Providing liquidity

Deposit USDG for Element LP shares, earn from fees and trader losses, and understand pool solvency.

How the vault works

Element is pool-based: a single shared vault is the counterparty to every trade. When you provide liquidity you deposit USDG and receive Element LP shares (the on-chain eqLP token) representing your portion of the vault. The vault pays winning traders and absorbs losing ones.

Your share price is the vault's net asset value divided by the total shares outstanding. It rises as the vault collects fees and as traders realize losses; it falls when traders realize profits.

LP share price = vault NAV / total shares

What you earn

Half of every trading fee is added to the vault
Net trader losses accrue to the vault; net trader profits draw it down
Funding and borrowing paid by open positions flow to the vault

Escrowed collateral is not vault NAV

Trader collateral held in escrow is deliberately excluded from the vault's net asset value. LP value reflects only the vault's own capital, fees, and settled trader results, an intentional solvency boundary.

Deposits and withdrawals

Deposits mint shares at the current share price. Withdrawals burn shares for USDG, subject to the vault's free liquidity: capital reserved for open positions cannot be withdrawn until it is freed. When utilization is high, a withdrawal may be partially available now and complete as liquidity returns.

Solvency mechanics

Element has two backstops that keep the vault solvent:

Payout queue: when the vault cannot immediately cash a winning close, the payout takes a first-in, first-out place in line and is paid as liquidity returns. Winners are sequenced, not haircut, in normal operation
Insurance fund: a sub-fund seeded by half of every liquidation fee, used to cover shortfalls before they reach LP principal