Automated Market Maker

GenieDEX incorporates automated market makers (AMMs), an alternative funding fee mechanism adjusts user positions based on the side with greater liability to the liquidity reserve:

• If Long Positions > Short Positions: Longs pay funding fees to shorts and liquidity providers.
• If Short Positions > Long Positions: Shorts pay funding fees to longs and liquidity providers.

This mechanism incentivizes traders to adopt positions that earn funding fees, naturally pushing the mark price closer to the index price and reducing deviations.

In limit order book and concentrated liquidity markets, this behavior aligns the market price with the index price. Power perpetual AMM models achieve this alignment using price oracles, with the funding mechanism acting as a financial incentive for liquidity providers and contrarian traders.