Market maker math
Markets are priced by an LMSR automated market maker seeded by the asker's subsidy. This page covers how the subsidy sets depth, what the maker's maximum loss is, and the one rounding rule that outranks all others.
Why LMSR
A Logarithmic Market Scoring Rule maker always quotes a two-sided price, even at zero volume, and never runs out of one side. That makes it the right bootstrap maker for a micro market that has to be tradable the instant it is created, no liquidity to attract first.
Subsidy sets depth
The subsidy fixes the LMSR liquidity parameter b: b = subsidy ÷ ln 2. A larger subsidy means a deeper market, trades move the price less, and a larger bounded loss the creator is underwriting. Depth is set at creation and is fixed for the life of the market; it does not grow with volume.
Bounded maker loss
The most the maker can lose is exactly the subsidy, b · ln 2. That is the whole point of seeding with a subsidy: the creator's downside is known and capped up front, and in exchange the market is liquid from the first trade. Traders' profits come out of that bounded pool.
Rounding favours the pool
One rule outranks all the others: every rounding decision in the maker favours the pool. Cost charged to a buyer rounds up; proceeds paid to a seller round down. Any path where rounding favoured the trader would be loopable, so it is treated as a critical bug and there is a dedicated invariant test guarding it.