or briefly abnormal. Its quality depends on source selection, weighting, update speed, and outlier handling. ## How it works A centralized venue might read several spot exchanges. An on-chain venue might consume an oracle that aggregates independent publishers. The method can use a median, weighted average, time-weighted value, or other calculation. Each design has different trade-offs. The index can anchor the [funding rate](https://lynx.finance/glossary/funding-rate/) and feed the [mark price](https://lynx.finance/glossary/mark-price/). It may also be used for settlement or protective market controls. ## Why it matters Traders should know which market their derivative is actually tracking. An index with weak sources or slow updates can misrepresent current conditions. During volatile periods, differences between the index, mark, last trade, and executable price can widen. ## Worked example Imagine an intentionally simple equal-weighted index with three valid spot inputs: `$60,000`, `$60,030`, and `$59,970`. Their average is `($60,000 + $60,030 + $59,970) ÷ 3 = $60,000`. A real methodology might use weights, medians, confidence intervals, or exclusion rules, so this arithmetic is illustrative rather than universal. ## How it works on Lynx Lynx currently uses on-demand price updates from Pyth for opening and closing trades. That oracle price references the traded instrument and is independent of the token selected as collateral. The Pyth feed—not Lynx’s interface—defines how its publishers and aggregation produce the reference value. The number is an accounting and execution input, not a promise that the same price is available on a spot exchange. ## Common misconception > An index price is not necessarily tradable. It is a calculated reference; the price available for opening or closing a position depends on the venue’s execution model and liquidity. ## Sources - [How perpetual futures stay in line with the index price](https://help.coinbase.com/en/international-exchange/perpetual-futures-basics/how-do-perpetual-futures-stay-in-line-with-index-price-of-the-underlying-spot-asset) — Coinbase International Exchange (primary) - [How the Pyth oracle program aggregates publisher data](https://docs.pyth.network/price-feeds/core/how-pyth-works/oracle-program) — Pyth Network (technical) - [Traders](https://lynx-finance.gitbook.io/lynx-finance/for-users/traders) — Lynx Finance (primary) --- # Mark price > The mark price is a venue-calculated fair-price estimate used for functions such as unrealized PnL, margin checks, and liquidation. It is designed to be harder to distort than a single last trade. Its formula commonly references an index price and market premium, but the exact inputs, bounds, and update rules vary. - Canonical page: https://lynx.finance/glossary/mark-price/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Pricing and execution - Also known as: fair price, futures mark - Related terms: [Index price](https://lynx.finance/glossary/index-price/), [Liquidation](https://lynx.finance/glossary/liquidation/), [Realized and unrealized PnL](https://lynx.finance/glossary/realized-and-unrealized-pnl/), [Funding rate](https://lynx.finance/glossary/funding-rate/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Crypto liquidation explained: what happens and who gets the money](https://lynx.finance/blog/crypto-liquidation/) ## In plain English The last trade shows where one transaction happened. It may be stale, unusually small, or briefly far from the broader market. The mark price gives the risk system a more stable value for calculating the position’s condition. The mark is not necessarily a price at which the trader can execute. Closing still depends on the venue’s available liquidity and order or pricing model. ## How it works A common design starts with an [index price](https://lynx.finance/glossary/index-price/) assembled from external spot markets, then applies a bounded premium or basis derived from the perpetual market. Some designs add smoothing, impact-price inputs, or other protections. The venue then uses the mark to calculate [unrealized PnL](https://lynx.finance/glossary/realized-and-unrealized-pnl/) and compare account equity with maintenance requirements. Because formulas differ, “mark price” should be read as a defined venue value, not a universal calculation. ## Why it matters Liquidation risk can change even when the last-traded price shown on a chart does not. A trader checking only the chart may misunderstand why unrealized PnL or the liquidation estimate moved. The mark, index, and executable price answer different questions. ## Worked example Suppose the index price is `$60,000`. A small last trade occurs at `$60,900`, but the venue’s bounded premium calculation produces a mark price of `$60,100`. The risk engine may value a `0.20 BTC` long at `$60,100` for unrealized PnL and margin, not at the `$60,900` last trade. Closing the position could still produce another price entirely. ## How it works on Lynx Lynx documentation does not define a separate mark-price series like some order-book venues. It describes an oracle entry price and an oracle reference price for open-position PnL, with the oracle price also used when a trade closes. For Lynx, do not assume a chart’s latest trade is the risk-accounting price. The oracle reference, entry price, artificial opening spread, and final close price answer different questions. ## Common misconception > Mark price, index price, and execution price are not synonyms. The mark serves risk accounting; the index represents a reference market; execution determines the actual trade result. ## Sources - [What is the funding rate?](https://help.coinbase.com/en/international-exchange/funding/what-is-the-funding-rate) — Coinbase International Exchange (primary) - [Perpetual-style futures settlement and other mechanics](https://help.coinbase.com/en/derivatives/perpetual-style-futures/settlement-and-other-mechanics) — Coinbase (technical) - [Gross Profit and Loss (P&L)](https://lynx-finance.gitbook.io/lynx-finance/welcome-to-lynx/core-design/gross-profit-and-loss-p-and-l) — Lynx Finance (primary) --- # Position size and notional value > Position size describes the quantity of derivative exposure a trader holds. Notional value expresses that exposure in a reference currency, commonly by multiplying quantity by the relevant asset price. Notional is not the same as collateral, account balance, or maximum loss; it is the market value on which PnL and many costs are based. - Canonical page: https://lynx.finance/glossary/position-size-and-notional-value/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Capital and risk - Also known as: notional, exposure, trade size - Related terms: [Leverage](https://lynx.finance/glossary/leverage/), [Collateral](https://lynx.finance/glossary/collateral/), [Realized and unrealized PnL](https://lynx.finance/glossary/realized-and-unrealized-pnl/), [Funding rate](https://lynx.finance/glossary/funding-rate/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Leverage, margin, and position size in crypto perpetuals](https://lynx.finance/blog/leverage-margin-position-size/) ## In plain English A position can be described in asset units, contracts, or a currency value. “Long `0.5 ETH`” is a quantity. If ETH is valued at `$3,000`, that quantity represents `$1,500` of notional exposure. The trader might support it with much less than `$1,500` of collateral. Always check which price a venue uses for notional. Entry price, mark price, and current execution price can produce different values. ## How it works For a linear contract, a common simplified relationship is: `notional value = position quantity × reference price` Inverse and quanto contracts can behave differently. Contract specifications may also assign a multiplier to each contract. Notional can change as the reference price moves even when the number of contracts stays fixed. ## Why it matters [Funding](https://lynx.finance/glossary/funding-rate/), trading fees, price impact, margin requirements, and PnL are often calculated from notional or quantity rather than the collateral deposit. Looking only at collateral can therefore make the economic size of a position seem smaller than it is. ## Worked example A trader opens exposure equal to `0.5 ETH` when the relevant price is `$3,000`. The notional value is `0.5 × $3,000 = $1,500`. If the position is supported by `$300` of collateral, its starting leverage is `$1,500 ÷ $300 = 5×`. If ETH rises to `$3,200`, the same `0.5 ETH` quantity has a current notional of `$1,600` under that price. ## How it works on Lynx Lynx documentation defines position size as position collateral multiplied by leverage. The opening fee is deducted before leverage is applied, so the final position size uses the post-fee collateral amount rather than the full amount initially entered. Position size and PnL are accounted for in the selected collateral asset. The traded instrument remains a separate synthetic price exposure. ## Common misconception > A `$10,000` notional position does not mean the trader paid `$10,000`, borrowed exactly `$10,000`, or can lose only the collateral shown beside it. Those are separate questions. ## Sources - [Funding rates for international derivatives](https://help.coinbase.com/en/coinbase/derivatives/funding-rate) — Coinbase (technical) - [Futures Glossary](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm) — U.S. Commodity Futures Trading Commission (regulatory) - [Frequently Used Terms in Lynx](https://lynx-finance.gitbook.io/lynx-finance/community/glossary) — Lynx Finance (primary) --- # Realized and unrealized PnL > Profit and loss, or PnL, measures how a position’s value has changed. Unrealized PnL is the estimated gain or loss on exposure that remains open, usually calculated with a venue-defined mark. Realized PnL records the result assigned when exposure is closed or settled, with fees and funding handled according to venue rules. - Canonical page: https://lynx.finance/glossary/realized-and-unrealized-pnl/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Pricing and execution - Also known as: PnL, profit and loss, open PnL, closed PnL - Related terms: [Position size and notional value](https://lynx.finance/glossary/position-size-and-notional-value/), [Mark price](https://lynx.finance/glossary/mark-price/), [Collateral](https://lynx.finance/glossary/collateral/), [Funding rate](https://lynx.finance/glossary/funding-rate/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Crypto liquidation explained: what happens and who gets the money](https://lynx.finance/blog/crypto-liquidation/) ## In plain English Unrealized PnL answers, “What gain or loss does the open position currently show under the venue’s accounting price?” Realized PnL answers, “What result has been locked into the account by closing or settling exposure?” An unrealized gain can disappear before the position closes. A realized gain can still be offset by fees, funding, earlier losses, or a change in collateral value. ## How it works For a simple linear long position, directional PnL can be expressed as: `quantity × (current or exit price − entry price)` For a short, the price difference reverses. Unrealized PnL commonly uses the [mark price](https://lynx.finance/glossary/mark-price/); realized trading PnL uses the actual closing execution or settlement price. Inverse contracts and average-entry calculations require different formulas. ## Why it matters Unrealized losses reduce the equity supporting a position and can move it toward liquidation. Unrealized gains can increase equity but should not be treated as spendable, final profit until the venue allows them to be realized or used. The net account result should reconcile trading PnL, fees, funding, and collateral changes. ## Worked example A trader opens a `0.25 ETH` long at `$3,000`. When the mark reaches `$3,120`, simplified unrealized PnL is `0.25 × ($3,120 − $3,000) = $30`. The trader then closes half the quantity—`0.125 ETH`—at `$3,120`. That realizes `$15` before costs. If the remaining half is still marked at `$3,120`, it shows another `$15` unrealized. ## How it works on Lynx Lynx distinguishes three PnL views. Gross PnL measures the leveraged price move. Trading PnL includes funding and interest. Net PnL includes all fees and is the value used for the trader’s final result and liquidation accounting. These values are measured and settled in the selected collateral asset. The collateral token’s own market-price movement is not part of Lynx position PnL. ## Common misconception > A green unrealized PnL number is not the same as net profit in the wallet. Execution, fees, funding, price impact, and settlement still stand between the estimate and the final result. ## Sources - [Perpetual-style futures settlement and other mechanics](https://help.coinbase.com/en/derivatives/perpetual-style-futures/settlement-and-other-mechanics) — Coinbase (primary) - [Futures Glossary](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm) — U.S. Commodity Futures Trading Commission (regulatory) - [Frequently Used Terms in Lynx](https://lynx-finance.gitbook.io/lynx-finance/community/glossary) — Lynx Finance (primary) --- # Slippage and price impact > Price impact is the change in expected execution caused by the size of a trader’s own order relative to available liquidity. Slippage is the difference between an expected execution price and the price ultimately received. They can overlap, but market movement, latency, transaction ordering, and execution rules can create slippage beyond quoted price impact. - Canonical page: https://lynx.finance/glossary/slippage-and-price-impact/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Pricing and execution - Also known as: execution slippage, market impact - Related terms: [Position size and notional value](https://lynx.finance/glossary/position-size-and-notional-value/), [Mark price](https://lynx.finance/glossary/mark-price/), [Index price](https://lynx.finance/glossary/index-price/), [Liquidation](https://lynx.finance/glossary/liquidation/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [What is a perp DEX? Decentralized perpetual exchanges explained](https://lynx.finance/blog/what-is-a-perp-dex/) ## In plain English A large order must consume more available liquidity than a small order. If the available prices worsen as size increases, the order creates price impact. Slippage describes the additional difference between the execution expected when the order was prepared and what actually happened. A slippage tolerance is a limit or instruction, not a promise that the order will execute. If conditions exceed the limit, the trade may fail or fill only under the venue’s stated rules. ## How it works Order-book venues consume quoted bids or offers at several price levels. Pool-based venues move along a pricing curve. Oracle-based perpetuals may apply a spread or impact function based on size and market skew. Each mechanism can quote a different expected average execution price. Between quote and settlement, the market can move. On-chain transactions can also be reordered or delayed. The final execution records the combined result of quoted impact and subsequent slippage. ## Why it matters Execution quality changes entry price, realized PnL, and the distance to liquidation. Increasing a tolerance does not create liquidity or remove impact; it only permits execution across a wider range. Comparing quotes at several position sizes can reveal when an intended trade is large relative to the market. ## Worked example An asset displays at `$100`. Because of order size, the venue quotes an expected average execution of `$100.50`. The trader’s own expected price impact is therefore `0.5%`. Before settlement, conditions move and the order executes at `$100.70`. Slippage relative to the `$100.50` quote is approximately `0.20 ÷ 100.50 = 0.199%`. The total difference from the original displayed price is `0.70%`. ## How it works on Lynx Lynx does not model entry price impact by walking an order book or an AMM curve. Its documentation describes an artificial spread added to the oracle price when a position opens, based on aggregated spot-market spreads for the traded instrument. The documented close path uses the oracle price without that artificial spread. Slippage tolerance remains separate: it limits how far an accepted execution may move from the submitted expectation. ## Common misconception > Slippage and price impact are not interchangeable settings. Impact describes how the order interacts with liquidity; slippage compares expected and actual execution. ## Sources - [Price impact vs price slippage](https://support.uniswap.org/hc/en-us/articles/8643794102669-Price-Impact-vs-Price-Slippage) — Uniswap Labs (primary) - [Futures Glossary](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm) — U.S. Commodity Futures Trading Commission (regulatory) - [Fees](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) — Lynx Finance (primary) --- # Open interest > Open interest is the total amount of derivative contracts or exposure that remains open and has not been offset or settled. It changes when positions create or remove outstanding exposure. Unlike trading volume, which counts activity during a period, open interest describes the stock of active contractual exposure at a point in time. - Canonical page: https://lynx.finance/glossary/open-interest/ - Published: 2026-07-31 - Updated: 2026-07-31 - Last reviewed: 2026-07-31 - Written by: Lynx Editorial - Technical review: Lynx Protocol Team - Category: Market signals - Also known as: OI, outstanding interest - Related terms: [Perpetual futures](https://lynx.finance/glossary/perpetual-futures/), [Funding rate](https://lynx.finance/glossary/funding-rate/), [Position size and notional value](https://lynx.finance/glossary/position-size-and-notional-value/), [Liquidation](https://lynx.finance/glossary/liquidation/) - Related articles: [On-chain perpetual futures, explained](https://lynx.finance/blog/onchain-perpetual-futures-explained/), [Why funding rates go negative (and what it tells you)](https://lynx.finance/blog/why-funding-rates-go-negative/) ## In plain English Volume asks how much changed hands during a period. Open interest asks how much derivative exposure is still outstanding. A market can trade heavily while open interest stays flat if participants mostly transfer or close existing exposure. Every contract has economic exposure on both sides. Reporting conventions avoid simply counting one long and its matching short as two separate contracts, although venues may publish open interest in contracts, asset units, or notional value. ## How it works When two participants create new opposing positions, open interest increases. When both close matching exposure, it decreases. When a new participant takes over an existing participant’s side, ownership changes but the amount still open can remain the same. For perpetuals, open interest has no expiry cycle forcing it to roll into a later contract. Liquidations, voluntary closes, and new positions can change it continuously. ## Why it matters Open interest helps describe participation and outstanding exposure. Analysts often compare it with price, volume, funding, and liquidity, but the number does not reveal every trader’s leverage, entry, liquidation price, or motivation. Rising open interest alone is not bullish or bearish. ## Worked example Alice opens one long contract while Bob opens the matching short. The market now has one contract of open interest, not two. Later both close that contract, reducing open interest back to zero. If Alice instead transfers her long exposure to Cathy while Bob remains short, trading volume increases but one contract remains open. Open interest therefore stays at one. ## How it works on Lynx Lynx tracks long and short open interest for each traded instrument. The difference between those sides—the open-interest skew—determines which side pays funding and contributes to the rate. That mechanism is designed around Lynx’s isolated liquidity pools: funding discourages one-sided trader exposure that would otherwise increase the corresponding pool’s counterparty risk. ## Common misconception > Rising open interest does not prove that new money is betting on higher prices. Every new contract has opposing exposure, and direction requires additional context. ## Sources - [Open interest](https://www.cmegroup.com/education/courses/introduction-to-futures/open-interest.html) — CME Group Education (technical) - [Futures Glossary](https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm) — U.S. Commodity Futures Trading Commission (regulatory) - [Fees](https://lynx-finance.gitbook.io/lynx-finance/for-users/fees) — Lynx Finance (primary)