> 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/markets/what-is-fuyos-lmsr/decentralization.md).

# Decentralization

Fuyo's current architecture is deliberately practical: the pricing engine runs off-chain, blockchain records confirmed transactions as proof, and the treasury seeds initial liquidity. This is a conscious design choice, not a limitation.

#### Why Off-Chain Engine Makes Sense Now

* Speed: On-chain LMSR calculations are slow and expensive. Off-chain means instant price updates.
* Flexibility: We can adjust parameters, respond to attacks, and improve the engine without smart contract upgrades.
* Cost: No gas fees on every price update — critical for 1-minute markets with dozens of updates per minute.
* Auditability: Blockchain records every confirmed bet as an immutable receipt, providing the trust layer without the cost.

#### The Path to External Liquidity

Fuyo's treasury seeds markets now. The long-term vision has three phases:

| **Phase**                    | **Liquidity Source**                                           | **Status** |
| ---------------------------- | -------------------------------------------------------------- | ---------- |
| Phase 1 — Bootstrap          | Protocol treasury seeds all markets with capped risk parameter | Current    |
| Phase 2 — LP Integration     | External liquidity providers earn fees by seeding markets      | Future     |
| Phase 3 — Market Maker Layer | Professional market makers compete for market seeding rights   | Future     |

LMSR's mathematical properties make this transition smooth. The risk parameter is the dial — increasing it as external liquidity comes in is a configuration change, not an architecture change.

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