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Liquidity

What is liquidity?

Liquidity describes funds provided to the LMSR market maker algorithm. It is used to enable trades without sufficient opposing bets. Available liquidity corresponds to market depth and increased liquidity will lead to trades having less of an effect on market prices.

How much will I earn as a liquidity provider?

You will earn your share of collected market fees, equal to your contributed share to the market's liquidity.

Your profit will depend on:

  • Your share of total liquidity
  • The market's liquidity fee
  • The trading volume of the market

Will I get the funds I invested in liquidity back?

The value of the liquidity will decrease the more decided the market becomes and increase the more undecided it becomes. As a market approaches informational saturation your funds might all get used up and you won't get anything back.

Last update: 2022-09-11