Earn (LPs)
Each market has one pool. The pool is the writer on every trade in that market: it sells Up and Down, collects the premium and spread, and pays winners from collateral it locked when it sold. LPs own the pool through shares.
How the pool earns and loses
| Flow | Effect |
|---|---|
| A trader buys | Premium in. W per unit moves from free to committed. |
| A trader sells back | Bid paid out. Collateral released. |
| A band settles | The pool's legs pay out like anyone's. Committed collateral returns to free, less what winners receive. |
| A round closes | All the pool's legs are claimed. Committed resets to 0. |
The pool earns when premium plus spread exceeds what it pays winners. It loses when the price lands where traders were positioned.
Example: one round
Pool: 10,000 USDG, 10,000 shares, NAV 1.000.
| Trade | Premium in | Locked |
|---|---|---|
10 traders buy Up on a band with W 600, 0.1 each, at 119.39 | 119.40 | 600 |
6 traders buy Down on the band below, W 600, 0.1 each, at 300.00 | 180.00 | 360 |
Settlement lands inside the Up band, 150 above its strike: Up pays 150 × 1.0 = 150. The Down band below closes above its cap, so Down pays 0.
| USDG | |
|---|---|
| Premium collected | 299.40 |
| Paid to winners | 150.00 |
| Pool result | +149.40 |
| Free USDG after close | 10,149.40 |
| NAV per share | 1.0149 |
Had the price closed above the Up band's cap, Up would have paid 600 and the pool would be down 300.60.
Shares
| Deposit | deposit(amount, navQuote, sig) mints amount ÷ navPerShare shares |
| Redeem | redeem(shares, navQuote, sig) pays shares × navPerShare, up to free USDG |
| NAV | Signed by the pool's pricer (EIP-712 CashNav). Between rounds, NAV = free USDG ÷ shares. |
| Shares | Recorded in the pool, not a transferable token |
Committed collateral can't be redeemed until its round settles. At most 80% of the pool can be committed at once, so at least 20% of pool value stays free.
To provide liquidity to a pool, contact us on X: @splitmarkets.
Risks
| Risk | What it means |
|---|---|
| Short options | One fast move can cost more than many quiet rounds of premium |
| Directional flow | If most traders take one side, the pool holds the other to expiry |
| Gap | A move through several bands pays several widths at once. The most a band can cost is its W per unit sold. |
| Utilization | When committed is at the cap, the pool stops selling and redemptions wait for the round to close |
No liquidation: the pool can only lose collateral it already holds.