> For the complete documentation index, see [llms.txt](https://docs.footymarket.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.footymarket.xyz/how-it-works/collateral-mechanics.md).

# Collateral Mechanics

Three operations govern collateral flow in a Footymarket market. Understanding these operations is the foundation for understanding how the protocol works at a deeper level.

## The three operations

| Operation  | Input                    | Output                   | When                       |
| ---------- | ------------------------ | ------------------------ | -------------------------- |
| **Mint**   | 1 USDC                   | 1 YES share + 1 NO share | Any time before resolution |
| **Redeem** | 1 YES share + 1 NO share | 1 USDC                   | Any time before resolution |
| **Settle** | 1 winning share          | 1 USDC                   | After resolution only      |

### Mint

Any user can deposit 1 USDC into a market at any time and receive one YES share and one NO share. This operation is always available while the market is open. It is used to enter a position or to provide liquidity to the order book.

Minting does not require a counterparty. The protocol creates the shares directly against the deposited collateral.

### Redeem

Any user holding both a YES share and a NO share can return them to the protocol and receive 1 USDC. This operation is always available before resolution. It is the inverse of minting.

Redeeming does not require a counterparty either. It is a direct interaction with the protocol.

### Settle

After a market resolves, holders of the winning share can redeem each share for exactly 1 USDC. Losing shares expire worthless and cannot be settled.

Settlement is the final state. Once a market resolves, mint and redeem operations are no longer available.

## How settlement paths use these operations

The on-chain settlement program uses mint and redeem internally when filling matched orders from the order book. The three settlement paths (NORMAL, MINT, MERGE) correspond directly to these operations. See [Settlement Paths](/trading/settlement.md) for how the CLOB operator triggers each path.

## Protocol fee

A protocol fee applies at settlement, not at trade execution. This removes friction during active trading and aligns protocol revenue with successful markets. See [Fees](/protocol/fees.md) for the current rates.

{% hint style="warning" %}
Once a market is resolved, the redeem operation is no longer available. Losing share holders cannot recover their collateral. Only winning shares settle to USDC.
{% endhint %}


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