Market Properties

All the properties below need to be defined at market creation.

Question

The question defines what the prediction market is about by asking what the outcome of an event will be. It should be written in a clear and unambiguous manner, so that forecasters are always sure what the predictions they’re asked to make are related to.

Outcomes

A Prediction Market must have at least two possible outcomes, and can have up to 32 possible outcomes. Outcomes must be written in a clear and ambiguous manner, and cover all the possibilities of how the future event may unfold.

Outcomes are always priced between 0 and 1 units of the market’s selected token, and the sum of the prices of all outcomes in a market is always equal to 1.

When forecasters decide to buy a given outcome, they will effectively buy shares of that outcome at its current price. If that market is chosen as the correct outcome once the market is resolved, the price of its shares will become 1, that the price of all other outcomes will become 0.

Every trade (buy or sell transaction) impacts the price of an outcome.

In the rare case where the outcome of the market was unforeseen, the market can be considered Invalid. In this case, the price of the outcomes will not go to 0 nor 1, and traders get back their shares and receive an amount of the selected market tokens equivalent to the number of shares multiplied by the price of the outcome at the time that the market closed.

Closing date (expiration date)

A Prediction Market must always close at a certain date, set by the Market Creator before the market is Open – the Closing Date. The Closing Date should be set to before the event happens, so that trading stops before the outcome is known and that outcome prices don’t become heavily skewed.

Once a market has closed, the correct outcome must be defined by the governing committee so that the market can be resolved.

Description

It is paramount that forecasters understand the criteria used to determine the right outcome of a Prediction Market. The Description field must be used to clarify the context of the market, and the criteria for determining the correct outcome, and in what circumstances the market must be considered Invalid.

Resolution source

In addition to the Description, a Prediction Market must include the URL of a trustworthy source where the correct and indisputable outcome of the market will be published.

Category

The Category field of a Prediction Market are intended for the developers of web applications and data visualization tools. With this information, they can make it easier for end-users to find markets that are of interest to them.

Image

The Image field takes in the URL of a JPG, GIF or PNG file that can be used to illustrate a market when the information is displayed on a web page.

This image can be used as an avatar or a header — it’s up to the developer of the web application to decide whether to use it or not.

Token

Prediction Markets can operate with any ERC-20 token chosen by the Market Creator that exists on any blockchain where the protocol is deployed.

The token’s contract address must be supplied when creating a market to specify which token that market will operate with.

When using the blockchain’s native token (for example, MATIC for Polygon), a wrapped version of the token will be used, since Polkamarkets works with ERC-20 tokens only.

Liquidity

Like any trading market, a Prediction Market must have an appropriate amount of liquidity for it to enable meaningful trades. The more liquid a market is, the better it can handle large trades without impacting the price of the outcomes too much. A market with a small amount of liquidity will not be able to absorb large trades without having a large impact on outcome prices. The more liquid a market is, the better. Market Creators are required to add liquidity when they create a market. While the market is open, any user, including the creator, can add or remove liquidity.

Liquidity Providers Fee

To incentivise liquid markets, Market Creators have the possibility to set a trading fee as a reward for Liquidity Providers. By default, it is set to be 2% of every trade, but the Market Creator can set a higher fee (up to 5%), a lower fee, or even remove the fee by setting it to 0%.

Creator Fee

To incentivise market creation, Market Creators have the possibility to set a Creator Fee as a reward for themselves. By default, it is set to be 1% of every trade, but the Market Creator can set a higher fee (up to 5%), a lower fee, or even remove the fee by setting it to 0%.

The Market Creator can insert a wallet address to be the recipient of the Creator Fee.