Introducing Forecastory
TL;DR
Forecastory is a new prediction market protocol based on Ethereum that incorporates a new paradigm of mechanism to provide liquidity for long-tail markets.
Earning opportunities on Ethereum
One of Ethereum’s visions is to create an internet-native economy on the Internet. After the ICO frenzy of 2017~2018, it has grown to a rich financial ecosystem. This move has taken Ethereum’s utility one step further. In addition to speculation and trading, people can lease assets in a decentralized manner. Many markets today are capital-intensive, but I’m looking forward to the development of labor-intensive markets on Ethereum. One such market is the idea of prediction markets.
The potential of prediction markets
a prediction market is a kind of derivative market to predict the future. Users bet on the most probable outcome of a future event, and they will get rewarded if their predictions were correct.
Since Ethereum enabled a turing-complete smart contract environment on the Internet, it became much easier to create markets on anything. Theoretically, there can be thousands of markets from global to local topics. However, this has been difficult due to constraints of mechanism.
One of the core issues in the current prediction markets is insufficient liquidity of the market.
Prediction markets are a type of derivative market for predicting the future. Users can bet on the most likely outcome of future events, and they are rewarded if their predictions are correct.
Ethereum has enabled a turing-complete smart contract platform on the Internet, making it easy to create markets on anything. In theory, there could be thousands of markets, ranging from global to local topics. However, this is difficult to do due to the limitations of the mechanism.
One of the core limitations of current prediction markets is the lack of market liquidity.
There have been several mechanisms for prediction markets.
order-book based matching
This type is the most traditional and widely known mechanism. Most centralized exchanges such as Coinbase, Binance, and decentralized exchanges such as 0x are using this mechanism for exchanges. This mechanism’s core issues are that it is difficult to provide enough liquidity for long-tail markets, and thus, price discovery fails.
Uniswap style AMM(Automated market maker)
Uniswap first implemented a working protocol for x*y=k model introduced by Vitalik Buterin.
Technically speaking, this mechanism is called Constant Product Market Maker(CPMM). A big advantage for this mechanism is that it is guaranteed to provide liquidity for any pair of token exchanges as long as liquidity providers stake token pairs. One issue for CPMM is that it always causes ‘Imperamanent loss’ for liquidity providers. It is a problem that Impermanent loss may become “Permanent loss” in prediction markets, and loss tends to become large for highly volatile prediction markets. This is a disincentive to attract liquidity providers to markets
Forecastory is aiming to solve those issues with a new prediction market mechanism.
Predicton market composability
Forecastory aims to bring Defi-like composability to prediction markets. Forecastory becomes gradually community-driven and decentralized. Forecastory becomes oracles agnostic, allowing more flexibility for NFT or Defi protocols on the Ethrereum network.
Forecastory, a new prediction market protocol
Forecastory combines two mechanisms
Parimutuel betting mechanism
The Parimutuel mechanism is a known AMM mechanism for betting. While this method is not suitable for exchanges, it has the richest history compared to other betting mechanisms. The pari-mutuel method’s advantage is that there is always liquidity, and there is no need for a liquidity provider like CPMM. The problem with this method is that the price is usually always constant, making it difficult to incentivize early market participation and reflect dynamic market expectations about the future.
Dynamic pricing powered by bonding curve mechanism.
The Bonding Curve mechanism introduced by Simon de la Rouviere eliminates the above problem by providing price movement; Forecastory gives more incentive to those who make the right predictions early on than to those who make them later on. The price movement is usually in response to the total token issued. Also, the bonding curve mechanism creates price arbitrage opportunities for traders.
Predicton maket composability
Forecastory aims to bring Defi-like composability to prediction markets. Forecastory becomes gradually community-driven and decentralized. Forecastory is also oracle agnostic, allowing more flexibility for NFT or Defi protocols on the Ethrereum network.
Try forecastory; shape the future.
Forecastory is live on the Rinkeby test net.
You can learn more on the Tutorial page and documents.
You can get test net tokens; Eth faucet and Dai faucet.
After being tested on Rinkeby for a while, Forecastory becomes live on the mainnet.
UPDATE October 14th
Forecastory is live on mainnet.
Please use it at your own risks.
Learn more
If you have some questions about Forecastory, please reach out to @kohshiba on Discord or Twitter. Feedback is also welcome!
