AMM Liquidity for New Markets

bitCaster is built around a central limit order book (CLOB): traders and market makers place real bids and asks, and matching happens against that book. That is the long-term shape we want, because active human market makers can compete on spread, size, and judgement.

New markets have a cold-start problem. If the book is empty, early traders have no counterparty; if there are no traders, human market makers have little reason to watch the market yet. To bridge that gap, a market creator can fund an automated market maker (AMM) after creating the market. Registration itself is ordinary Open registration. It contains no opening probability or funding payment and does not set a public price.

What the AMM Does

The AMM uses non-refundable post-creation funding to post bid and ask orders on the CLOB. It is not a separate pool that replaces the order book. It is a bot that provides liquidity so early users can trade and discover a price.

For creators, this matters because it makes a newly-created market more ready for early trading. A funded market is more likely to receive early trading interest than a completely empty book. The tradeoff is that the funding is risk capital: it can be spent paying informed traders, and it is not a withdrawable balance or LP share. The funding depositor receives no probability-bearing position or special payout.

AMM liquidity is meant to bootstrap trading, not dominate the market forever. In a healthy mature market, human and professional market makers should gradually replace the initial AMM quotes with tighter, more informed liquidity.

Why LMSR

bitCaster currently uses an LMSR (Logarithmic Market Scoring Rule) AMM strategy. We chose LMSR for v1 because it gives a clear budget-based loss bound, works well for prediction-market probabilities, and can be sampled into ordinary CLOB limit orders.

The first accepted payment starts the bot from a uniform neutral activation state. That payment controls the initial capacity and the capital at risk. Later funding can increase the liquidity parameter b after pending bot trades finish. The bot keeps its trade-derived position q unchanged. This change can move its bid and ask quotes. It does not change the latest confirmed trade price. More funding can support deeper quotes.

LMSR is not intended to be the only possible AMM forever. bitCaster may add other market-making strategies later, especially if they serve different market types, creator preferences, or professional liquidity workflows better.

Funding Choices

After creating a market, the creator can skip funding or enter an amount in sats. Any user can make later funding payments from the market detail LIQUIDITY tab. The bot posts no quotes until an accepted payment activates it. Funding is non-refundable. Review the amount and any fee before confirming.

The opening bid/ask spread target is two percentage points when liquidity permits it. For example, a binary market can start with a 49% bid and 51% ask. Whole-share sizes, fees, or limited funding can require a wider spread. More funding can support deeper quotes, but it does not guarantee a specific spread or trade size. Enter a quantity in the trade form to check whether the current orders can fill it within your price limit. The form explains a refusal. The preview does not reserve liquidity. Your wallet balance and fees also limit the trade.

Funded markets are displayed in sats. Internally and on public *Subunits wire fields, collateral is accounted in msat. The explicit base-asset and collateral-unit fields remain part of the protocol, but the current product admits only sat and msat, respectively.

The funding deposit is committed to market-making for that market. It does not create a depositor withdrawal claim, residual claim, probability-bearing position, or profit-share claim. Market cards and detail pages display confirmed bot funding after receive fees as Total funding. New confirmed payments increase this total. Trades do not reduce it. Total funding is not live order-book liquidity or remaining bot inventory.

Funding does not establish a public market price. The latest confirmed trade is the public price authority. Before the first confirmed trade, the market has no price and clients show No trades yet or an em dash. A bid/ask midpoint is a separately labeled reference for the current two-sided book. It is not a confirmed trade price or a guaranteed execution price. An empty or one-sided book has no displayed midpoint.

For the human and professional market-maker trading model, see Trading Model & Human Market Makers.