Graduation Protocol

Overview

Graduation is the protocol mechanism that transitions a market from the bonding phase to order book trading. With our Zero-Migration Architecture, tokens already exist during bonding as "soulbound" ERC-20s—graduation simply enables transfers and deploys the Order Book.

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Graduation Trigger

The market graduates when all conditions are met:

1. Bonding Target: Vault balance ≥ bonding target (default $1,000 USDC, admin-configurable)

2. Solvency: Vault balance ≥ MAX(TotalYES, TotalNO)

3. Market Balance: Each side has ≥ 20% of total tokens

canGraduate = (VaultBalance ≥ bondingTarget) 
           AND (Solvency ≥ 100%)
           AND (YES / Total ≥ 20%)
           AND (NO / Total ≥ 20%)

[!IMPORTANT] The 20% minimum side ratio ensures healthy two-sided markets. One-sided markets (e.g., 95% YES / 5% NO) cannot graduate until more balanced.

This ensures markets have meaningful liquidity and genuine two-sided participation before transitioning to order book trading.

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Solvency Calculation

Example State

Metric	Value
Total YES Tokens	10,000 shares
Total NO Tokens	8,000 shares
Maximum Liability	10,000 (if YES wins)
Vault Balance	$10,500
Solvency	10,500 / 10,000 = 105%

At 105% solvency, graduation is triggered.

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Zero-Migration Graduation

Unlike traditional systems that mint tokens at graduation, BaseCase uses Zero-Migration:

Tokens exist from the start, minted directly when users buy during bonding. Graduation just "unlocks" them by enabling transfers.

Graduation Sequence

Step	Operation	Description
1	Verify	Check all graduation conditions met
2	Fee Extraction	Deduct 2% graduation fee
3	Fee Distribution	50% Protocol / 25% Stakers / 25% Creator
4	Enable Transfers	Call enableTransfers() on YES and NO tokens
5	Deploy Order Book	Deploy OrderBook contract
6	Trading Active	Users can now trade tokens freely

Key Advantage: O(1) Gas Cost

OLD (Manual Migration):
  - Admin calls mintTokensToHolders(holders[])
  - Iterates through every holder
  - Gas scales with number of users: O(n)
  - Could run out of gas with many holders!

NEW (Zero-Migration):
  - Contract calls enableTransfers()
  - Single state change
  - Gas is constant: O(1)
  - Works with any number of holders!

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Token Architecture

Token Lifecycle

Token Specifications

Token	Standard	Phase	Transferable
YES Token	ERC-20	Bonding	❌ Soulbound
NO Token	ERC-20	Bonding	❌ Soulbound
YES Token	ERC-20	Post-Graduation	✅ Full
NO Token	ERC-20	Post-Graduation	✅ Full

Each market deploys its own YES and NO token contracts at market creation.

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Order Book Activation

Upon graduation, the Order Book is enabled for secondary trading:

Trading Capabilities

Feature	Description
Limit Orders	Place orders at specific prices
Market Orders	Execute immediately at best price
Order Cancellation	Cancel unfilled orders anytime
Price Discovery	Supply/demand matching

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Post-Graduation State Changes

Property	Before	After
Trading Venue	Protocol CPMM	Order Book
Fee Rate	2%	0.1% (taker)
Token Transfers	❌ Blocked	✅ Enabled
Limit Orders	Not available	Available
Wallet Visibility	Visible (ERC-20)	Visible (ERC-20)

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Failed Graduation

If the bonding deadline expires before reaching graduation conditions:

Refund Mode Activation

IF (block.timestamp > bondingDeadline) AND (Solvency < 100% OR Vault < bondingTarget)
THEN activateRefundMode()

Refund Calculation

Users receive a pro-rata share of the vault:

UserRefund = (UserDeposits / TotalDeposits) × VaultBalance

Expected Recovery

Solvency at Deadline	Expected Recovery
90-99%	~90-95%
80-89%	~85-90%
< 80%	~80-85%

Recovery is less than 100% due to fees paid and slippage incurred during trading.

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Atomicity Requirements

The graduation process executes atomically:

• Single Transaction: All graduation operations complete together

• No Front-Running: Price manipulation impossible

• Consistent State: Tokens enabled for all users simultaneously

With Zero-Migration, atomicity is guaranteed since enableTransfers() is a single state change affecting all holders equally.