Potion Insurance: Priceless system

Potion uses UMA’s priceless contract technology and has access to its distributed human oracling solution.

UMA uses clever game theory to minimize the number of times participants call the Oracle, saving both on-chain fees and time, and minimizing cheating.

This is how it works:

Users are able to either accept automatically proposed pricing (coming from a coingecko API feed), or to submit their own manually if they believe automatic pricing isn’t working. After proposing a price for the protocol, two scenarios can take place:

• Undisputed pricing: When users’ submitted pricing matches pricing observed by contract seller, no Oracle will be required.
• Disputed pricing: If the sponsor disagrees with pricing used by users when buying potion puts, or exercising them, they’re able to dispute the operation and invoke UMA’s DVM oracle. The DVM Oracle will to ask $UMA holders to vote on a neutral price, and the dispute will be settled on-chain.

Both parties benefit from this approach

• Users are incentivized to use correct pricing, or else they risk facing penalties, and losing money.
• In case of disagreement, a neutral third party distributed human oracle will produce a price and settle the dispute
• In most cases, the right price will be used, saving on-chain transaction costs, oracle calls and delays.