> ## 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.

# PAMM Overview

> Virtual Liquidity AMM (PAMM) — a constant product market maker for binary prediction markets on EVM chains. No LPs, no order books, just one deposit and instant liquidity.

# Virtual Liquidity AMM (PAMM)

PNP's **Prediction AMM (PAMM)** is a constant product market maker purpose-built for binary outcome markets on EVM chains. It provides instant, continuous liquidity from a single collateral deposit — no LP tokens, no order books, no bootstrapping problem.

## Why PAMM Exists

Every prediction market needs a way for traders to buy and sell outcome tokens against collateral. Existing approaches all have friction:

| Approach | Problem |
| - | - |
| **Order books** | Thin markets, need active market makers, poor UX |
| **LMSR (Logarithmic)** | Subsidy provider has unbounded loss, complex math |
| **AMM with real LPs** | Chicken-and-egg: someone must mint both tokens to seed the pool |

PAMM takes a different path. The AMM pool is **implied** from a single number — the reserve. There is no pool in the traditional sense. Liquidity depth emerges from a mathematical relationship between three on-chain values.

## How It Works in 30 Seconds

1. A **creator** deposits collateral (e.g. 10,000 USDC) into the contract
2. This becomes the **reserve** `R` — the market's liquidity backbone
3. **Virtual reserves** are derived: `V_YES = R - S_YES`, `V_NO = R - S_NO`
4. Uniswap V2-style constant product math runs on these virtual reserves
5. Every market starts at **50/50** — price discovery happens through trading
6. At settlement, **winners split the entire reserve** pro-rata

No LP tokens are minted. No one needs to provide both sides. One deposit creates a fully functional, continuously tradeable market.

## Key Properties

* **Instant liquidity** — market is tradeable the moment it's created
* **Single-sided seeding** — creator deposits collateral, receives zero tokens
* **Self-balancing prices** — constant product formula ensures prices always sum to 1.00
* **Depth scales with reserve** — bigger deposit = tighter spreads, less slippage
* **Gas efficient** — single transaction per trade, no matching engine
* **EVM native** — deployed as Solidity contracts with ERC-1155 outcome tokens

## Deployed Networks

PAMM is currently deployed on:

* **Monad** (testnet)
* **Base**
* **Polygon**

The contracts are written in Solidity 0.8.28 using the Foundry framework.

## Core Contracts

| Contract | Role |
| - | - |
| **PNPFactory** | Market creation, minting/burning outcome tokens, settlement, redemption. Holds all collateral as ERC-1155. |
| **VirtualLiquidityLib** | Pure math library implementing the CPMM bonding curve — buy/sell calculations, quadratic solver. |
| **FeeManager** | Accumulates protocol fees. Splits 50/50 between market creator and protocol owner after market ends. |

## Who Is PAMM For?

**Market creators** who want to spin up prediction markets without needing a market maker or LP pool. Deposit collateral, set a question and deadline, and you have a live market.

**Partners and protocols** looking for easily bootstrappable liquidity for custom markets — sports, crypto prices, governance votes, real-world events. PAMM gives you a working AMM with a single function call.

**Traders** who want to express views on binary outcomes with instant execution, transparent pricing, and on-chain settlement.

> [card] [How It Works](https://pnpprotocol.mintlify.site/pamm/how-it-works.md)
>
> Virtual reserves, CPMM math, buying and selling mechanics

> [card] [For Creators](https://pnpprotocol.mintlify.site/pamm/for-creators.md)
>
> How to create markets, what you earn, risk profile

> [card] [Economics](https://pnpprotocol.mintlify.site/pamm/economics.md)
>
> Fee structure, settlement payouts, worked examples


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