Order book seeding bug in mvp server and main base code after user creates a new market

Issue #86 | State: CLOSED | Created: 2026-01-23T07:38:03Z

Assignees: linked0

Updated: 2026-01-29T05:36:45Z | Closed: 2026-01-29T05:36:45Z

Body:

I found this issue in MVP server and also our main base code server when a user tries to buy shares in a new market which was created from the UI.

To reproduce this error (either MVP server or main base code):

1. Create a new market using $100 liquidity
2. Try to buy $100 shares of any outcome
3. Transaction fails with ERC1155InsufficientBalance error

MVP testing

###Main base code testing

##Order book seeding requires 2x token balance causing ERC1155InsufficientBalance errors

Problem

When trading a market with which was created using $100 initial liquidity, trades fail with ERC1155InsufficientBalance error.

Error: execution reverted: 0x03dee4c5... (ERC1155InsufficientBalance)

Root Cause

The order seeding formula uses value-based distribution instead of token-based distribution:

Current Formula (Value-Based):

// OrderSeedService.ts line 63
shares: liquidityUSDC * 0.30 / (price + 0.01)

This tries to maintain "$30 USDC worth" at each price level:
- 51¢: $30 / 0.51 = 58.82 shares
- 52¢: $25 / 0.52 = 48.08 shares
- 53¢: $20 / 0.53 = 37.74 shares
- 54¢: $15 / 0.54 = 27.78 shares
- 55¢: $10 / 0.55 = 18.18 shares
- Total: 190.6 shares needed

But server only has 100 tokens from splitting 100 USDC.

Impact

- ✅ Market creation succeeds
- ✅ Order book appears with correct structure
- ❌ Trading fails when trying to match orders (server doesn't have enough tokens)



Current Workaround

Run yarn provision:all after creating markets. This mints an additional 200 tokens per market, giving the server enough balance to fulfill the oversold orders.

Proper Fix

Change from value-based to token-based distribution (industry standard):

// Distribute X% of available tokens (not X% of USDC value)
shares: availableTokens * 0.30  // 30% of 100 tokens = 30 shares

This ensures:
- 100 USDC → 100 tokens → 100 shares distributed (1:1 ratio)
- No ERC1155InsufficientBalance errors
- Ready for user-provided liquidity (no hidden 2x requirement)

Industry Standard Reference

- Polymarket: Uses AMM (CPMM-1) with 1:1 capital efficiency
- Kalshi: Uses CLOB with token-based order distribution
- Both achieve full liquidity depth with 1:1 deposit:token ratio

Files to Modify

1. api/src/services/OrderSeedService.ts (lines 54-68)

2. api/src/services/BatchProcessor.ts (lines 338-340)
  


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## Comments

### @linked0 — 2026-01-29T02:42:37Z

## Fix Implemented ✅

Changed from **value-based** to **token-based** distribution in `OrderSeedService.ts`.

### Before (Value-Based) - Caused ERC1155InsufficientBalance
```typescript
// Distributed by USDC value, creating MORE shares than available tokens
shares: liquidityUSDC * 0.30 / (price + 0.01)
// At 51¢: $100 * 0.30 / 0.51 = 58.82 shares
// Total SELL orders: ~190 shares (but only 100 tokens exist!)

After (Token-Based) - Fixed

// Distribute available tokens proportionally (1:1 ratio from splitPosition)
const availableTokens = liquidityUSDC;
shares: availableTokens * 0.30  // 30% of 100 tokens = 30 shares
// Total SELL orders: 100 shares (30 + 25 + 20 + 15 + 10 = 100%)

Files Modified

1. api/src/services/OrderSeedService.ts (lines 51-76) - Token-based share calculation
2. api/src/services/BatchProcessor.ts (lines 331-338) - Updated comments

Result

• $100 liquidity → 100 tokens minted → 100 shares distributed
• No more ERC1155InsufficientBalance errors
• No need to run yarn provision:all after market creation

@Abdulkarim4u — 2026-01-29T02:55:24Z

Thank you. yeah thats a great fix . no need to keep redoing yarn provision:all