# Collateral Mechanics

Three operations govern collateral flow in a Pitchcast 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](https://github.com/Pitchcast-xyz/pitchcast-docs/blob/main/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 %}


---

# Agent Instructions: Querying This Documentation

If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter:

```
GET https://docs.pitchcast.xyz/how-it-works/collateral-mechanics.md?ask=<question>
```

The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.