Synthetic Exposure
How collateral and hedging combine to form each synthetic position.
When a user opens a leveraged directional position:
Multiply records the synthetic entry price referenced from the external venue.
The user’s collateral is locked. User margin does not fund hedge execution.
Dimes constructs and maintains the hedge on the underlying venue using Underwriting Facility capital only.
User PnL becomes a function of probability movement multiplied by leverage.
Hedge PnL offsets user PnL so that Dripster remains market neutral within defined liquidation constraints.
Hedge Mechanics
For a long synthetic YES exposure, Multiply hedges by acquiring the equivalent YES exposure on the underlying prediction market venue using facility capital. The hedge produces gains or losses that mirror the user’s PnL, keeping Dripster neutral to price direction.
If the position evolves favorably for the user:
the hedge pays out more than its acquisition cost,
the excess is transferred to the user as profit,
and the hedging facility recovers its original principal.
If the position moves against the user:
the hedge pays out less than its acquisition cost,
the user’s margin absorbs the loss through liquidation,
and the transferred loss restores the hedging facility’s principal.
The same logic applies symmetrically to synthetic NO exposure, where Dimes hedges using equivalent NO exposure or an equivalent short position on YES, depending on venue mechanics.
This construction ensures the hedging facility does not lose principal as long as positions are liquidated before user losses exceed posted margin, and markets remain within defined hedgeability and execution constraints.
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