While providing LP in a perps market can technically be seen as a bet that traders will lose, that’s only a small part of the picture in Vibe’s design.

In reality, the primary bet LPs are making is that there will be ongoing trading activity — because once the market is active, the role of LP shifts dramatically.

From Risk Capital to Passive Yield

Let’s take a $100K LP example:

• A trader opens a $100K long. We set aside $100K worth of tokens from LP, charge spreads, funding, and potentially earn liquidation fees.
• Soon after, another trader opens a $100K short.
• Now, the long and short PnL offset each other — your LP is no longer needed to cover that position.

At this stage:

• Your $100K can be redeployed to new trades.
• The open interest of $200K is generating spreads, funding, and liquidation revenue.
• All of this revenue is pure profit for buybacks, with zero directional exposure.

Why Risk Drops to Almost Zero

Once traders are both long and short in balanced proportions:

• P&L risk is netted between them.
• The LP is no longer exposed to trader wins/losses — it’s simply there to ensure the market can quote and execute.
• Revenue continues at full speed, but without the need to risk LP tokens.

The only minor, temporary exposure is:

• Short-term hedging windows (e.g., 10–60 seconds) while matching traders.