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Liquidity Provisioning

Liquidity is the backbone of every prediction market. On Panana, anyone can become a liquidity provider (LP) and earn rewards for enabling active markets.

How It Works​

In the early stages, Panana and selected partners will provide most of the initial liquidity. However, users are encouraged to participate and earn a share of the trading fees by contributing liquidity to open markets.

Markets on Panana require a minimum liquidity threshold before they can go live. This threshold ensures healthy trading conditions and is set on the protocol level, but can be increased by the market creator if needed.

There are two ways a market reaches the threshold:

  • The market creator provides the entire required liquidity.
  • Multiple users contribute until the threshold is reached.

Why Provide Liquidity?​

When users provide liquidity, they:

  • Earn LP tokens that represent their share in the market’s liquidity pool
  • Gain exposure to the most likely outcome if outcome odds are unbalanced
  • Earn trading fees proportional to:
    • Their stake in the pool
    • The time they’ve been providing liquidity
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If a market has $5,000 in liquidity, and you provided $2,500 (50%), and the market generates $3,000 in trading fees after your deposit — you’d earn $1,500 in LP fee revenue when you withdraw in addition to the intrinsic value of your LP shares.

Only trades made after a user provides liquidity count toward their fee share.

A minimum LP fee is enforced at the protocol level, but market creators can raise this fee during market creation to incentivize LPs.

Synthetic Liquidity (Admin Only)​

Panana supports synthetic liquidity for advanced capital efficiency. Unlike real liquidity, no funds are transferred upfront into the market vault when synthetic liquidity is used.

  • The market operates normally, backed by real user trades
  • When the market resolves, the synthetic liquidity must be re-collateralized to ensure full payouts
  • This is done by selling LPS tokens, and the synthetic LP must transfer the missing assets into the vault
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Only protocol admins can provide synthetic liquidity
This prevents abuse (e.g., markets being left undercollateralized and users not being paid).