Catnip Exchange Receives Grant to Build New Prediction Markets on Balancer Smart Pools

Jeremy Musighi
Balancer Protocol
Published in
3 min readJan 25, 2021

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I’m excited to announce that Balancer Labs has awarded a grant to Catnip Exchange, for its newest project to build a new type of prediction market, through the creation of a never-before-seen Balancer Smart Pool implementation.

You may remember Catnip Exchange from their explosive prediction market on the 2020 U.S. presidential election, which was also built on Balancer. This betting market was built by designing a Balancer Public Pool consisting of two Augur outcome tokens: yTrump (betting on a Trump win), nTrump (betting on a Biden win), and DAI.

The yTrump/nTrump/DAI pool has seen ~11 million USD in total swap volume and was the highest volume pool on Balancer on and around Election Day in early November. An additional nTrump/DAI Balancer pool that Catnip later created saw another three million in swap volume.

The Catnip team has used Balancer to deploy several other politics-related prediction markets, as well as its first markets for sports, with its recent launch of several NFL playoffs betting pools.

Their latest project will utilize Balancer Smart Pools to create a multiple choice betting market for the Australian Open.

Like Catnip’s prior pools, it will be composed of tokenized outcome shares from an Augur market, in this case one on who will win the Australian open, as well as DAI.

Each outcome token in the pool will represent a different tennis player with an additional token “Other” to represent all unlisted contenders. Once the underlying Augur market settles, the token representing the winner will be redeemable for one DAI, and the other tokens will pay out zero.

At any point in time, the price a token is trading at will signal the market’s perceived odds of that player winning. For example, if Nadal is trading at .15, that would signal 15% odds of him winning the Australian Open.

A generic Public Pool would not work for this use case, since after each match, the token representing the disqualified player would lose all its value. At that point, an attacker could mint complete sets of tokens and swap in the losing token for the other tokens to extract all the pool’s value.

So Catnip will use a Smart Pool with adjusting (narrowing) token compositions.

Before each match, pool swapping will be halted. Once the match is complete, the disqualified player will be removed, weights will be adjusted for the remaining players, and trading will be resumed. This will mitigate LP risk while delivering a better UX for traders. Pool parameter changes will be controlled by a Gnosis Safe Multisig.

This construct will be generalizable into other sports tournaments as well as use cases beyond sports like Primary elections. Like all projects that receive grants from the Balancer Ecosystem Fund, the code will be fully open source and shared with the public.

As applications for Balancer Ecosystem Fund continue to heat up, we’re thrilled by the continuous flow of exciting new projects using Balancer to come out with novel products and services. Keep ’em coming!

If you have an idea to build something cool using Balancer, we want to help you bring it to life! Please read about the grant application process here and submit your proposal here.

If you want to get involved in the Balancer ecosystem in general, join us on Discord. New opportunities are popping up regularly and there is a role for you to play in our movement!

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