We are thrilled to announce the launch of prediction markets on the Dfyn Exchange. Our newly introduced prediction markets will allow users to predict if the price of the assets will go up or down in the next 5 minutes.
Such products have actively existed and traded in the traditional financial markets, we are finally bringing binary prediction markets on Polygon. The mission of Dfyn is to make DeFi more accessible for the masses and we are starting off with one of the simplest financial instruments in the world.
In the current iteration, we are launching prediction markets for the MATIC token. We are working on integrating two other tokens for prediction markets.
How do the prediction markets work?
The working of Dfyn’s prediction markets is quite straightforward. However, before diving into how the prediction markets work, the users should be familiar with a few terms.
- ↑ Bull: Predicting that the price of an asset will increase.
- ↓ Bear: Predicting that the price of an asset will decrease.
- Payout: Expected returns on the initial amount locked in the market. When a round is live, users will be shown the expected payout for both positions. However, only those who correctly predicted the price direction would receive the payout.
- Locked Price: Price of the asset when a round goes live. It serves as the reference price when determining whether the market has gone up or down.
- Prize Pool: Total tokens locked in a particular round.
- Closed Price: The price of the asset at the end of a round.
- Rounds: The prediction markets are divided into rounds that remain live for a duration of 5 minutes. Each round is further categorized into three phases:
- Next Phase - During this phase, the users can enter their position, i.e. either bull or bear.
- Live Phase - During this phase, the locked price is set, and participants can monitor live movements in MATIC’s price. At the end of the live phase, a snapshot of MATIC’s price will be taken and compared to the locked price. Rewards will be distributed based on whether the closed price is higher or lower than the locked price.
- Expired Phase - When the live phase comes to an end, the round is marked as expired.
To participate in the prediction markets, users can visit this link and predict whether the price of MATIC will rise or fall from the time a round goes live.
Note: Once you enter a position, you can not make any changes to it since the funds are locked in the contract. Make sure that you are satisfied with your position before confirming.
How is the price of an asset determined?
To monitor MATIC’s live price feed, Dfyn will use the MATIC oracle provided by ChainLink. We decided to go with ChainLink’s oracle since it is fully decentralized, provides reliable data and has a robust security mechanism. Furthermore, the ChainLink team has agreed to accommodate our request for a faster price feed by providing a custom feed that allows Dfyn to query the most recent MATIC price every 30 seconds.
Are there any fees?
Yes, a small percentage of each round’s total pool will be credited to the Dfyn treasury. This fee will later be used to buy back and burn DFYN.
How is the payout calculated?
For each round, the payout is calculated using the following formulas:
- Payout Ratio for the BULL Pool = Prize Pool ÷ TVL in the BULL Pool
- Payout Ratio for the BEAR Pool = Prize Pool ÷ TVL in the BEAR Pool
For example, if 1500 MATIC is locked in the BEAR pool, and the overall prize pool is 4500 MATIC, the BEAR payout ratio will be (4500÷1500)=3x, and the BULL payout ratio will be (4500÷3000)=1.5x. The following formula gives the payout received by each winner:
- Payout Amount = Payout Ratio × Value Locked× (1 — Treasury Fee)
In the above case, if you entered a BEAR position with 200 MATIC, and the round ends in a BEAR result, you would get a payout of (3*200) × (1–0.05) = 570 MATIC (assuming a fee of 5%). Your profit would be 370 MATIC (570–200).
Note: The fee percentage is subject to change.
What are the edge cases and how are they handled?
There are two edge cases that the users must be aware of —
Case 1) All participants in a round enter the same side (for example, if everyone takes BEAR position): In such an event if the round ends with the position that the users entered, their locked funds are returned to them (minus the fee). However, if the round ends with the opposite position, the funds will be credited to the treasury.
Case 2) Closed price in a round is equal to the locked price: In such an unlikely event, no one will be regarded as the winner, and all the locked funds will be transferred to the treasury.
Note: The prediction markets are currently in BETA. Despite our team’s thorough testing, a few bugs might still be present. Use this feature at your own risk.
Dfyn is a multi-chain AMM DEX currently functional on the Polygon network. Dfyn nodes on various chains act as liquidity entry and exit points into the cross-chain liquidity super mesh that is being enabled by Router Protocol.
Telegram Announcement: https://t.me/dfynofficial