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The Nile Markets protocol enables traders to take leveraged positions on future EUR/USD exchange rates. A shared USDC liquidity pool acts as the counterparty to every trade. This page walks through the core mechanics — from opening a position to final settlement.

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The Core Loop

1

LPs deposit USDC into the vault

A liquidity provider deposits USDC into the pool. The vault mints share tokens proportional to the current share price, representing the LP’s ownership of the pool. The deposited USDC becomes available as counterparty capital for trader positions.
2

Trader deposits collateral

A trader adds USDC to their margin account. This collateral backs their positions but is not yet locked — it sits as free balance until a position is opened.
3

Trader opens a position

The trader specifies:
  • Side: LONG (betting EUR/USD goes up) or SHORT (betting it goes down)
  • Tenor: 1 Day, 1 Week, or 1 Month
  • Notional: The face value of the contract in USDC
  • Margin: The amount of collateral to lock (must be at least 2% of notional)
The protocol locks the trader’s margin, records the position, and charges an opening trading fee.
4

Entry price is locked

At the moment of opening, the protocol fetches the current forward price for the position’s maturity date. This becomes the entry strike — the reference price against which all PnL is calculated. The entry strike never changes.
5

Position is live — PnL moves with the market

While the position is open, unrealized PnL fluctuates as the forward price changes. During this period, the trader can:
  • Add margin to reduce liquidation risk
  • Remove excess margin to free collateral
  • Partially reduce the position
  • Close the position early at the current forward price
6

Liquidation guard

If a position’s equity (locked margin + unrealized PnL) drops below the maintenance margin threshold (1% of notional), the position becomes liquidatable. Anyone can trigger the liquidation, with a penalty deducted from the trader’s remaining margin.
7

Maturity settlement

When the maturity date arrives, the position settles. The fixing price — the Pyth EUR/USD spot price recorded at 4 PM UTC on the maturity business day — determines the final PnL.
8

PnL settlement

Final PnL is calculated and settled:
  • Trader wins: Profit is transferred from the pool to the trader’s margin account
  • Trader loses: Loss is deducted from locked margin and credited to the pool
  • Bad debt: If loss exceeds locked margin, the excess is absorbed by pool equity

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Zero-Sum Dynamics

The protocol creates no value and destroys no value in trading itself. Every unit of USDC that flows to a trader as profit is drawn from the pool, and every unit lost by a trader flows into the pool. 
Trader PnL + Pool PnL = 0   (excluding fees)
Fees are the only extraction from the system. They are charged on position open, close, and settlement, and split between the pool (70%) and the protocol treasury (30%). This means the pool has a structural edge: even if trader wins and losses perfectly balance, the pool accumulates fee revenue.
The zero-sum property is enforced as an onchain invariant. The sum of all trader PnL plus pool PnL equals zero at all times.

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Forward Pricing

Forward prices are the core pricing mechanism. Unlike spot prices that reflect current exchange rates, forward prices project the rate at a specific future date by incorporating the interest rate differential between EUR and USD. See Oracle & Forward Pricing for the full formula and parameter details.
The forward rate represents the annualized interest rate differential between EUR and USD. A positive rate means the forward price is above spot (USD rates higher than EUR rates), which is the typical market condition.

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Margin Model

The protocol uses isolated margin — each position has its own independent margin that does not interact with other positions or free collateral.
The minimum collateral required to open a position: 2% of notional by default (50x max leverage). Traders can choose to lock more margin, reducing their leverage and liquidation risk.
The minimum equity threshold below which a position becomes liquidatable: 1% of notional by default. If position equity drops below this level, anyone can liquidate it.
Position equity = locked margin + unrealized PnL. A position is healthy when equity >= MM, and liquidatable when equity < MM.Example: A LONG position with 200 USDC margin and -110 USDC unrealized PnL has equity of 90 USDC. If maintenance margin is 100 USDC, this position is liquidatable (90 < 100).
MarginNotionalLeverageLiquidation Distance
200 USDC (2%)10,000 USDC50x~1% price move
500 USDC (5%)10,000 USDC20x~4% price move
2,000 USDC (20%)10,000 USDC5x~19% price move
10,000 USDC (100%)10,000 USDC1xCannot be liquidated

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Settlement

A position can close in four ways:
When: The maturity date has passed and a fixing price has been recorded.Price used: The fixing price — Pyth EUR/USD spot at 4 PM UTC on the maturity business day.Fee: Standard trading fee (0.05% of notional).
Fixing timestamps are business-day adjusted. If a position’s theoretical maturity falls on a weekend, the fixing timestamp is rolled forward to the next Monday at 4 PM UTC.

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Next Steps

Quick Start

Set up your environment and query the protocol on Sepolia in 15 minutes.

Core Concepts

Deep dive into non-deliverable forwards, tenors, sides, margin, and protocol modes.

Position Lifecycle

Detailed walkthrough of every state transition from open to close.