Hook Market Maker
Choose Hook Market Maker, or HMM, when you want part of a pool's fee income to fund a continuing inventory strategy while keeping the trading-fee rate fixed.
The strategy uses quote-asset fees for bids below price. Tokens acquired by those bids are offered for resale above their acquisition cost, with a premium that can decline over time. Launch-token fees also fund the strategy's sell-side inventory. It manages separate positions funded by fees, never the permanently locked launch liquidity.
How it works
- Each swap funds the strategy. After the protocol treasury share, the configured strategy share is reserved in whichever pool token the fee was earned. Both token balances are eligible; Quote only collection naturally earns only quote fees.
- Quote funds place a bid below price. A bid is a liquidity band that buys launch tokens as price moves down through it. Available funds, the bid ceiling and the oracle reference constrain placement.
- Acquired tokens become resale inventory. The strategy records what it actually spent. New resale offers start no lower than acquisition cost plus the configured premium, and must also be above live price and within the reference guard. Tokens received as fees have no invented purchase cost.
- The resale premium can decay. The app starts with a 5% premium and 72-hour decay toward the cost-based minimum. Decay lowers the minimum for later placements or refreshes, not the price of a live offer every second. Actual offers may remain higher because of price, reference and placement rules.
- Fills recycle funds. Maintenance harvests qualifying fills, returns sale proceeds to quote funds, and places or refreshes eligible bands. It runs through swap activity and can also be triggered separately. Below-threshold amounts or inventory without an eligible range wait for a later pass.
These are liquidity ranges, not guaranteed limit-order fills. The illustration is not to scale, and a bid or resale offer need not always be present.
Settings in the app
| Creator choice | Options and starting value |
|---|---|
| Trading fee | Standard tiers: 0.01%, 0.05%, 0.3%, 1%, 2%, 5% or 10%. Starts at 1%. The hook charges it; the ordinary LP fee is zero. |
| Fee collection | Quote only or Both tokens. The standard launch starts with Quote only. Both tokens charges the input asset of each swap. |
| Liquidity strategy share | 25%, 50% or 100% of post-treasury hook fees. Starts at 50%. |
The app also supplies these strategy settings. They are authored starting values, not additional launch-form controls:
| Strategy setting | App starting value |
|---|---|
| Minimum quote deployment | Quote units worth $1 at the launch's configured quote/USD rate. |
| Quote harvest threshold | Quote units worth $1 at that same rate. Token harvesting has its own budget-based threshold. |
| Maximum bid principal | Quote units worth $100 at that rate for a new or refreshed bid. This is not a lifetime spending cap. |
| Bid and ask widths | Approximately 3% of price each, rounded to the pool's price grid. |
| Reference deviation | 0. New bids cannot extend above the rounded oracle reference; new asks cannot start below it. Cost and live-price rules can constrain asks further. |
| Resale premium and decay | 5%, decaying toward the cost-based minimum over 72 hours. |
The dollar amounts are converted to fixed quote-token quantities when the launch is prepared. They are not continuously repriced dollar limits. The oracle reference is the pool's own truncated record, not an independent market valuation.
Who pays and where fees go
The trader pays the fixed hook fee. About 20.833% of that fee is reserved for the protocol treasury under the current terms. The strategy share is then reserved on each swap, in both fee assets after that treasury share, not only when someone collects fees. The remainder follows your ordinary owner, rewards and burn allocation, including any collection bounty. There is no hook-author royalty.
For example, of 100 units left after treasury in one fee asset, a 50% share reserves 50 for HMM and leaves 50 for the launch's normal allocation. At 100%, all 100 fund HMM instead. This does not mean the trader pays a second 50% charge. Strategy income is not also available for ordinary rewards or owner payouts.
Swap-triggered maintenance adds execution work that the swap's caller pays for in gas. A separate maintenance caller pays for that transaction. Actual fills and available funds determine how much can be placed; fee income does not promise an immediately active bid.
See fees from trade to income for distribution and integer rounding after the strategy reservation.
What the fee owner can change after launch
The current fee owner can change the strategy share anywhere from 0% to 100%, change all strategy settings within contract bounds, and pause new placements. The share change applies to future fee reservations, not fees already reserved. Setting it to zero stops new funding but does not itself unwind existing inventory.
Changing strategy settings or pausing queues a refresh for the next maintenance pass. A pause withdraws the strategy's auxiliary positions during that pass and stops new placements. It does not stop pool trading or fee collection, and it cannot withdraw locked launch liquidity. Lower inventory caps do not force a sale of existing stock. Previously acquired lots retain their recorded cost floors and ages; a new purchase premium applies to newly acquired lots.
These are fee-owner contract controls. Do not assume every control has a matching app form. See the HMM V2 owner-control reference for the read and transaction interfaces.
Limits and risks
HMM is not a price floor, buyback promise or profit guarantee. A bid has limited funds and can be exhausted. Acquired tokens can fall in value or remain unsold. A cost-aware resale minimum governs where the strategy offers inventory; it cannot make the market trade there or guarantee returns after fees and gas.
The oracle can lag or be manipulated, maintenance can be deferred or fail, and thresholds can leave small balances idle. Premium decay does not guarantee a fill after 72 hours. Future fee-owner changes can materially alter funding and placements. Outside LPs are permitted and can withdraw their own liquidity.
HMM does not burn its strategy inventory, lend it out, or rebalance the locked launch positions. A burn allocation on the separate ordinary fee stream is a different choice.
When to choose it
Use fixed-fee HMM if you accept less immediately distributable fee income in exchange for a fee-funded inventory strategy. Choose Abyssal Hook if all available launch income should follow the ordinary allocation without HMM. Choose Dynamic Hook Market Maker if you also want the fee to react to rapid price moves.
These mechanics describe HMM V2, the SDK 0.10.0 launch profiles. Earlier HMM launches keep their original contracts; this does not describe an upgrade of them. For exact configuration and bounds, see the HMM V2 SDK reference, or return to the hook comparison.