# 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.

***

## 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.

***

## 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.

***

## 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!
```

***

## Token Architecture

### Token Lifecycle

{% @mermaid/diagram content="flowchart TB
Create\["Market Created"]
Bonding\["Bonding Phase\u003cbr/\u003eTokens soulbound"]
Graduation\["Graduation"]
Trading\["Order Book\u003cbr/\u003eTokens transferable"]

```
Create --> Bonding
Bonding --> Graduation
Graduation --> Trading

style Create fill:#f0fdf4,stroke:#22c55e,stroke-width:2px,color:#000000
style Bonding fill:#fef3c7,stroke:#f59e0b,stroke-width:2px,color:#000000
style Graduation fill:#eff6ff,stroke:#3b82f6,stroke-width:2px,color:#000000
style Trading fill:#ede9fe,stroke:#8b5cf6,stroke-width:2px,color:#000000" %}
```

### 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**.

***

## 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            |

***

## 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) |

***

## 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.

***

## 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.


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.basecase.gg/core-concepts/graduation.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.