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What LPs do

Liquidity providers supply capital that makes markets usable. In return, they may earn fees, but they also absorb market risk. TACO has different LP models for event and price markets. Do not assume the same risk or withdrawal behavior applies to both.

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Event liquidity

Event LPs provide capital to a specific market tranche. Each tranche has its own fee rate and risk depth. Shallow tranches may stop supporting one side earlier, while deeper tranches continue supporting more extreme states.

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Price liquidity

Price LPs add collateral to a shared pool. Their pool shares track a claim on pool collateral, and fee-sharing rights can be handled by a separate non-transferable LP token when enabled.

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Fees are not guaranteed profit

LP fees compensate for taking risk. They do not guarantee positive returns. Market moves, trader wins, liquidation outcomes, oracle changes, and withdrawals can all affect LP value.

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Before adding liquidity

Check:
  • market type
  • collateral token
  • lock or exit rules
  • fee reward path
  • market status
  • current exposure and liquidity depth