> For the complete documentation index, see [llms.txt](https://infty-trade.gitbook.io/whitepaper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://infty-trade.gitbook.io/whitepaper/mechanisms.md).

# Mechanisms

Picture a pool collectively maintained by individuals (LPs), with its level (perpetual contract prices) fluctuating based on member contributions or withdrawals (position adjustments). The objective is to maintain stability, even with fluctuating member activity.

**1. Water Level Equilibrium Rate**

First, think of the water level representing the total value of LPs' short or long positions against their total liquidity provided. A flat water level, with no additions or removals, is a perfect balance, called the standard level (zero). Removing water lowers the level (negative), and adding raises it.

**2. Relationship Between Water Level and Premium Rate**

The height of the pool's level (PR) influences the price disparity with the market's normal price (PPR). When balanced, water costs align with the market, lacking a premium. Disbalance shifts water prices relative to the standard.

**3. Price Calculation**

Imagine a calculator (PRMM algorithm) that adjusts water prices based on the water level (equilibrium rate) and other rules (system parameters), ensuring prices remain fair despite fluctuating member actions.

**4. Adjustment Mechanism**

There are rules for automatically adjusting water prices based on level changes, ensuring prices align with market rates, even amid significant member activity.

<figure><img src="/files/noKOxOoHRp0nU0KihKEd" alt=""><figcaption></figcaption></figure>

#### **Conclusion**

A pool controlled by many (LPs), where the level (perpetual contract prices) changes with member activity. The aim is to stabilize the level, even when actions might shift it. The water level's balance represents LPs' position values versus their liquidity. A balanced (zero) level means no change. The level's impact on price differences (premium rate) depends on the balance. A calculator (PRMM algorithm) adjusts prices based on the level and rules to keep prices fair. A rules system auto-adjusts prices to match the market despite heavy member actions. In short, this system maintains market-aligned prices through a rule-based algorithm responding to member behavior changes.


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