Glossary

Base L2

Base is an Ethereum Layer 2 network built by Coinbase. It processes transactions off Ethereum's main chain for lower fees and faster confirmations, while inheriting Ethereum's security through periodic settlement to L1. MarkIt is deployed on Base to make small positions practical — gas fees are typically less than 0.01 USDC per transaction.

Binary Market

A market with exactly two possible outcomes: YES or NO. One side resolves to 1.00 USDC per token, the other to 0. MarkIt exclusively supports binary markets — each market poses a question with a definitive yes-or-no answer (e.g., "Will the Rockets beat the Hornets?").

CloseOnly

The final phase of active trading before a market closes. During the CloseOnly window (typically the last hour before close), only positions that reduce the current skew are accepted. This prevents last-minute manipulation where a large one-sided position could distort the market right before it locks.

Implied Probability

The probability of an outcome as reflected by its token price. A YES token priced at 0.65 USDC implies the market collectively estimates a 65% chance that YES is the correct outcome. Implied probability is derived from the price because a rational participant would only pay 0.65 for a token that pays 1.00 if they believed the probability of payout exceeded 65%.

Float

Undeployed USDC held in the LpVault. Float is available to fund new markets or fulfill queued withdrawal requests. As markets resolve and the vault collects capital, float increases.

FIFO Withdrawal Queue

The mechanism by which vault LPs withdraw their capital. Withdrawal requests are processed in order (first in, first out) as float becomes available. This ensures fair ordering without requiring all markets to resolve before any LP can withdraw.

Liquidity Provider (LP)

A participant who deposits USDC to underwrite trading. LPs can deposit into the LpVault (recommended — capital is diversified across markets automatically) or directly into individual market pools. LPs earn fees from trading activity but do not take directional positions on outcomes themselves. LP returns depend on trading volume and market balance, not on which outcome wins.

LpVault

The aggregated liquidity pool for MarkIt. LPs deposit USDC into the vault and receive shares priced at NAV (net asset value). The vault deploys capital into markets in batches, collects returns after resolution, and processes withdrawals through a FIFO queue. The vault owns the MarketFactory and is the primary entry point for LPs.

NO Token

An ERC-20 token representing a position that the market's question will resolve as NO. If the NO outcome wins, each NO token is redeemable for 1.00 USDC. If YES wins, NO tokens are worth 0. Each market has its own unique NO token contract.

Outcome

The final result of a market — either YES or NO. The outcome is determined by the market operator after the real-world event occurs (e.g., the final score of an NBA game) and recorded on-chain via the resolve() function. Once set, the outcome is permanent and cannot be changed.

Pool Size

The total USDC held by a market's MarketEngine contract. This includes LP deposits, USDC spent by traders on positions, and accumulated fees. Pool size determines how much position-taking the market can support and affects price sensitivity — larger pools absorb large positions with less price impact.

Resolution

The process by which a market's outcome is determined and recorded on-chain. The market operator calls resolve() with the winning outcome (YES or NO), permanently setting which tokens are redeemable for 1.00 USDC. Resolution transitions the market from active trading to the payout phase.

Skew

The imbalance between YES and NO positions in a market. If 10,000 USDC of positions are on YES and 5,000 USDC on NO, the market is skewed toward YES. Higher skew means: the crowded side is more expensive, the contrarian side is cheaper, and fees are higher on the crowded side. The protocol uses a dynamic skew cap to prevent extreme imbalance.

Solvency Invariant

The core safety guarantee of MarkIt: the contract always holds at least enough USDC to pay every winner in full. Formally: USDC balance ≥ max(YES liability, NO liability). This is checked after every state-changing transaction, and any operation that would violate it is rejected. The invariant uses the actual on-chain USDC balance, not internal accounting.

Spread

The difference between the combined cost of buying both YES and NO tokens and the 1.00 USDC payout. If YES costs 0.57 and NO costs 0.44, the spread is 0.01 (since 0.57 + 0.44 = 1.01). The spread represents the fee captured by LPs and varies based on the dynamic fee parameters and current market skew.

USDC

USD Coin — a stablecoin pegged to the US dollar, issued by Circle. Each USDC is backed by US dollar reserves and redeemable 1:1. MarkIt uses USDC as its sole settlement currency. USDC has 6 decimal places on-chain (1 USDC = 1,000,000 units).

Utilization

The ratio of total open interest to pool size, measuring how much of the LP pool is actively backing positions. A 50% utilization rate means half the pool is backing open positions. Higher utilization means more fee revenue per USDC deposited, making the pool more capital-efficient for LPs.

YES Token

An ERC-20 token representing a position that the market's question will resolve as YES. If the YES outcome wins, each YES token is redeemable for 1.00 USDC. If NO wins, YES tokens are worth 0. Each market has its own unique YES token contract.