Decentralized Prediction Markets and Sports Books
Fuente:
arXiv
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| Hauptverfasser: | , , |
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| Format: | Preprint |
| Veröffentlicht: |
2023
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| _version_ | 1866910777261162496 |
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| author | Amini, Hamed Bichuch, Maxim Feinstein, Zachary |
| author_facet | Amini, Hamed Bichuch, Maxim Feinstein, Zachary |
| contents | Prediction markets allow traders to bet on potential future outcomes. These markets exist for weather, political, sports, and economic forecasting. Within this work we consider a decentralized framework for prediction markets using automated market makers (AMMs). Specifically, we construct a liquidity-based AMM structure for prediction markets that, under reasonable axioms on the underlying utility function, satisfy meaningful financial properties on the cost of betting and the resulting pricing oracle. Importantly, we study how liquidity can be pooled or withdrawn from the AMM and the resulting implications to the market behavior. In considering this decentralized framework, we additionally propose financially meaningful fees that can be collected for trading to compensate the liquidity providers for their vital market function. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2307_08768 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | Decentralized Prediction Markets and Sports Books Amini, Hamed Bichuch, Maxim Feinstein, Zachary Mathematical Finance Trading and Market Microstructure Prediction markets allow traders to bet on potential future outcomes. These markets exist for weather, political, sports, and economic forecasting. Within this work we consider a decentralized framework for prediction markets using automated market makers (AMMs). Specifically, we construct a liquidity-based AMM structure for prediction markets that, under reasonable axioms on the underlying utility function, satisfy meaningful financial properties on the cost of betting and the resulting pricing oracle. Importantly, we study how liquidity can be pooled or withdrawn from the AMM and the resulting implications to the market behavior. In considering this decentralized framework, we additionally propose financially meaningful fees that can be collected for trading to compensate the liquidity providers for their vital market function. |
| title | Decentralized Prediction Markets and Sports Books |
| topic | Mathematical Finance Trading and Market Microstructure |
| url | https://arxiv.org/abs/2307.08768 |