How MYX Finance Works? Here Are the Details

MYX Finance is an on-chain derivatives trading platform that allows users to trade USDC-margined perpetual contracts with up to 50x leverage. 

Unlike order book exchanges, MYX uses a unique Matching Pool Mechanism (MPM) to pair long and short positions while maintaining a balance of capital efficiency and instant execution. 

If you’re wondering how MYX works behind the scenes, this article will walk you through its system step by step, focusing on order flow, liquidity, and capital management.

Understanding the Order Flow and Open Interest Mechanics

At the heart of how MYX Finance works is how it processes different types of orders and keeps track of user open interest. 

Traders can open and close positions using four primary actions:

• Buy to Open: This increases a user’s long open interest.
• Sell to Close: This reduces an existing long position.
• Sell to Open: This increases a user’s short open interest.
• Buy to Close: This decreases an existing short position.

When traders go long or short, the system records these as open interests on either side. Open interest is the total amount of active contracts in a given direction. 

A high long open interest means more traders are betting on rising prices. Conversely, high short open interest signals expectations of a price decline.

To ensure fair trading conditions, funding fees are paid hourly between opposing sides. The side with higher open interest pays the other. 

This mechanism helps balance the market and prevents one side from dominating. For example, if longs greatly outnumber shorts, long traders will pay a funding fee to shorts, incentivising more people to take short positions and restore equilibrium.

This dynamic keeps MYX’s market more stable and ensures that the liquidity pool, which acts as a counterparty in some trades, doesn’t carry too much risk on one side. It’s a clever way of nudging participants toward a healthy long-short distribution.

Read more: How to Buy PENGU via DEX and CEX

How the Liquidity Pool Supports Capital Efficiency

In MYX Finance, there is no centralised order book. Instead, the Liquidity Pool (LP) plays a crucial role in trade execution. 

When a trader opens a position, and there is no immediate counterparty, the LP steps in to fill that role passively. It temporarily takes on the opposite position to what the user is trading.

For example, if Alice opens a long position of 1 BTC, the LP takes on a short position and reserves 1 BTC worth of USDC as collateral. If Alice shorts 1 BTC at $30,000, the LP allocates $30,000 in USDC as collateral, covering the maximum potential profit Alice could make.

This structure allows trades to be executed instantly, which is a key part of how MYX works. Once more traders enter the opposite side of Alice’s position, the LP exits its exposure and those traders replace the LP as the counterparty. This is called delayed matching, and it frees up the LP’s capital for new trades.

When markets are in balance, the LP’s exposure is low. In that case, MYX can handle more volume with the same amount of capital. This is what makes the Matching Pool Mechanism extremely capital-efficient. 

Unlike traditional systems that require large pools of idle funds, MYX keeps liquidity flowing through real-time adjustments.

In extreme imbalances, the LP may need to hedge its positions externally using other markets. Since LPs can see exactly what their exposure is, they can hedge effectively on centralised exchanges if needed. 

This optional hedging step is crucial in volatile or one-sided market conditions to protect the platform and its users.

To manage extreme cases, MYX also includes an Automatic Deleveraging (ADL) system. If the LP pool reaches full capacity, the system will forcibly reduce exposure by closing the most profitable opposing trades. 

This helps lower both long and short open interest without needing new capital, preventing structural breakdowns when usage is too high.

Read more: Is Pump.fun Popular Again? 

Trading Experience, Cost Structure and Risk Management

Trading on MYX is fast and straightforward. Orders are filled instantly because the LP stands ready to take the opposite side. 

Index prices are sourced from the Pyth Oracle to ensure accuracy and fairness. This avoids the risk of price manipulation or extreme slippage that can occur on less transparent platforms.

Trades are denominated in USDC, and the margin system uses isolated positions. This means that each trade is independent, so if one position is liquidated, it doesn’t affect the rest of your account. Leverage is available up to 50x, offering higher exposure without full capital upfront.

MYX also includes price deviation protection, which cancels market orders if the final execution price differs too much from the intended one. This is particularly helpful when network delays or gas spikes affect confirmation times, reducing unwanted slippage.

The fee structure in MYX is designed to encourage balance. Traders are classified as either Makers or Takers:

• Takers are those who worsen the imbalance. For example, if long open interest is already high and a trader opens another long position, they pay a higher fee.
• Makers are those who reduce the imbalance. Their actions help restore balance, so they pay a lower fee.

Taker fees start at 0.06%, while Maker fees are 0.04%, with discounts for high-volume traders. At the highest tier, Maker fees drop to 0.01%, making MYX one of the most cost-effective on-chain derivative platforms for institutional or large-volume users.

These design choices, non-custodial access, predictable index pricing, and reward-based fee structure, contribute to a fair trading environment. 

Unlike centralised platforms, MYX never takes custody of your assets. You connect a wallet, trade directly from it, and always retain control of your funds.

Conclusion

MYX Finance operates through a well-designed Matching Pool Mechanism that matches traders’ positions in real time while ensuring liquidity and balance. 

With USDC settlement, real-time oracle pricing, and a responsive liquidity system, it offers an efficient and transparent on-chain trading experience.

For users who want an easier and safer way to explore crypto trading, platforms like Bitrue offer an excellent starting point. Bitrue’s user-friendly interface, solid reputation, and deep liquidity make it ideal for both beginners and experienced traders alike.

Frequently Asked Questions

1. What is the Matching Pool Mechanism on MYX Finance?

It is a system that instantly matches long and short trades using a liquidity pool, balancing open interests and improving capital efficiency.

2. How does MYX Finance manage liquidity risks?

The LP pool acts as a temporary counterparty, then exits positions once opposing traders arrive. In extreme cases, LPs can hedge on external markets or rely on the ADL system.

3. Are there trading fees on MYX?

Yes, takers pay up to 0.06% and makers pay as low as 0.01%, with discounts based on trading volume and contribution to long-short balance.

Investor Caution 

While the crypto hype has been exciting, remember that the crypto space can be volatile. Always conduct your research, assess your risk tolerance, and consider the long-term potential of any investment.

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Disclaimer: The views expressed belong exclusively to the author and do not reflect the views of this platform. This platform and its affiliates disclaim any responsibility for the accuracy or suitability of the information provided. It is for informational purposes only and not intended as financial or investment advice.