Protocol

Liquidity

Liquidity is what makes a Hedge market tradeable and what backs leverage. Providers deposit USDC that seeds a market's reserves at the live odds; that same capital lets traders size positions beyond their own margin.

What liquidity does#

Seeds the market

Funding a market sets its opening prices at real 1X2 odds and gives traders something to buy against from the very first second.

Backs leverage

Free liquidity is what leveraged positions draw on. As it's used, the max leverage on offer steps down; as positions close, it recovers.

How deposits and withdrawals work#

Funding adds to reserves equally. A deposit seeds the market so it stays solvent by construction — the vault always holds enough to cover every winning share.
Reserved vs. idle. When traders take leverage, part of the liquidity is reserved to back those positions. Only idle, unreserved liquidity is free to be withdrawn.
A 10% buffer always stays idle. The reserve buffer keeps a portion of the pool unreserved at all times, so positions can always unwind cleanly.

How your principal is protected#

After a market resolves, providers withdraw their residual — their pro-rata share of whatever remains in the vault. Crucially, that withdrawal is bounded by the solvency invariant:

Winners are always covered first

A liquidity withdrawal can never reduce a market's vault below the USDC owed to winning shares. Providers only ever take out what's left after winners are fully covered — solvency is enforced by the program, not by trust.

Providing liquidity#

In the app, the Liquidity section lets you deposit USDC and see how much of the pool is idle versus reserved. Because withdrawals are limited to unreserved funds, liquidity is most flexible to remove when fewer leveraged positions are open.

Liquidity is the other half of leverage — if you haven't yet, read Leverage to see how the backed side works, and the trustless contract for the solvency invariant in detail.