# FAQ
## General
What is BaseCase?
BaseCase is a **decentralized prediction market protocol** built on Base (Coinbase's L2). It enables anyone to create and trade prediction markets without requiring upfront liquidity.
The protocol uses a novel "Shadow Liquidity" mechanism that bootstraps markets through virtual reserves, graduating to full order book trading once solvency is achieved.
Why is it called "BaseCase"?
The name plays on two meanings:
1. **Base Network**: We're built on Base, Coinbase's Layer 2
2. **Base Case**: In logic, the fundamental assumption from which predictions flow
It's also a nod to prediction markets being about establishing the "base case" probability for future events.
Is BaseCase custodial?
**No.** BaseCase is fully non-custodial:
* Your funds remain in smart contracts
* Only you control your wallet
* Winnings are claimable permissionlessly
* No KYC required
***
## Trading
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**⚠️ BONDING PHASE RISK:** If a market fails to graduate before its deadline, you receive a **pro-rata refund (typically 80-95%)**, NOT a full refund. Any slippage may reduce your return. Only deposit what you can afford to lose.
{% endhint %}
How do I make money?
You profit when your prediction is correct. With **Winner Profit Guarantee**, winners receive exactly **$1 per winning share**:
| If you buy... | At price... | And win... | You receive... |
| ------------- | ----------- | ---------- | ---------------------- |
| 100 YES | $0.60 | YES wins | $100 ($1 × 100 shares) |
| 100 YES | $0.60 | NO wins | $0 |
**All winners profit.** Since you can never pay more than $1/share (the $1 ceiling), winning always means profit. Bonding phase participants (OGs) also receive bonus payouts from excess vault funds.
Alternatively, you can sell your shares before resolution if the market moves in your favor.
What are the fees?
| Phase | Fee | Split |
| ------------------ | ------ | ---------------------------------------- |
| Bonding (Buy/Sell) | **0%** | No fees during bonding |
| Graduation | 2.0% | 50% Protocol / 25% Stakers / 25% Creator |
| Order Book (Taker) | \~0.2% | 50% Protocol / 25% Stakers / 25% Creator |
| Order Book (Maker) | 0% | — |
**Note:** Fees are collected at graduation and on order book trades, not during bonding!
What's the difference between Bonding and Trading phases?
**Bonding Phase:**
* Market is bootstrapping
* Trade against virtual CPMM
* **No fees** (0%)
* No limit orders
* Tokens are soulbound (non-transferable)
**Trading Phase (Graduated):**
* Market has reached solvency + 20% min per side
* Trade on order book
* Low fees (\~0.2% taker)
* Limit + market orders
* Tokens become transferable ERC-20
Can I sell before resolution?
**Yes!** You can sell your tokens anytime:
* **During Bonding:** Sell back to the bonding curve at current price (no fees)
* **After Graduation:** Place a sell order on the order book (\~0.2% taker fee)
This allows you to lock in profits or cut losses without waiting for resolution.
***
## Shadow Liquidity
What is Shadow Liquidity?
Shadow Liquidity is our **virtual AMM** that enables markets without initial capital:
1. Markets start with 100,000 virtual YES + 100,000 virtual NO tokens
2. These are just numbers—no real tokens exist yet
3. User USDC goes into a vault
4. When vault can cover max payout, real tokens are minted
Learn more: [Shadow Liquidity →](https://docs.basecase.gg/core-concepts/shadow-liquidity)
What are shadow shares?
Shadow shares are **ERC-20 tokens** that are soulbound during bonding:
* They're minted to your address when you buy
* They're non-transferable until graduation
* They entitle you to a pro-rata payout if your side wins
At graduation, they become fully transferable ERC-20 tokens.
How does solvency work?
```
Solvency = VaultBalance / MAX(TotalYesShares, TotalNoShares)
```
* At 100% solvency, the vault can pay all winners
* Markets also require **20% min on each side**
* No fees during bonding; solvency builds through balanced trading
Example:
* Vault: $1,000
* YES shares: 900
* NO shares: 600
* Solvency: $1,000 / 900 = 111% ✓
***
## Resolution
How are markets resolved?
BaseCase uses the **UMA Optimistic Oracle**:
1. **Anyone** can propose an outcome
2. There's a **dispute period** (typically 2 hours)
3. If disputed, UMA token holders vote on the truth
4. The verified outcome becomes final
This ensures decentralized, manipulation-resistant resolution.
What if there's a dispute?
Disputes are resolved by UMA's decentralized oracle:
1. Disputer posts a bond
2. UMA token holders vote on the correct outcome
3. Winner gets their bond back + a reward
4. Loser forfeits their bond
5. Final outcome is enforced on-chain
This creates strong economic incentives for honest reporting.
How long until I can claim winnings?
After resolution:
* **If undisputed:** Claimable after dispute period (\~2 hours)
* **If disputed:** Claimable after UMA vote (\~24-48 hours)
Claims never expire—you can claim anytime after resolution.
***
## Creating Markets
How do I create a market?
1. Click **Create Market**
2. Enter your question (clear, unambiguous)
3. Set the resolution date
4. Submit the transaction
**That's it!** No capital required.
What can I create markets about?
Anything that can be objectively verified:
✅ **Good examples:**
* "Will ETH reach $5,000 by Dec 31, 2024?"
* "Will the Fed cut rates in March 2024?"
* "Will SpaceX launch Starship successfully in Q1?"
❌ **Bad examples:**
* "Is Bitcoin the best cryptocurrency?" (subjective)
* "Will it rain tomorrow?" (too vague—where?)
* "Am I cool?" (not verifiable)
How much do creators earn?
Market creators receive **25% of protocol fees** generated:
| Fee Source | Creator Receives |
| ------------------ | ---------------- |
| 2% graduation fee | 0.5% |
| \~0.2% trading fee | \~0.05% |
> **Note:** No fees during bonding phase. Fees only collected at graduation and on order book trades.
Popular markets can generate significant revenue for creators!
***
## Technical
What chain is BaseCase on?
**Base** — Coinbase's Layer 2 built on the OP Stack.
* Low fees (\~$0.01 per transaction)
* Fast confirmations (\~2 seconds)
* Ethereum security
* Easy bridging from Coinbase
What collateral is accepted?
Currently: **USDC only**
We chose USDC because:
* Stable value for accurate probability expression
* Wide availability on Base
* No volatility risk during market duration
Are the contracts audited?
Contracts are currently in development. Prior to mainnet launch:
* [ ] Internal security review
* [ ] External audit (planned)
* [ ] Bug bounty program
{% hint style="warning" %}
**Use at your own risk.** The protocol is experimental software.
{% endhint %}
***
## Still have questions?