> ## Documentation Index
> Fetch the complete documentation index at: https://pnpprotocol.mintlify.site/llms.txt
> Use this file to discover all available pages before exploring further.

# For Market Creators

> How to create a PAMM prediction market, what creators earn, risk profile, and why PAMM is the best bootstrappable liquidity model for spinning up markets fast.

# For Market Creators

As a PAMM market creator, you are **the house**. Your capital deposit becomes the market's liquidity backbone. You don't receive tokens — your collateral IS the pool. This page covers everything a creator needs to know.

## Creating a Market

To create a PAMM market, you call `createPredictionMarket` on the PNPFactory contract with:

| Parameter | Description |
| - | - |
| `initialLiquidity` | Collateral amount to deposit (e.g. 10,000 USDC) |
| `collateralToken` | The ERC-20 token used for trading (e.g. USDC, WETH) |
| `question` | The prediction question |
| `endTime` | Unix timestamp when the market closes |

**What happens:**

1. Your collateral is transferred to the PNPFactory contract
2. The reserve `R` is set to your deposit amount
3. **You receive zero tokens** — your capital becomes the virtual liquidity depth
4. The market is immediately tradeable at 50/50

```
Creator deposits 10,000 USDC
→ R = 10,000
→ V_YES = 10,000,  V_NO = 10,000
→ price_YES = 50%,  price_NO = 50%
→ Market is LIVE
```

That's it. One transaction, instant market.

## Why You Get Zero Tokens

If you received tokens at creation, those tokens would count in `S_YES` or `S_NO`, destroying the virtual liquidity:

```
If creator got 10,000 YES tokens:
  R = 10,000
  S_YES = 10,000
  V_YES = R - S_YES = 0  ← Pool is dead. No liquidity.
```

Your capital must be fully absorbed into the virtual pool. It IS the pool. Your 10,000 USDC makes `V_YES = V_NO = 10,000` possible.

## How You Make Money

Creators earn through three channels:

### 1. Take Fees (Compound in Reserve)

Every trade has a 1% **take fee** that stays inside the reserve. This grows `R` over time without minting additional tokens. Since your economic exposure is tied to what remains in `R` after settlement, every trade makes the reserve slightly deeper — benefiting you.

After 100 trades averaging 1,000 USDC each:

```
Take fees accumulated: ~980 USDC
This is now part of R, increasing your claim on remaining reserve.
```

### 2. Remaining Reserve After Settlement

When the market resolves and all winners redeem, whatever is left in `R` goes back to you. This includes:

* Your initial deposit (if not fully consumed by winners)
* Accumulated take fees
* Collateral from the losing side that wasn't claimed by winners

### 3. Protocol Fee Split (50%)

A separate 1% **protocol fee** is collected on every trade and sent to the FeeManager contract. After the market's end time, this fee pool is split **50/50** between you and the protocol.

## Creator Revenue Example

```
Market: 10,000 USDC initial deposit
Trading volume: 50,000 USDC buys + 30,000 USDC sells

Protocol fees collected: ~800 USDC total
  → Creator's share: 400 USDC (claimable from FeeManager)

Take fees in reserve: ~490 USDC (compounding in R)

If market is balanced and resolves:
  → Creator recovers initial deposit + take fees + losing side leftover
  → Net profit: 400 USDC (protocol fees) + portion of remaining reserve
```

## Your Risk Profile

> [!WARNING]
>
> The creator bears directional risk. If the market is heavily one-sided and the favored side wins, you can lose your entire deposit.

### Best Case: Balanced Market

Both sides trade roughly equally. Fees accumulate. After settlement, the losing side's collateral partially remains in the reserve. You recover your deposit plus profit.

```
Balanced market, 10K initial, YES wins:
  Reserve grew to 20,200 from trading + fees
  YES holders claim 18,000
  Remaining: 2,200 → creator claims
  Net: -10,000 + 2,200 + 400 (protocol fees) = -7,400

Wait — in this scenario the creator still loses? Let's be precise.
```

The math depends on the exact ratio. Here's the honest breakdown:

### Scenario: One-Sided Market (Everyone Buys YES, YES Wins)

```
Initial: R = 10,000 (your deposit)
Trading: +3,000 from YES buyers
Final R: 13,000

YES wins. All 13,000 goes to YES holders.
Creator gets: 0 + protocol fee share
Loss: -10,000 + ~30 (fee share) = -9,970
```

You were effectively the implicit NO side, and you lost.

### Scenario: One-Sided Market (Everyone Buys YES, NO Wins)

```
Final R: 13,000
S_NO = 0 — no NO tokens exist

No one can redeem. Creator calls claimRemainingReserve().
Creator gets: 13,000 + protocol fee share
Profit: +3,000 + ~30 = +3,030
```

You pocketed the YES buyers' collateral. You were the implicit NO side and won.

### Scenario: No Trading Activity

```
R = 10,000, S_YES = 0, S_NO = 0
Market expires. Creator claims full reserve.
Profit: 0 (capital returned in full)
```

### Risk Summary

| Scenario | Creator Outcome |
| - | - |
| Balanced market, either side wins | Moderate profit from fees + remaining reserve |
| One-sided, favored side wins | **Loss up to 100% of deposit** |
| One-sided, underdog wins | Significant profit |
| No trading activity | Capital returned in full |

**You are short volatility and long balanced markets.** The more evenly split the trading activity, the better your outcome.

## Why PAMM Is the Best Bootstrappable Model

If you're looking to spin up prediction markets quickly, PAMM solves the problems that kill other models:

### No Chicken-and-Egg Problem

Traditional AMMs need LP tokens with both sides deposited. PAMM needs one deposit. Done.

### No Market Maker Needed

Order books require active market makers placing bids and asks. PAMM provides continuous liquidity algorithmically. Traders can buy and sell 24/7 without anyone on the other side.

### Instant Activation

One transaction creates a fully functional, continuously tradeable market. No waiting for liquidity providers, no minimum participation threshold.

### Predictable Liquidity Depth

Your deposit directly controls how tight the spreads are. Deposit more = less slippage for traders. The relationship is transparent and deterministic.

### Built-in Fee Revenue

You earn fees on every single trade — both the protocol fee split and the take fees that compound in the reserve. This is passive income from market activity.

### Any Collateral Token

PAMM works with any ERC-20 as collateral. USDC, WETH, DAI — whatever your community prefers.

## For Partners

If you're building a platform and want to offer prediction markets, PAMM gives you:

* **One contract deployment** — PNPFactory handles everything
* **ERC-1155 outcome tokens** — standard, composable, tradeable
* **Configurable fees** — set protocol and take fee rates
* **Permissionless market creation** — let your users create markets
* **Settlement flexibility** — any authorized address can settle
* **Full collateral custody** — all funds in the contract, transparent on-chain

The creator flow is a single `createPredictionMarket()` call. Integration is straightforward for any EVM chain.

> [card] [Economics Deep Dive](https://pnpprotocol.mintlify.site/pamm/economics.md)
>
> Fee structure, settlement math, worked examples with numbers


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