Protocol liquidity and settlement queue
How does the pool grow?
The House LP starts at zero, without seed capital from the protocol operator. It does not accept direct LP deposits. Realized trading losses add liquidity; settled trading profits reduce it.
The protocol does not hedge LP exposure on another venue. A run of profitable positions can reduce the pool's balance.
Cash and book LP
The protocol tracks two different measures:
| Measure | What it controls |
|---|---|
| Available cash | How much profit can be settled immediately |
| Book LP | The mint rate and whether USDT overflow is distributable to stakers |
Book LP is an accounting balance:
book LP = cumulative losses − payouts made − overflow distributed
It can be negative. LP funds, user balances and margin are accounted for in the trading contract; there is no separate LP vault.
What if liquidity cannot cover my profit?
The contract returns your margin and settles as much profit as available liquidity allows. The unpaid portion becomes a claim in a first-in, first-out settlement queue.
New trading losses replenish settlement liquidity. The keeper calls harvest to settle claims in order. Claims from newly profitable positions cannot skip ahead of existing claims.
Can I trade with queued profit?
Yes. Queued profit cannot be withdrawn while unpaid, but it can be used as margin for a new trade.
| New trade outcome | What happens to the claim used as margin? |
|---|---|
| Win | The margin and new profit return together to the back of the queue. |
| Loss | The lost portion of the claim is canceled and can mint TACO. |
| Liquidation | The entire claim used for the position is canceled. |
What happens above $5 million?
The portion of book LP above $5 million is distributed hourly to TACO stakers in USDT. This is called LP overflow.
Before this threshold, staking distributions come from the stakers' half of collected protocol fees. Once overflow applies, net LP growth above the threshold is also allocated to stakers under the protocol's distribution rules; the platform takes no share of overflow.