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Market Creation

Creating a Polkamarkets Prediction Markets is a feature only available to POLK holders to help increase the quality of markets.
Once created, a market is immutable: the creator cannot change any of its properties.

Properties

A Prediction Market created in Polkamarkets always has the following properties:
Question
The question defines what the prediction market is about by asking what the outcome of an event will be. It should be written in a clear and unambiguous manner, so that forecasters are always sure what the predictions theyโ€™re asked to make are related to. A simple example of what a clear and ambiguous question could be is โ€œWhich candidate will win the 2022 Brazilian general election?โ€
Outcomes
A Prediction Market must have at least two possible outcomes, and can have up to 32 possible outcomes. Outcomes must be written in a clear and ambiguous manner, and cover all the possibilities of how the future event may unfold. Outcomes are always priced between 0 and 1 units of the marketโ€™s selected token, and the sum of the prices of all outcomes in a market is always equal to 1. When forecasters decide to buy a given outcome, they will effectively buy shares of that outcome at its current price. If that market is chosen as the correct outcome once the market is resolved, the price of its shares will become 1, that the price of all other outcomes will become 0. Every trade (buy or sell transaction) impacts the price of an outcome. Possible outcomes for the example Question above could be: Lula priced at 0.7, Bolsonaro priced at 0.29, and โ€œSomeone elseโ€ priced at 0.01. When Lula won the election, the price of the Lula outcome would have gone to 1, and the price of all other outcomes would have become 0. In the rare case where the outcome of the market was unforeseen, the market can be considered Invalid. In this case, the price of the outcomes will not go to 0 nor 1, and traders get back their shares and receive an amount of the selected market tokens equivalent to the number of shares multiplied by the price of the outcome at the time that the market closed. A possible scenario where the example market above could be considered Invalid would be if the elections were cancelled. To learn more about how outcome prices are calculated, please read the Trading and Price Calculation section.
Closing date (expiration date)
A Prediction Market must always close at a certain date, set by the Market Creator before the market is Open โ€“ the Closing Date. The Closing Date should be set to before the event happens, so that trading stops before the outcome is known and that outcome prices donโ€™t become heavily skewed. In the example above, the first round of the 2022 Brazilian general election was scheduled for October 2, 2022, so that example market could be scheduled to close on October 1, 2022. Once a market has closed, POLK holders are able to bond POLK tokens to the outcome that they believe is correct. This process is called โ€œmarket resolutionโ€. To learn more, please read the Market Resolution section.
Description
It is paramount that forecasters understand the criteria used to determine the right outcome of a Prediction Market. The Description field must be used to clarify the context of the market, and the criteria for determining the correct outcome, and in what circumstances the market must be considered Invalid. For the example above, the Description should state that the correct outcome will be determined according to the election result published by the Superior Electoral Court of Brazil, and that the market must be considered Invalid if the election were to be canceled or postponed.
Resolution source
In addition to the Description, a Polkamarkets Prediction Market must include the URL of a trustworthy source where the correct and indisputable outcome of the market will be published. In the example above, the Resolution source could be the website of the Superior Electoral Court of Brazil: https://www.tse.jus.br/
Category and Subcategory
The Category and Subcategory fields of a Polkamarkets Prediction Market are intended for the developers of web applications and data visualization tools. With this information, they can make it easier for end-users to find markets that are of interest to them. For the example above, a possible Category could be โ€œPoliticsโ€ and the Subcategory could be โ€œBrazilโ€ or โ€œElectionsโ€.
Image
The Image field takes in the URL of a JPG, GIF or PNG file that can be used to illustrate a market when the information is displayed on a web page. This image can be used as an avatar or a header โ€” itโ€™s up to the developer of the web application to decide whether to use it or not. For the example above, an appropriate image could be that of a flag of Brazil.
Blockchain / Network
The Polkamarkets Protocol is deployed on several blockchains / networks, but a given market can only exist in one blockchain / network. Similar markets (even with one identical question, outcomes, etc.) can be created on other networks where the protocol is deployed as well, but they will operate independently. The example prediction market above could have been created on Polygon, for example.
Token
Polkamarkets Prediction Markets can operate with any ERC-20 token chosen by the Market Creator that exists on any blockchain where the protocol is deployed. The tokenโ€™s contract address must be supplied when creating a market to specify which token that market will operate with. When using the blockchainโ€™s native token (for example, MATIC for Polygon), a wrapped version of the token will be used, since Polkamarkets works with ERC-20 tokens only. For example, the market above could have used $USDC as its token, contract address on Polygon being 0x2791Bca1f2de4661ED88A30C99A7a9449Aa84174
Liquidity
Like any trading market, a Polkamarkets Prediction Market must have an appropriate amount of liquidity for it to enable meaningful trades. The Polkamarkets Protocol uses an Automated Market Maker (AMM) algorithm, similar to that used by Uniswap and other DEXes, making it possible for anyone to add and remove liquidity to markets at any moment. It is this algorithm that is responsible for changing the prices of the outcomes whenever a trade (buy or sell transaction) happens. The more liquid a market is, the better it can handle large trades without impacting the price of the outcomes too much. A market with a small amount of liquidity will not be able to absorb large trades without having a large impact on outcome prices. The more liquid a market is, the better. Market Creators are required to add liquidity when they create a market. While the market is open, any user, including the creator, can add or remove liquidity. Liquidity is an important feature, but it is not without risks. Please read the Market Liquidity section of this documentation before you decide to add liquidity to a Polkamarkets Prediction Market.
Liquidity Providers Fee
To incentivise liquid markets, the Polkamarkets Protocol gives Market Creators the possibility to set a trading fee as a reward for Liquidity Providers. By default, it is set to be 2% of every trade, but the Market Creator can set a higher fee (up to 5%), a lower fee, or even remove the fee by setting it to 0%. Adding liquidity to a market can be rewarding, but it is not without risks. Please read the Market Liquidity section of this documentation before you decide to add liquidity to a Polkamarkets Prediction Market.
Creator Fee
To incentivise market creation, the Polkamarkets Protocol gives Market Creators the possibility to set a Creator Fee as a reward for themselves. By default, it is set to be 1% of every trade, but the Market Creator can set a higher fee (up to 5%), a lower fee, or even remove the fee by setting it to 0%. The Market Creator can insert a wallet address to be the recipient of the Creator Fee.

How Market Creation Works

๐Ÿ–๏ธTips and Strategies for Prediction Market Creators