Risks & Returns

Daily trading volume: $500,000
Fee rate: 0.3%-1% (avg ~0.5%)
Daily fees: ~$2,500
LP share of fees: ~$1,000

On a $100,000 Vault position, that's 1%/day
(Hypothetical. Actual volume varies.)

Trader sees: $96K-$97K at 25% probability
Trader buys $500 worth of shares
Price moves from 25% → 28% during execution

Average cost per share: higher than 25%
That difference = the spread = LP's edge

Market pool: $15,000
Winners claim: $8,000
Remaining: $7,000 → Returns to Vault

If the Vault deployed $10,000, it lost $3,000 on this market.
But across many markets, winners and losers balance out.

Everyone bets on $96K-$97K
BTC lands at $96,500
Many winners, many payouts

Pool can't cover it all from trader bets alone
Vault-deployed capital covers the rest.
LP loss on this market.

Max LP loss = α × ln(bucketCount)

Typical values:
- α = 3,333 USDC, 16 buckets → Max loss ≈ $9,240
- α = 1,000 USDC, 8 buckets  → Max loss ≈ $2,079

This is known BEFORE the market starts.

Market opens: α = 3,333
Required reserves: $9,240

Market matures: α = 1,000
Required reserves: $2,772

Surplus released: $6,468
Vault harvests this. LPs get capital back early.

poolBalance ≥ maxLiability + 2 × α × ln(N)

Translation: The market always has enough to pay winners.
If a trade would violate this, it reverts. No exceptions.

Vault total: $100,000
Deployed: $80,000 (across markets)
Liquid buffer: $20,000

This covers:
- Withdrawal queue processing
- Emergency scenarios
- New market seeding

Vault total: $100,000
Max per market: $20,000

Even if a market goes maximally wrong,
the Vault loses at most ~$9K, not $100K.