Notes on Market Mechanisms

• Centralized
• Order Book
• Also called: Continuous Double Auction
• Cons: large spread when few participants;
• Fixed-wager bets in horse racing
• Automated Market Makers:
• Works better in low-liquidity situation
• Uniswap-style x*y=k
• Fixed constant that you can input
• Payment to liquidity providers
• More for pairs of tokens than for
• LSMR?
• TODO
• Parimutuel Betting: You get a proportion of the bets on your pool
• Pros: Very simple
• Cons: No benefit to betting early; don't know what the payout is
• Example: Twitch stream betting games
• "Dynamic Parimutuel Betting": Account for bet ratio at time of entry?
DPM.pdf138.2KB
1. Cons: Don't know what the payout is?
• Apparently: no selling market?
2. Q: Why isn't this implemented in more places?

References

• Vitalik Buterin: Tales from the Election

Automated Market Makers for Prediction Markets · Gnosis Developer Portal Conditional Tokens

Prediction markets require liquidity to function well. However, while most people have an understanding of what it means for events to be probable, turning knowledge about the likelihood of events into corresponding orders in a prediction market can be a confusing endeavor. Moreover, coordinating trades of predictive assets between participants can be tricky.

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