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

# Liquidity provision

What LPs put into the vaults, what comes back out, and exactly which risks sit in between.

Vaults run on LP capital, and the spread on every fill flows back to whoever supplied it. The intention behind the design is that an LP gets paid for something real, namely immediacy in a market with an external reference price, rather than for standing in as the unwilling other side of somebody's arbitrage.

## Depositing

Each market takes deposits separately, and anyone holding an `LP` attestation may make one. USDG, the market's Stock Token, or a mixture of the two all work; whatever arrives is valued at the guarded oracle mid and converted into shares at the prevailing value per share. Nothing is charged on the way in and nothing is locked.

Accounting on the shares follows ERC-4626. Value per share reads `(usdgBalance + tokenBalance × mid) / totalShares` and climbs as spread revenue lands. Transfers of shares are restricted to other attested LPs.

## Withdrawing

Burning shares returns a **proportional, in-kind** cut of whatever the vault currently holds: 1% of the shares brings back 1% of the USDG and 1% of the tokens. Making withdrawal in-kind was deliberate, and three things follow from it:

* Leaving never makes the vault trade, so an exit cannot move the market and cannot be sandwiched.
* Every vault state supports withdrawal, `HALTED` and `RETIRED` included. Nothing (no pause, no halt, no parameter) can hold LP capital in place.
* Whatever skew the vault is carrying shows up in the mix an LP receives. Wanting pure USDG means swapping the token leg like any other trader.

## What LPs earn

Each fill sends the realised spread, less the protocol's 10% [share](/protocol/fees.md), continuously into value per share. Nothing is emitted and nothing is pointed; the yield is simply what the market pays for immediacy. Realised spread revenue per market runs live on the [trade explorer](/using-icaria/trade-explorer.md), so vaults get underwritten against a record instead of a forecast.

## What LPs risk

Written out directly, because anyone who has not priced these in has no business depositing:

| Risk           | Nature                                                                                            | Mitigation                                                                                                 |
| -------------- | ------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- |
| Price exposure | Holding the Stock Token means tracking the stock. Roughly half the time, by design, an LP is long | Markets are isolated; the LP picks which assets to hold                                                    |
| Gap risk       | Overnight and weekend fills happen at prices that may gap by the open                             | Closed-regime multipliers and smaller clips exist precisely to charge for it                               |
| Oracle risk    | A bad mid means bad quotes                                                                        | The guards in [Oracles and market sessions](/risk/oracles.md); the band caps what any single fill can cost |
| Issuer risk    | A Stock Token is a claim on its issuer                                                            | Covered in [Issuer risk](/risk/issuer.md); it is disclosed rather than diversified away                    |
| Adverse flow   | One-way flow that never reverses leaves the vault pinned at its band edge                         | Quoting goes one-sided rather than taking on inventory without limit                                       |

Things LPs are **not** exposed to: leverage, liquidation, losses arriving from another market, or any asset they did not choose. No vault touches another.

## Guarded launch

While the guarded phase runs, per-market TVL caps sit alongside the daily volume caps to bound total exposure while parameters get tuned against real data. Raising them is a timelocked decision taken as the [execution quality](/transparency/execution-quality.md) record accumulates, on the schedule laid out 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.useicaria.xyz/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.