Omen: DXdao’s New Flagship Product
In the span of 10 days, the DXdao went from a hush experiment from its progenitor Gnosis and a collective of hard-working developers, to a noteworthy flash of the 2017 ICO era. The DXdao’s OpenRaise leaped from their completed 250 ETH kickstarter threshold (in under 24 hours) to over 5,000 ETH under management just ten days later. But now that the hype has tempered down, what is DXdao up to now? Mesa was their first product, built as a fork from a Gnosis open-source repository. But what will be the flagship product that the builders of DXdao can call their own?
Introducing Omen
Omen is a fully decentralized prediction market platform built on top of the Gnosis conditional token framework. Slated to launch in the coming weeks, Omen will allow anyone to create a prediction market- be it in the realm of crypto, sports, politics, entertainment, etc.- and stake funds on a particular outcome.
“People can and will continue to disagree about important topics — that is natural and important — but prediction markets force them to acknowledge the current consensus and whether their input is persuasive.” — Flip Incoming, “The Case for Prediction Markets”
Generally, if you look at the cryptocurrency market, people buy and sell crypto based on their prediction of its future value. Prediction markets (also known as information markets, idea futures, event derivatives, decision markets, etc.) allow people to buy and sell outcomes of events. Because people are staking their funds in these markets, the truth becomes its own profit-bearing asset. Prediction markets can serve as aggregators of superior knowledge, where the market share price adjusts to new information and reflects the probability of future outcomes. Omen facilitates all of this on-chain through Gnosis’ conditional token framework.
How does Omen work?
A prediction market can be established in a matter of minutes. To open a prediction market, all you need is an event, a set of outcomes, a resolution date, a category, funds to create the market, and an arbitrator.
Omen will support any token given by DXdao’s Token Curated Registry (totaling 9 thus far, including DXD and various ERC-20 stablecoins), whereas Augur currently supports only ETH, with v2 to switch it to DAI.
The user stakes their crypto (DAI for example) as collateral, which then creates outcome tokens. In the above example, the three outcomes to “Who will win the 2020 United States presidential election?” are Donald Trump, Joe Biden, and Someone else. In this case, three outcome tokens are minted for each amount of DAI staked. The market contracts hold the DAI collateral until the outcome is determined, which will make one of the token sets redeemable, and the others irredeemable.
Over time, the price valuations of each outcome may fluctuate in relation to new information being released. Trading outcome tokens helps discover the value of different opinions in a more objective way. Price discovery is the market’s language of prognostication: hence the name Omen.
Liquidity is enabled through a fixed product market maker, similar to that of Uniswap and Balancer. This grants users the liquidity necessary to trade anytime on-chain. There is a trading fee set by Omen itself to compensate liquidity providers.
There are two ways to enter these prediction markets- minting new conditional tokens, and selling the ones that have the outcome(s) you favor less, or purchasing someone’s already-minted conditional tokens from the market. However, most users will join the prediction market by buying and eventually selling outcomes against the automated market makers.
How are outcomes determined?
When a prediction market reaches its resolution date, the outcome is determined by Realitio. Users on Realitio post bonds for their chosen outcomes, and they can be challenged by someone posting a new answer, and doubling the bond. This may happen for several cycles until the posting stops, and the answer is determined by the last one to post their bond. If someone doesn’t agree with Realitio’s outcome as a market reporter, they can dispute it through arbitration via Realitio or Kleros.
Kleros selects a randomized subset of jurors from a juror pool by sortition and applies game-theoretical incentivization to align the pseudonymous voters to consensus. Arbitration can be appealed until the users simply stop paying for arbitration. Those who stake on the correct outcomes collect from those who staked on the incorrect outcome. In the future, the DXdao, the self-governing organization behind Omen, could also function as a competent arbiter.
It will be interesting to see some of the first dispute resolution cases, if any. We may just have to see how the community interacts with Omen’s sleek prediction market platform as an economic opinion of future events.
For more updates, follow:
This article is for informational purposes only. Please seek independent legal and financial advice in your jurisdiction before making any investment decisions.
