Liquidity & Pricing

How PMX determines token prices from pool liquidity

Pricing Mechanism

PMX uses a liquidity-based pricing model. The price of each outcome is derived from the proportion of total liquidity allocated to it. Prices update with every trade — no order books, no market makers.

Pricing Formula

Price(outcome) = Liquidity(outcome) / Total Liquidity

Total Liquidity = YES Liquidity + NO Liquidity

This guarantees:

  • YES price + NO price always equals 1.00 (100%)
  • Prices reflect the market's aggregate belief about the outcome
  • Larger trades have proportionally more price impact (slippage)

Example: Initial State

YES Liquidity
$500
NO Liquidity
$500
YES Price$500 / $1,000 = 0.50 (50%)
NO Price$500 / $1,000 = 0.50 (50%)

Both outcomes start with equal implied probability.

Example: After a Trade

A user buys $500 worth of YES tokens, adding $500 liquidity to the YES pool:

YES Liquidity
$1,000
+$500
NO Liquidity
$500
unchanged
YES Price$1,000 / $1,500 ≈ 0.67 (67%)
NO Price$500 / $1,500 ≈ 0.33 (33%)

More liquidity in YES → higher YES price, lower NO price.

Price Impact & Slippage

Larger trades shift the liquidity ratio more, resulting in greater price impact. This is slippage — a natural property of liquidity-based markets, not a bug.

Small Trades

Minimal price impact — fill close to the current market price

Large Trades

Significant price impact — moves the market substantially

Tip
Use the quote preview before executing a trade to see your exact fill price and slippage.
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