Penalty

Penalty applies when you offset a position before 1h holding period

To replicate on-chain liquidity constraints, the mini-game also incorporates a penalty mechanism. The penalty mechanism has been implemented to make sure that users of 1xMM Pools will not keep positions for few minutes, after a significant market move.

Therefore, if you hold a position less than 1 hour:

• You are subject to a early-closure fee of 10 bps, which will decrease over the 1 hour

• If your position generates a positive PnL, you will receive only a ratio of the profit

The Penalty Ratio is equal to:

$$\text{Penalty\_Ratio}= 1 - \sqrt{Min(1.0, \frac{t - t_0}{1h})}$$

Hence:

$$penalty\_fee_{t_0,t,1h} = (10 \; bps + \text{Positive\_Perf}) \times \text{Penalty\_Ratio}$$

Of course, the Penalty Ratio is adjusted by the time bonus that you can acquire through a bonus or when increasing in level. The adjustment is applied as follows:

\text{Penalty_Ratio}= 1 - \sqrt{Min(1.0, \frac{t - t_0 + time\_bonus}{1h})}