The impact curve⁽⁰⁵⁾

A house-backed exchange is exposed to one kind of trader above all: the one who sees a price a moment before the oracle does and takes the small, near-certain gain. The fill rule removes most of that edge. The impact curve removes the rest by letting small wins keep less than large ones.

It applies to gains only. A loss is always the full raw amount.

move     = |exit' − entry| / entry        exit' = deadbanded exit
term1    = 1 / (move × rateMultiplier)
term2    = referenceNotional / (1e6 × move × positionMultiplier)
scale    = (1 − baseRate) / (1 + term1 + term2)
adjusted = gain × scale

scale is the share of the gain you keep. It rises toward 1 − baseRate, which is 0.9 by default, as the move grows: a 5 % move keeps almost 90 %, a move of a few hundredths of a percent keeps much less.

Parameters

Kept share by move

Read it this way: a BTC win on a 1 % move keeps 88.3 % of its gain before the fee; on a 0.1 % move it keeps 75.7 %.

Why two terms

• term1 is the same on every market. It weighs most on very small moves, where an early look at the price is worth the most. For BTC at a 0.1 % move it is 0.0667; at 1 % it is 0.0067.
• term2 depends on the market through positionMultiplier. A larger multiplier stands for a deeper market where small moves say less, so BTC keeps more than ETH, and ETH more than SOL. For BTC at 0.1 % it is 0.1228; at 1 % it is 0.0123.

A trade end to end

ETH short, $200 margin at 50x: a $10,000 position. Entry $2,500, bust price $2,548.75. The close fills at $2,475, a 1 % move in your favour, and the house can pay.

Rounding

The program computes scale in fixed point at 1e18 and rounds every step down, in the house's favour. The figures above are rounded to four decimals.