Active LP: direct market liquidity

You give a market depth: you put VIZ into the curve of a specific market so that bets do not move the price too sharply. In return you receive a share of the fees. The key difference from a "market-maker-as-banker" model: on VIZ, direct liquidity is principal-protected — the outcome cannot put you in the red.

The gist in two paragraphs

Your capital (pm_add_liquidity) enters the market's curve and determines how smoothly bets move the price. The deeper the pool, the more comfortable large players are and the larger the volume — and therefore the fees. You earn a percentage of bets (the market fee) plus a share of late-bet penalties (the anti-sniping penalty), which accrue in favor of LPs.

Your principal does not depend on who won. Withdrawal (pm_withdraw_liquidity) is price-neutral: a proportional shrink of the reserves returns your principal without moving the curve (a round trip does not change the price). And at market settlement, settle_liquidity returns each LP's principal unconditionally, plus a bonus (fees, remainders undistributed to winners, the penalty pool). LP = principal-protected + fee income — and the fee income is realized only at settlement.

What happens, step by step

You add liquidity. pm_add_liquidity — VIZ goes into the market's curve and you receive a pool share proportional to your contribution. Your deposit does not shift the price (you add symmetrically). The minimum contribution is pm_min_liquidity (a governed parameter, 100 VIZ by default): the same floor as creating a market, and it applies to topping up an open market as well. The reason is technical — every call creates a SEPARATE liquidity row (contributions are not merged into one position) and settlement walks all of them, so cheap micro-deposits cannot be allowed. If you want to add less, add less often and in larger amounts.

While the market is open. A fee is withheld from bets and distributed to LPs by share. Late bets pay the anti-sniping penalty, which also goes in favor of liquidity. Your income accrues as turnover grows.

You withdraw (optionally). pm_withdraw_liquidity, partially or fully. The withdrawal is price-neutral: you get back your principal (fee income is realized only at settlement — see below), and the curve does not shift. No impermanent loss as in classic AMMs: an in-and-out round trip neither moves the price nor eats your capital.

Settlement. Once the market is resolved, liquidity returns on its own, through per-block settlement. settle_liquidity hands each LP the principal unconditionally plus a bonus. Liquidity is locked from the close of betting until settlement (while payouts are computed), then released.

What an active LP needs to understand

• Principal-protected refers to the outcome, not to everything under the sun. You do not lose principal because of who won the market. Your income is fees and penalties; outcome risk is not shifted onto you.
• You are not the counterparty to leverage. Leverage traders' loans are fronted by the lazy pool (a passive product), not by your direct liquidity. Leverage does not touch your principal. (There is a subtle design nuance about covering leverage overprofit — it is localized to the pool, not to direct LPs.)
• Depth = volume = income. Thin liquidity scares off large bettors; your contribution directly affects market quality and, through volume, your fees.
• The lock during settlement is normal. From the close of betting until payouts are computed, liquidity is locked; that is the settlement procedure, not a loss. Afterwards the principal returns.
• Income is realized at settlement. Earned fees (earned_fee) are finalized when the market resolves; before resolution they are reflected, but they are booked in the return.
• Withdrawing early means principal only. pm_withdraw_liquidity requires the row to be active (status == 0), and the fee counter is only assigned together with status = 3 at settlement — so an early withdrawal cannot observe any commission; you simply get your principal back, price-neutrally. There is no separate "income so far" to collect mid-flight.
• Void markets pay no income. If a market ends void (no contest — the oracle produced no winner, e.g. the source canceled or was 50/50), bets are refunded and LPs get their principal back with zero bonus. LP income comes only from markets that resolve to a winner.

Roles next to yours

• Market creator — provides the initial liquidity (they are a direct LP too) and sets the fee.
• Bettor — pays the fee that makes up your income.
• Passive LP (lazy pool) — a different product: passive capital that fronts leverage; not to be confused with direct market liquidity.

Further reading: "Passive LP (lazy pool)" (how it differs and where the leverage risk sits), "Why a pool, not odds" (how the curve works), "Market creator" (how the fee and depth are set).