> ## Documentation Index
> Fetch the complete documentation index at: https://docs.hyro.network/llms.txt
> Use this file to discover all available pages before exploring further.

# How It Works

> The full flow in plain language — from challenge to funded vault to LP carry.

This page walks through the whole system at a high level. For role-specific detail, jump to [For Traders](/traders/getting-started), [For LPs](/lps/why-lps-participate), or [For Builders](/reference/architecture).

## The trader journey

<Steps>
  <Step title="Buy a challenge">
    A trader signs in (email or Phantom wallet) and pays an evaluation fee in USDC. The fee is recorded on-chain and the rule version is pinned at purchase.
  </Step>

  <Step title="Pass evaluation">
    The trader trades a demo account on Bybit under smart-contract-enforced rules. A Rust engine monitors continuously; an oracle posts equity and the verdict to Solana.
  </Step>

  <Step title="Get funded (Tier 1)">
    On pass, a funded demo opens. The trader keeps **80%** of profits, paid in real USDC, from 0% up to +15%.
  </Step>

  <Step title="Unlock the dual-track at +15%">
    The demo is **not** canceled. It continues at a 50/50 split on incremental profit, **and** a real-capital vault opens in parallel — seeded by HyroTrader and open to LP deposits.
  </Step>

  <Step title="Scale with LP capital">
    The trader runs both surfaces in parallel. LPs deposit into the real-capital vault and the trader scales beyond the firm's balance sheet.
  </Step>
</Steps>

## The LP side

An LP deposits USDC into a vault and receives **vault shares** minted at the current NAV. Their capital is routed to the manager's Bybit sub-account, the manager trades, and the LP earns carry on profits the trader generates. When the LP withdraws, shares are burned and USDC is returned at the prevailing NAV — with a high-water-mark-protected performance fee crystallizing on realized gains.

[Read the LP flow in detail →](/lps/deposits-withdrawals)

## What's on-chain vs. off-chain

Hyro is explicit about this boundary — it's the single most important thing for LPs to understand.

<CardGroup cols={2}>
  <Card title="On Solana (on-chain)" icon="link">
    Capital settlement · share accounting · LP deposits & withdrawals · performance-fee logic · challenge-fee collection · payout records (every payout has a TXID)
  </Card>

  <Card title="Off-chain" icon="server">
    Trade execution on Bybit's real order books · the Rust risk engine that monitors rules · NAV reporting via the Hyro oracle (which writes results back on-chain)
  </Card>
</CardGroup>

<Warning>
  NAV reporting currently depends on oracle infrastructure operated by Hyro. This is the **largest trust assumption in Phase 1**, and it's disclosed plainly. See [Trust Assumptions](/resources/decentralization).
</Warning>

## The oracle, briefly

A NATS/JetStream message queue reads Bybit sub-account equity and posts NAV updates and challenge state to Solana roughly **every 60 seconds** during active hours. Safety checks pause the vault if the exchange API goes dark for more than 5 minutes, or if on-chain NAV diverges from Bybit equity by more than 2%. An independent watchdog reader cross-validates the primary.

[More on oracle infrastructure →](/reference/oracle)

## Where it's headed

Execution starts on Bybit and progressively expands to other CEXes, then to on-chain Solana DEXes (Drift, Phoenix) in Phase 4 — removing CEX counterparty risk entirely for the on-chain track. The protocol decentralizes in stages: decentralized capital and programmatic rules today, permissionless trader onboarding next, on-chain execution after that.

<Card title="The Dual-Track Model" icon="git-branch" href="/traders/dual-track" horizontal>
  The mechanic that removes the artificial scaling cap — explained in full.
</Card>