Assassin OKX vs Mage Binance: A Financial Philosophy Behind the Algorithm

If you are wondering why your orders on OKX often get liquidated before your orders on Binance? Or why you earn less on your orders on Binance compared to your orders on OKX? Or why OKX has been slow to launch new futures trading pairs, is it because they don't want to continue? Then this long article will address your confusion.

Revealing: Why OKX hasn't launched many new perpetual Futures Trading contracts? In contrast, Binance is soaring with new contract trading? - Is it a business decision? Compliance? No, this is actually a battle of underlying algorithms.

Introduction

I wonder if anyone has noticed the same perpetual futures trading pair.

Why can Binance leverage up to 75x (of course, assuming you open at 75x, the maximum can only reach 5000u), while OKX can only provide up to 20x.

Is it true that the prices of the same trading pair are different at the same point in time between two exchanges? Are the funding fee rates also different?

Is this because you are frighteningly strong, and capital is specifically targeting you? Is OKX specifically watching your account, hitting it with pinpoint strikes; is Binance watching your account and cutting your profits?

Don't be silly, kid. You're overthinking it... It's all because of the different underlying algorithms.

1. What is perpetual Futures Trading?

We first need to understand the key factors that determine perpetual Futures Trading:

1. Index Price

2. Mark Price

3. Funding Rate Algorithm

In short, regarding the relationship between these three key elements:

Mark Price + Index Price = The core algorithm mechanism that determines the "Contract Price".

The funding rate algorithm = a mechanism that determines whether you should lend money to others and how much you should lend.

As for the differences in the algorithms of these three elements between Binance and OKX, allow me to elaborate.

What?! You say you don't want to know the details? Just passing by to see the conclusion.

Alright, let's take a look at this simple comparison table.

Summary:

OKX algorithmically determines (mark price + buy 1 sell 1) that it has higher volatility than Binance's Futures Trading, and with coarser granularity, this further exacerbates its volatility.

The devil is in the details.

Below is a detailed explanation without (hard) chat (core). If you find it boring, you can go directly to the next chapter:

Index Price

The index price refers to the weighted average price of the spot circulating in the current market, usually derived from the spot prices of multiple mainstream exchanges, calculated after weighting.

In order to prevent an exchange from deviating too much due to technical or liquidity issues, the system performs a "smoothing":

• Binance: ±2%
• OKX：±5%

Therefore, in extreme market conditions, the index price fluctuations of OKX are greater than Binance, resulting in higher risk/reward and faster market response.

Mark Price

This is the most critical price in Futures Trading — it directly determines whether you Get Liquidated.

The design concept of the mark price is to incorporate some reference factors from the futures trading prices based on the spot index price, forming a more "reasonable" midpoint price used to calculate profits and losses and Get Liquidated.

The formula is:

Mark Price = Index Price + Basis

The so-called "basis" is the price difference between spot and futures, smoothed using a moving average to prevent interference from "spike" market conditions.

In other words, the fluctuation of spot prices is the biggest culprit for you getting liquidated, rather than the mysterious notion of "the exchange secretly changing prices."

Differences in Mark Price Algorithms between OKX and Binance

OKX's Algorithm:

Only take the "Buy 1" and "Sell 1" of the futures, which is the mid-price of the order book (Taker price).

Not looking at the order book depth leads to greater fluctuations (easier to get liquidated), but the price is closer to the market.

This means that when there is a difference between the spot and futures prices, the regression will be faster, but you are also more likely to Get Liquidated or make a fortune.

Under the OKX plan, the Mark Price is more closely aligned with the spot price, and when there is a price difference between the futures and spot prices, it will also revert more quickly.

Binance's Algorithm:

Be more cautious. It calculates three prices:

1. Weighted price closely related to the spot index and funding rate (taking into account order book depth)
2. OKX style buy 1/sell 1 midpoint
3. Actual Transaction Price of Futures Trading

Then take the median value of the three as the mark price.

Smaller fluctuations, stronger stability, but slower convergence between spot and futures.

Why can the spot and futures trading prices be different?

This is the norm of Futures Trading. The algorithm does not force the two to converge.

Therefore, the platform introduced a mechanism to "compensate" for this price difference: Funding Rate.

Arbitrageurs use "forward/reverse positions" to flatten the price, but this mechanism actually has a bug, let's talk about it below.

How is the Funding Rate settled?

The positive and negative values of the funding rate are merely the result of market behavior. Its function is to gradually bring the contract price back to the spot price by transferring costs.

The positions you hold will incur funding fees at regular intervals. For example:

• You opened a 10x long position with 100U (notional position 1000U)
• The current funding rate is 0.1%
• This period you need to pay: 1000 * 0.1% = 1U
• Standard Rate: Long Position → Pay to Short Position
• Negative Rate: Short Position → Pay to Long Position

OKX's funding rate algorithm:

The general idea of the formula is:

(Futures Trading market price - spot index price) / spot index price, then take the moving average.

Then limit the upper and lower bounds through Clamp (±1.5%)

Moreover, OKX's lending rate is set to 0. This means that the market hardly considers the real cost of borrowing coins.

Binance's funding rate algorithm:

In contrast, Binance is more complex, based on OKX's algorithm (with limits of ±2%), and also takes into account two key factors:

① Lending Rate ≠ 0

Binance's default lending rate is 0.01%, so even if the spot and futures prices are the same, there will still be a minimum funding fee of 0.01%.

② Premium Index + Impact Bid/Ask

This part is the highlight. Binance is not satisfied with the "surface price" of buying 1 and selling 1, but instead refers to the depth of the entire order book. However, it has renamed this concept to "Impact Buy/Sell Quote."

For example:

• "Impacting the Seller's Bid": When someone places a market buy order for $1,000,000, to what price will it be pushed?
• "Impact on Bid Price": Conversely, to what price will it be pressed down when selling?

These in-depth considerations make Binance's funding rate more reflective of real supply and demand, rather than just focusing on the surface price.

Precision Design

• OKX Precision: 0.0001 → Minimum order size is relatively large → Plus OKX has buy 1/sell 1, fast fluctuations.
• Binance Precision: 0.000001 → View order book depth, price changes are more delicate.

Combining OKX's mechanism that only references buy 1 sell 1 leads to:

Volatility is fast, getting liquidated is severe, and the pace is urgent, suitable for short-term quick shooters;

And Binance is as stable as a hen, suitable for large funds and large positions for steady operations.

A real-world bug where the funding rate is "useless":

When the contract price < spot price (negative funding rate), theoretically arbitrageurs should:

Shorting spot + Going long on Futures Trading → Driving up the Futures Trading price

But the problem arises:

If the spot tokens are controlled by the market makers and cannot be borrowed, arbitrageurs simply cannot complete this set of operations.

Even if one is willing to lend, the borrowing interest rate may be higher than the funding rate, rendering the arbitrage opportunity ineffective.

As a result, the futures price remains consistently lower than the spot price, while the funding rate keeps settling, allowing the "longs to take money for free," but the price cannot recover.

This is also why Alpaca/TRB and these "meme coins" can have such wild operations. Even though Binance has repeatedly adjusted the funding rate frequency and funding rate, it still cannot "dissuade" the restless hearts of the retail investors.

Interesting exchange "Conscience Behavior":

It is said that some exchanges that are "a bit conscientious" will "print" a little coin themselves to smooth out the price, sell it in the spot market, and simultaneously go long on Futures Trading to perform hedging operations.

Why is it said to be conscientious? Because it could have directly printed money to smash the market for arbitrage, but it chose to stabilize the market – in capitalism, this is already very Zen. However, after encountering a bug, it was attacked by the community.

Smart you, seeing this, should have realized a few key facts:

1. The Mark Price determines the profit and loss status of your account.
2. The funding rate mechanism is the bridge for price transmission between futures and spot.
3. The algorithm design of different exchanges affects the pace of Get Liquidated, capital flow, and even trading strategies.
4. Sometimes, the contract price doesn't come back, not because the arbitrageurs haven't seen the opportunity, but because they have no money, no coins, and can't borrow.

3. Above Algorithms, Below Human Nature - Different Trading Techniques and Offensive Strategies

Due to the different algorithms, two different "trading methods" and listing strategies have emerged (the premise is to have control over the spot market).

Trading on OKX:

• It's easier to insert pins: Since OKX's mark price algorithm only refers to buy 1/sell 1, and the price accuracy is coarser, a slightly larger taker order can push the price to jump violently, which is very convenient to create a "pin liquidation".
• Higher volatility, lower cost for pump/dump: You can influence market trends with less capital while triggering counterparty Get Liquidated faster.
• Suitable for controlling the market, quick entry and exit: more suitable for short-term market manipulation, quickly triggering user stop-loss positions and then rapidly retracing.
• More aggressive arbitrage: Due to the rapid speed of price reversion, it allows for frequent construction of futures spot arbitrage, long and short hedging operations, and more.

Trading on Binance:

• It is more difficult to drive price fluctuations: due to the depth of the entire order book, it is necessary to eat more pending orders in order to "insert the pin", and the trading cost is higher. At the same time, because of the characteristics of the thickness of the order book, we can peek at the existence of "Zhuang" through the depth of the order book.
• Suitable for gradual layout and stable position control: Conservative big players may prefer this "hen-type market" - not easily Get Liquidated, but can steadily push prices up/down.
• Arbitrage space is more difficult to trigger: but once there is arbitrage space, it is more persistent. For example, the short-squeeze funding rate event also makes Binance frequently adjust the settlement frequency of the funding rate.

If this is "Honor of Kings":

OKX is more suitable for assassins like Han Xin, playing Get Liquidated games and oscillating wash trading; high mobility + jungle penetration + extreme escape;

Suitable for traders who frequently strike in volatile markets, the "fast-handed knife knife" type.

Binance is more suitable for strategists like Zhuge Liang, who excels in trend control, capital management, and institutional arbitrage; calmly calculating, using kite tactics, and passively triggering harvests.

Binance's algorithm emphasizes the balance of order book depth, impact price, and funding cost, just like Zhuge Liang uses wisdom and strategy to maneuver, exhausting opponents with kite tactics (funding rates) — stabilizing control and prioritizing the overall situation (this is also why most funding rate consumption battles occur at Binance).

4. Does the algorithm affect the exchange's decision on the perpetual listing of new coins?

The answer is definitely yes, and the impact is enormous, especially against the backdrop of severe overall market liquidity shortages, where new coins are immediately subject to "dousing". How exchanges manage price fluctuations and control Get Liquidated risk has almost become the "line of life and death" for whether or not perpetual contracts can be launched.

From the perspective of mechanism design, Binance is more suitable for launching new perpetual Futures Trading contracts. First, its relatively smooth pricing mechanism constructs the mark price by taking the median of the spot index, order book depth, and transaction price. This makes it relatively less likely for new coins to experience drastic "pump and dump" market conditions in the early stages of launch, even if liquidity fluctuates sharply, thereby avoiding the risk of Get Liquidated and preventing the exchange from having to bear losses.

Secondly, its depth-driven funding rate algorithm no longer relies solely on the best bid and ask prices on the order book, but simulates large Taker order behaviors to calculate the "impact bid/ask price" and construct a more realistic basis. This mechanism can effectively reduce the extreme profits/losses caused by Get Liquidated, allowing market makers and project parties to enter the market with confidence to stabilize prices.

In contrast, OKX has significantly higher risks when launching new perpetual contracts for new coins. Its algorithm results in coarser price granularity and more intense fluctuations. Moreover, the funding rate only considers the market price and lacks constraints from borrowing interest rates, akin to throwing a new coin directly into a sensitive, high-pressure Get Liquidated trigger.

Under the premise of insufficient liquidity, any bit of vigorous trading may cause price pins and trigger large-scale liquidation; After liquidation, if the slippage is large and the counterparty is insufficient, it is easy to wear the position, which will eventually lead to the loss of the exchange itself. The launch of $OM is a typical example - high volatility, pin-insertion, and position penetration, and finally the exchange "harms others and does not benefit itself".

Therefore, in terms of algorithmic philosophy, Binance's robust mechanism makes it more suitable for following the "large market cap trend + institutional arbitrage" route, and it is also easier to establish commercial connections with project parties/market makers; whereas OKX's high volatility mechanism, although more attractive to aggressive traders, may backfire if liquidity preparations are not adequately made when new coins are launched.

This is not a simple difference in business strategy, but an inevitable result determined by the underlying design philosophy.

Five, different underlying algorithms reflect different financial philosophies.

You can view this algorithmic game as a competition between two worldviews: one world advocates for systematic, smooth, and stable— that is Binance; the other world believes in the invisible hand, volatility, and the ultimate game of human nature— that is OKX. The platform you choose not only determines your trading strategy but also implies your faith in this financial world.

OKX: Behavioral Finance School + Market Structuralism

What OKX embodies is a trading philosophy that is more aligned with the "philosophy of volatility". Its core logic is: the market is not rational; it is a stage driven by human nature and strategic trading.

From an algorithmic perspective, OKX uses the best bid and ask as the core calculation source for its mark price, combined with a coarser price precision and a more direct response to the order book, which makes the price more likely to "jump" and quickly trigger Get Liquidated or significant profits. This mechanism is almost a laboratory model of behavioral finance: prices are driven by emotions, irrational decisions, and herd behavior lead to exaggerated market reactions.

On OKX, the formulation of strategies is not based on long-term equilibrium assumptions, but rather on the "temporary imbalance of market structure." It encourages, and even tacitly approves, operators to exploit market microstructure (such as slippage, low liquidity, order book orders, etc.) to harvest profits—this is the essence of the "structuralist trading philosophy," which creates volatility by designing structural instability to capture excess returns.

It attracts traders who are skilled in rhythmic combat and dare to take risks – they do not need market stability, what they need is "extreme volatility".

Binance: Efficient Market Hypothesis + Quantitative Finance School

In stark contrast is the financial philosophy represented by Binance: although the market may be irrational in the short term, it will ultimately return to equilibrium in the long term; the mission of mechanism design is to push the market towards stability and rationality.

In the Binance system, the mark price is composed of the median of the spot index, order book price, and transaction price, while the funding rate also takes into account borrowing costs and impact price. This design is essentially constructing a systematic arbitrage equilibrium mechanism, allowing each price deviation to be gradually pulled back through rational arbitrage paths—this aligns perfectly with the belief of the "Efficient Market Hypothesis (EMH)": prices reflect all available information, and excess returns can only come from taking on greater risks or through systematic arbitrage.

The logic of Binance is "market control." They rely on a trading environment that is low in volatility, high in trust, and cost-transparent. This concept extends to the quantitative finance school and system trading theory: using mathematical models to navigate the market, hedging risks with combination strategies, and seeking probabilistic advantages in certainty.

It is not about fighting with knives in volatility, but about using arbitrage formulas to gradually bring the market into your logic.

OKX is human-oriented, believing that the market is irrational, and "emotion, volatility, and manipulation" are the eternal protagonists; Binance is structure-oriented, believing that the market can be modeled, anticipated, and managed, with volatility being a deviation rather than a destiny. This is not only a confrontation between two product logics but also an eternal debate between behavioral finance and quantitative finance, chaotic markets and rational markets.

written at the end

Behind this seemingly cold algorithmic contest, what is actually reflected are two fundamental understandings of the fiction of the "market": it is regarded as a battlefield full of human nature, allowing emotions, desires and games to run wild; Or is it seen as an order that can be tamed by reason, models, and institutions?

OKX and Binance are like two philosophers, interpreting Heraclitus's "universal change" and Plato's "rational order" respectively. One fights in chaos, the other in the framework. The trader is immersed not only in betting on the price, but also in choosing the system. Perhaps, the real trading is not only the understanding of algorithms, but also the insight and control of the tension between human nature and order.

The market never sleeps, and the philosophy of the market never stops.

May you and I always maintain a sense of awe towards the market.

Reference materials and inspiration source @ownejin12