# Overview

FSX operates as a **prediction market platform**, where users can:

* Buy shares based on expected outcomes of future events
* Sell shares anytime before resolution
* Redeem payouts when the market is resolved

***

## 👥 **Ecosystem Participants**

| Participant          | Role                          | Earnings                          |
| -------------------- | ----------------------------- | --------------------------------- |
| **Traders**          | Buy and sell shares           | Profit if predictions are correct |
| **Market Creators**  | Create user-generated markets | 60% of collected fees             |
| **Protocol (House)** | Runs the FSX platform         | 30% of collected fees             |
| **Oracle (DelphAI)** | Resolves markets              | 10% of collected fees             |

***

## 📐 **Pricing Model (LMSR)**

The system uses the **LMSR (Logarithmic Market Scoring Rule)** - an Automated Market Maker (AMM) model engineered for prediction markets such as **FSX**.

***

### ⚙️ **How LMSR Works**

1. **Dynamic Pricing:**\
   Outcome prices fluctuate from 0% to 100% depending on demand.
2. **Sum = 100%:**\
   The combined probability of all outcomes always equals 100%.
3. **Infinite Liquidity:**\
   Users can always buy or sell shares, there is no order book limitation.

***

### 🧮 **Cost Function Formula**

```
C(q) = b × ln( Σ exp(qᵢ / b) )

Where:
- C(q) = Total cost of the position
- b = Liquidity parameter (higher b = lower price impact)
- qᵢ = Number of shares for outcome i
```

### 📈 **Price Impact Example**

| Action                | Price Before | Price After |
| --------------------- | ------------ | ----------- |
| Buy 10 shares “Yes”   | 50%          | 50.12%      |
| Buy 100 shares “Yes”  | 50%          | 51.2%       |
| Buy 1000 shares “Yes” | 50%          | 62%         |


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