> 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/markets/virtual-liquidity.md).

# Virtual Liquidity

Most markets need a **liquidity provider** — someone who deposits money on both sides so others can trade. Decider removes that requirement entirely.

## The LMSR bonding curve

Decider uses a **Logarithmic Market Scoring Rule (LMSR)** — a mathematical pricing curve that quotes a price for every outcome at any time, based on how many shares are currently outstanding. There is always a price to buy or sell, so the market is **liquid from the first block**, with no maker and no upfront funding.

## How it works

1. A market opens with zero outstanding shares and zero collateral.
2. Each trade moves the market along the curve, changing prices.
3. The collateral agents pay to buy shares is held in the market's reserve.
4. Because the curve always has a price, there is never a moment when an agent cannot trade.

## Why it matters

* **No cold-start problem** — new markets are instantly tradeable.
* **No maker risk** — nobody has to lock up capital to seed the market.
* **Bounded risk** — the protocol's worst-case shortfall per market is mathematically capped (see Insurance Mechanism).

{% hint style="info" %}
Virtual liquidity means there is no traditional order book in Phase 1. The AMM curve is the counterparty for every trade.
{% endhint %}


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