> For the complete documentation index, see [llms.txt](https://docs.miragefi.org/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.miragefi.org/protocol/liquidity-provision.md).

# Liquidity provision

How LPs fund the vaults, what they earn from them, and precisely which risks they take on.

LPs fund the anchor vaults and collect the spread on each fill a vault makes. The design aims for an LP's return to come from a genuine service, immediacy in a market that has an external reference price, and not from acting as the unpaid counterparty to arbitrage.

## Depositing

Deposits are made per market and are open to anyone holding an `LP` attestation. A deposit may consist of USDG, the market's Stock Token, or both; it is valued at the guarded oracle mid and mints shares at the current value per share. There are no deposit fees and no lockups.

Shares use ERC-4626-style accounting. Value per share is `(usdgBalance + tokenBalance × mid) / totalShares`, and it rises as spread revenue accrues. Shares can be transferred only between attested LPs.

## Withdrawing

A withdrawal burns shares in exchange for a **pro-rata, in-kind** slice of the vault's current inventory: an LP with 1% of the shares receives 1% of the vault's USDG and 1% of its tokens. In-kind withdrawal is a deliberate property, and it has three consequences:

* An exit never forces the vault to trade, so exits cannot move the market and cannot be sandwiched.
* Withdrawals function in every vault state, `HALTED` and `RETIRED` included. No pause, halt or parameter is able to trap LP funds.
* The mix an LP receives mirrors the vault's current skew. An LP who wants only USDG swaps the token leg as any trader would.

## What LPs earn

On every fill, the vault's realised spread less the protocol's 10% [fee share](/protocol/fees.md) accrues continuously into value per share. There are no emissions and no points; the yield is the market's real cost of immediacy. Realised spread revenue for each market is published live on the [trade explorer](/using-miragefi/trade-explorer.md), so an LP can underwrite a vault on its record instead of a projection.

## What LPs risk

Set out plainly, since an LP who has not priced these should not deposit:

| Risk           | Nature                                                                                                                     | Mitigation                                                                                                               |
| -------------- | -------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ |
| Price exposure | The vault holds the Stock Token, so its value tracks the stock. By design, LPs are long the asset roughly half of the time | Per-market isolation; the LP decides which assets to hold                                                                |
| Gap risk       | Fills made overnight and at weekends happen at prices that can gap when the market opens                                   | The closed-regime multipliers and clip reductions exist specifically to charge for this                                  |
| Oracle risk    | A wrong mid produces wrong quotes                                                                                          | The guard stack described in [Oracles and market sessions](/risk/oracles.md); the band limits the damage on any one fill |
| Issuer risk    | Stock Tokens are debt claims on the issuer                                                                                 | See [Issuer risk](/risk/issuer.md); it is disclosed, not diversified away                                                |
| Adverse flow   | Persistent one-way flow leaves the vault sitting at its band edge                                                          | The vault turns one-sided instead of absorbing unbounded inventory                                                       |

What LPs do **not** carry: leverage, liquidation risk, losses socialised from other markets, or exposure to assets they did not select. Every vault is an island.

## Guarded launch

Throughout the guarded phase, per-market TVL caps together with the daily volume caps limit total exposure while parameters are tuned against realised data. The caps are raised through the timelock as the [execution quality](/transparency/execution-quality.md) record builds up, following the schedule in the [Roadmap](/roadmap/phases.md).


---

# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.

## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter:

```
GET https://docs.miragefi.org/protocol/liquidity-provision.md?ask=<question>&goal=<endgoal>
```

`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal.

The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.