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Published on Apr 20, 2022

Down the Rabbit Hole: Polymarket, bet on your beliefs!

Sidharth
#Insights
icon-alt6 Mins
Down the Rabbit Hole: Polymarket, bet on your beliefs!

Betting or predicting outcomes of real-world events or any other event is an old practice from election results to the prediction of stock prices.  The place where these events take place is called the information market. A place where people purchase and sell shares in the outcome of a future event. Prices fluctuate as a result of trading. You can invest in future outcomes by purchasing, trading, or selling shares.

Polymarket is a platform for information markets that allows trading on the world's most hotly contested topics. On Polymarket, you create a portfolio based on your predictions and earn a profit if your predictions are correct. When you decide to buy stock in a market, you're relying on your own expertise, research, and forecast. Polymarket has established itself as a prominent provider of unbiased, real-time data on upcoming events.

More about PolyMarket

Polymarket is based on the Polygon blockchain, which allows users to buy and trade tokens without paying any network fees.

Connect to Polymarket with your Magic Link or MetaMask wallet to get started. USDC is the only currency accepted by Polymarket.

Here is the data representing the daily gas spent and total transactions per day on Polymarket:

Source: https://dune.xyz/niraek/Polymarket-Relayers

Once your deposit is approved, you'll have everything you need to begin taking advantage of Polymarket's limitless trading.

  1. In the Navigation Bar at the top of the page, select Markets.

2. Look through the available marketplaces and pick one that appeals to you, like as follows for the coronavirus prediction markets.

3. In the Buy/Sell modal, select the outcome you feel will resolve correctly, like for the following market on corona virus.

Then, enter the USDC value of the shares you want to acquire. Here are the key data that will be present for each market outcome:

  • Market's current price.
  • The market's price after you've taken action. The higher the price variation, the larger the order size and the lower the liquidity.
  • Your average price: The price you pay on average for each result share. When buying shares, the larger the order size and the lower the liquidity, the higher the average price.
  • Estimated shares bought: This is a rough estimate of how many shares you'll buy. External slippage may cause this value to alter.
  • Maximum winnings: The maximum amount of USDC you can win if you guess correctly.
  • Return on Investment (ROI): The highest percentage gain you can expect, assuming you are correct.

4. Click Buy, review your order, agree to terms of service and privacy policy, and click confirm.

5. Within 20 seconds, your transaction will be completed.

Selling Shares

  1. Go to the market's page, find the buy/sell modal, and select the Sell tab, as shown here:

2. Click Max or enter the number of shares you want to sell. Review the data and then click Sell.

3. Click Confirm after reviewing your trade and agreeing to the terms of service and privacy policy.

4. Within 20 seconds, your transaction will be completed.

Redeem Shares

  1. To see your positions, go to Portfolio.

2. To see your market positions, scroll down. The button will change from Trade to Redeem once a market has settled. Click the Redeem button.

3. To redeem your winnings, go to Redeem Winnings.

Your shares have been successfully redeemed!

Liquidity at Polymarket

Automated Market Makers are used in the current market system. Rather than relying on a single liquidity provider, the markets allow any user to supply liquidity to the pool of assets. For each outcome, each liquidity pool (LP) share that is owned will mint one token. If a question has two possible answers, each LP mints one YES and one NO.

Lower liquidity has a stronger, negative price impact when purchasing or selling outcome tokens.

The outcome prices determine the quantity of LP shares you receive. The more one-sided a market is, the fewer LP shares for dollar you will receive. You will be reimbursed in outcome tokens of the most likely occurrence rather than LP shares.

Adding liquidity

Adding liquidity to markets can be pretty profitable, but it necessitates careful management to avoid losses. The most dangerous scenario for an LP is when prices drastically change, causing the outcome tokens to lose value.

Closing of a Market

When the resolution criteria are met, the market closes within three days. It can be predicated on a specific date or an event that occurs or does not occur. To ensure that the resolution is proper, market topics consult an external source.

Market Resolution

Correct shares can be redeemed for $1.00 a piece after a market settles. The value of all other shares will be zero. The Markets Integrity Committee (MIC) will determine the market at its sole discretion.

You can redeem your wins for accurate shares by going to the market page. Otherwise, go to the market page to delete any erroneous shares from your Portfolio.

As a result, each market may have multiple winners.

Polymarket + UMA

For markets displayed on the Polymarket.com interface, Polymarket supports UMA as a resolution source. Polymarket is oracle agonistic at its core, but the UMA integration gives market developers another alternative.

0xCB1822859cEF82Cd2Eb4E6276C7916e692995130 is the address of the Polymarket-UMA adapter on the Polygon network.

UMA

UMA is an optimistic oracle (OO) that secures markets with economic promises. Unlike mechanically restricted price feed oracles, an optimistic oracle can serve any arbitrary data on-chain. UMA's configurable oracle provides data for a cross-chain bridge, insurance, and custom derivatives, among other things.

UMA token holders are unbiased adjudicators of the results of relevant markets for markets guaranteed by UMA's optimistic oracle. These markets can operate with a completely decentralised resolution system.

Working of Polymarket, UMA Integration

A condition generated using the Gnosis conditional token structure underpins each market presented on the Polymarket.com interface. A condition is a query to be answered in the future by a certain oracle in a specific manner. To construct a market resolved by UMA's optimistic oracle, a contract combining the two systems is required, which can be referred to as the market's oracle. It means that the contract must reflect the payoff of a question that UMA has answered.

To do so, a condition and ancillary data must be associated, the optimistic oracle's request flow must occur, and at the time of resolution, some data translation must occur to take the price provided by UMA's OO and present it to the CTF in the correct format for the specific questionID. This is precisely what the UMA binary contract adapter accomplishes.

Anyone can use the binary adaptor to create a binary condition that UMA will resolve via the CTF. It's worth mentioning that there's a chance of invalid or unknown outcomes in UMA-resolved markets, which are set to resolve 50/50. This will infrequently happen for traders who use well-written marketplaces.

Microgrants program of Polymarket

Polymarket has a thriving community and offers microgrants to help members advance scientific research, product offers, etc. Polymarket has given out almost $40k grants till now!

What are the ways to become involved?

  1. Fill out the form to pitch your project to the team.
  2. Your proposal will be reviewed by the Polymarket team, who will provide comments.
  3. If you are chosen, they will provide you with a grant quote.
  4. Keep them informed about your development and work together on the launch of your project.
  5. Show the world what you and others in the Polymarket community have been up to.

Project Criteria to Think About:

  1. Impact: What kind of impact will your initiative have on the community and in terms of educating the public about Polymarket?
  2. Implementation: How tough will this project be, and how long will it take to put your plan into action?
  3. Experience: What abilities and experiences do you have that will help you make your proposal a reality?

How Polymarket Supports Hedging?

Polymarket offers the best way of hedging so far. Apparently, if you are investing in any of the DeFi protocols or markets including Aave, Compound, Uniswap, etc., there is always a risk of losing all your assets and funds if any of these markets suffer an exploit. However, Polymarket recently created a new market group in partnership with rekt news for predictions on the fact whether certain markets and DeFi protocols will suffer any future exploits by March 2022.

If you make your predictions while being a part of this market, then you will get to benefit even after any DeFi protocol suffers a future exploit. Thus, you will certainly benefit from your DeFi protocol trading and transactions, but even if the markets suffer any exploitation and downfall, then investing in this future exploit market condition will save you from severe losses by allowing you to benefit from the predictions.


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