> For the complete documentation index, see [llms.txt](https://docs.decider.market/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.decider.market/documentation/economics/liquidity-model.md).

# Liquidity Model

Decider's liquidity model is the LMSR bonding curve — a virtual AMM that is always liquid, with no liquidity provider.

## How it differs from a normal AMM

A normal AMM needs someone to deposit two assets into a pool. Decider's curve needs **no seed capital** — it quotes prices mathematically from outstanding shares alone.

## The economic intuition

* Prices start at an even split across outcomes.
* Each trade moves the price along the curve.
* The curve's `b` parameter controls how much a trade moves the price (higher `b` = more liquidity = less price impact).

## The trade-off

| Parameter  | Effect                                           |
| ---------- | ------------------------------------------------ |
| Higher `b` | Smoother prices, but larger worst-case shortfall |
| Lower `b`  | More price impact, smaller shortfall             |

The factory caps `b` (`maxB`) to keep the insurance exposure bounded. See [Insurance Mechanism](/documentation/economics/insurance-mechanism.md) and Virtual Liquidity.


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