> For the complete documentation index, see [llms.txt](https://docs.fuyo.markets/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.fuyo.markets/faq/lmsr.md).

# LMSR

A plain-language guide to the engine behind every market. No math required.

#### What is LMSR?

LMSR (Logarithmic Market Scoring Rule) is the pricing machine Fuyo uses to run every market. It's an automatic market maker (AMM): instead of matching you with another trader, it quotes a live price for YES and NO at all times and always takes the other side of your trade. That's how you get instant fills, even on a 1-minute market with almost nobody else trading.

#### How does it decide the price?

It keeps a running tally of how many YES shares and NO shares people hold, and turns that into a price. The more people lean toward one side, the higher that side's price climbs. There's a single formula doing this continuously, so there's always a price — even at the very first second of a brand-new market with zero trades.

#### Why do YES and NO always add up to $1.00?

Because the price *is* the market's estimate of probability, and something either happens or it doesn't. If YES is $0.70, the market thinks it's 70% likely, so NO must be the remaining 30% → $0.30. They're two halves of the same coin and always sum to $1.

#### Why does buying push the price up?

Buying a side tells the machine that demand for that outcome went up, so it raises that side's price and lowers the other. It's the same instinct as any market: more buyers → higher price. Your trade literally moves the odds, which is why the price feels alive.

#### Why are fast markets so volatile?

Fast markets (1/5/15-minute) run on a thin market so the odds react quickly and the ride feels visceral. The trade-off is that a bigger order can swing the price a lot — which is also why there's a small per-trade cap on those markets.

#### Where does the money to pay winners come from?

The LP funds each market up front. That's why it can always take your trade without a matching counterparty. Its risk on any single market is capped — the machine is built so the platform can never lose more than a small, known amount per market, no matter how the trade goes.

#### Does the platform always win?

No. On the raw pricing curve the platform can lose on a market — that's the cost of providing liquidity. It makes its money through the small fees (the 3% spread and the 10% fees on winners' profit). The displayed line is just the market's honest probability estimate.

#### Are the prices random?

It starts from a real-world estimate (an "oracle" — e.g. the current crypto price or a live data feed) and then moves purely based on how people trade. No one sets it by hand.

#### What does "the price I see is the price I get" mean?

It means you don't wait for a match and hope someone fills you at a fair number. The machine quotes a price and fills you right then. On larger orders your average price ends up slightly above the starting number because you move the market as you buy — but there's never a hidden counterparty deciding whether to fill you.

#### Can I sell my position before the market ends?

Yes. The same machine that priced your buy prices your sell — it works in reverse. You can cash out early to lock a gain or cut a loss (except in the last xx seconds before resolution). A small spread fees applies to the sell, since it's another trade.

#### Is this the same system other prediction markets use?

LMSR is a well-known, published design used across prediction markets such as Augur and Gnosis, because it guarantees a price at all times and caps the platform's risk. Fuyo's approach is that the platform is the initial market maker and adds a small liquidity fee for providing instant, always-on fills.