Liquidity and markets
Liquidity pools
Each market has one USDC pool that takes the other side of every trade. Anyone can add to it.
What the pool does
The pool is the counterparty. When a trader goes long, the pool is short by the same amount, and the reverse. Trader losses flow into the pool and trader profits are paid out of it. Pools are per market and never shared.
What liquidity providers earn
| Source | Detail |
|---|---|
| Trading fees | 30% of every trading fee in the market stays in the pool. |
| Spread | Every fill happens at the mark plus or minus the spread, in the pool's favour. |
| Funding | The crowded side pays funding, mostly to the pool that carries the imbalance. |
| Trader losses | Net trader losses accrue to the pool. Net trader profits are a cost to it. |
Deposit and redeem
- Deposit USDC into Neap, then add it to a market on Pools. You receive pool shares.
- Shares are priced at the pool's net asset value. Deposits use the upper estimate and redemptions the lower one, so nobody can dilute existing providers by timing a price update.
- Redeem shares for USDC at any time the pool has room. A redemption fails if it would leave the pool unable to back open positions.
Risks for liquidity providers
- You are the counterparty. If traders in a market win overall, the pool loses.
- A one-sided market leaves the pool with directional exposure. Spread, funding and open-interest caps reduce this; they do not remove it.
- A new long-tail market can have a thin or manipulated price source. Check the source pool's depth before you fund it.
- When utilisation is high, redemptions wait until positions close.