House risk
Being the house means your USDG takes the other side of every bet. This page says plainly how the house earns and how it loses.
How a deposit works
- You deposit USDG and receive a share of the house pool, recorded as a ledger position. No token is minted.
- The pool provides liquidity to every open market through pm-AMM. One market can take at most 10% of the house, and after funding a market at least 20% of the house stays free.
- The house has two honest values: the worst case (every open market resolves against the house) and the best case. Deposits are priced at the best case and withdrawals at the worst case, so nobody buys in cheap ahead of a known result or leaves with more than the house can lose.
- You withdraw pro rata from the house's free capital. Withdrawals can never be paused. A withdrawal larger than the free capital is refused; it goes through once markets settle or release reserves.
Where the house earns
Every bet and every sale pays a fee to the house. The fee is 2% today. The owner can set it between 0.5% and 5% for new markets; each market keeps the fee it opened with. A bettor with no edge wins about as often as the price says, so on average the fee is what the house makes from that bettor.
Where the house loses
Some bettors know more than the price: they react to a stock move before the pool does. Each time they trade, the pool sells them shares slightly too cheap. In the pm-AMM paper's model, with liquidity shrinking on the dynamic schedule, this loss runs at a steady expected rate for the whole life of a market:
expected loss per unit time = V_0 / (2 * T)
V_0 is the house money in the market at the open and T the market's life. Over the full life that adds up to half of V_0.
A worked example, before fees:
| Item | Value |
|---|---|
| House money in one market | 10,000 USDG |
| Market life | 5 days (120 hours) |
| Expected loss rate | 41.67 USDG per hour |
| Expected loss by the bell | 5,000 USDG |
| Handed back to the house as liquidity shrinks | 5,000 USDG |
So fees in that market must bring in more than 41.67 USDG an hour, on average, for the house to come out ahead. Fewer, larger, better-informed bettors make it harder; many small bettors with no edge make it easier.
What can go wrong
- Fees set too low. The loss is uniform, not zero. If fees do not cover it, the house loses money in expectation.
- A model mismatch. The steady rate is proven in the paper's Gaussian model. Real stocks gap on news and earnings, and those gaps can cost the house more than the model says.
- A wrong feed print. Markets settle on the Chainlink feed. A wrong print settles a market wrongly.
- Quiet feeds. Over weekends and holidays a feed can sit still, and markets wait for the next print.
- Bugs. The contracts are tested against a high-precision reference, but they are not audited yet.
Fee burn
The engine can send a share of every fee, at most half, to a separate burner contract that can only buy the project's token on its Uniswap v3 pool and send it to the dead address. It is off: nothing reaches the burner until the operator names a token at launch, and the house meter shows "off" until then.
The meter
The landing page and the app show the house meter: house pool, fees earned, expected loss, and fees minus loss. Every line is read from the chain, so anyone can see whether fees are keeping ahead of the loss.