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Vault Overview

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The Modular Vault

The Lemon Markets liquidity architecture is a multi-layered system designed to maximize capital efficiency while protecting participants.

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Tiered Backstops

To ensure solvency, the protocol utilizes a hierarchical payout waterfall:
  1. Market Liquidity: Localized margin and liquidity within a specific market instance.
  2. Buffer Pool: A protocol-owned reserve that acts as the primary backstop for winning trades.
  3. Insurance Pool: A provider-funded backstop where LPs supply capital to act as the counterparty of last resort.

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Why provide liquidity?

Liquidity Providers (LPs) in the Insurance Pool earn yield from:
  • Protocol Fees: A portion of Opening, Closing, and Duration fees.
  • Trading Surpluses: LPs benefit from trader losses that exceed the Buffer Pool’s capacity to absorb.
  • Liquidation Surpluses: A percentage of liquidated margin is recycled into the Insurance Pool.

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The lmUSD Token

When you deposit USDC, you receive lmUSD (Lemon USD) tokens in return.
PropertyValue
Token NameLemon USD
SymbollmUSD
Contract0x33d48643d4DEf2776f31cdeED7801Dd3d84BbD9c
The value of lmUSD increases over time as the vault accrues fees and trading profits. When you withdraw, you redeem lmUSD for USDC at the current share price.
Risk Warning: If traders sustain consistent profits over a long period, the value of the LP token (lmUSD) could decrease. This is known as “Counterparty Risk”.