Predik Light Paper

1. Abstract

Simple Terms

Predik lets you trade on real-world outcomes (sports, politics, crypto, economic data). Early believers get better prices. Trading is gasless. If you're right, your shares pay out.

Key Innovation: Markets must earn their launch.

Instead of the protocol seeding liquidity, users fund markets in Pre-Market. If enough people commit, the market graduates and becomes tradable. If not, commitments are refunded.

What this enables

No treasury seeding → markets scale with community demand
Gasless trading → viable for $1–$20 trades
Solvency-first → the system never promises more than it can pay

2. The Problem

Simple Terms

Prediction markets are useful and often accurate, but most people can't use them because of restrictions, fees, and complexity.

Why this matters in LATAM

Users are mobile-first and fee-sensitive
Many are blocked or underserved by existing platforms
People care deeply about sports + politics + inflation + FX + crypto

Main barriers today

Access: geo/KYC restrictions limit who can participate
Cost: on-chain trading fees make small trades irrational
Cold-start: markets need liquidity up-front or they're dead-on-arrival
UX: most tools are built for advanced crypto traders, not mass users

3. Predik in One Page

3.1 Two-Phase Market Lifecycle

Draft → Pre-Market (Discovery) → Graduation → Live (Trading) → Resolved → Closed
            │                        │
            └── if not enough demand └── disputes possible
                → Voided + Refunds        → Kleros (if challenged)

3.2 What happens in each phase?

Phase I — Pre-Market (Discovery)

Users commit USDC to outcomes
Prices move on a simple bonding curve
Early committers get better average prices
Market goes Live only if thresholds are met

Graduation

If minLiquidity + minCommitters are met before the deadline → market becomes Live
Otherwise → voided and refunds return users' commitments

Phase II — Live (Trading)

An automated market maker (CS-LMSR) always quotes buy/sell prices
Users can trade instantly, gasless (off-chain), with on-chain recoverability

Resolution

Oracles propose the outcome
Disputes are allowed (bonded)
Admin performs final sanity check before funds move (safety over liveness)

4. Roles & Incentives

Simple Terms

Predik works because each role has a reason to behave honestly.

Role	What they do	Why they do it
Creator	Proposes a market + posts a bond	Earn fee share; reputation; spam deterrence
Early Committer	Funds Pre-Market	Gets better prices + helps market go live
Trader	Buys/sells in Live	Trades beliefs; can hedge, take profit, or reposition
Disputer	Challenges incorrect outcomes	Prevents bad resolutions; rewarded if correct
Protocol	Runs infra + safety checks	Earns fees to sustain operations

Key Insight: Predik avoids "dead markets" by forcing demand validation before live trading exists.

5. Phase I: Pre-Market Discovery

Pre-Market is the discovery stage: users commit USDC to outcomes, early participation sets the initial pricing, and the market either graduates into Live trading or voids with refunds.

5.1 What users experience

In this phase you’re not trading yet — you’re validating demand and funding the initial liquidity while the market discovers a starting probability.

Simple Terms

The earlier you commit, the cheaper your position is. As more money comes in, the price rises. If the market never gets enough interest, you get refunded.

5.2 Graduation criteria

A market graduates if ALL conditions are met:

Criterion	Absolute Minimum	Default	Configurable
Minimum liquidity	$100	$250	✅ per-market
Minimum committers	10	15	✅ per-market
Deadline	—	7 days	✅ per-market
Anti-whale cap	33% × minLiquidity	—	fixed rule

If the deadline passes without graduation → Voided + Refunds.

5.3 Bonding curve (reader-level)

Bonding curves are the incentive engine for discovery: committing earlier means you get a better average entry price, and later demand pushes the displayed probability upward.

Simple Terms

Price starts near "even odds," then rises as more USDC is committed to that outcome.

Each outcome has a curve that maps committed collateral → displayed price signal
The UI shows an implied probability that is normalized across outcomes so totals sum to 100%

Technical details

Per-outcome score:

s_i(C_i) = P_0 + K \cdot C_i

Where:

$P_0 = \frac{1}{N}$
$K = \frac{P_{ceiling} - P_0}{\text{minLiquidity}}$ (per-market)

Displayed probability (normalized):

p_i = \frac{s_i}{\sum_j s_j}

5.4 Shares minted for a commitment

Commitments translate into shares. Shares are what you ultimately hold through resolution: if your outcome wins, each winning share pays $1 at settlement.

Simple Terms

If you commit $X, you receive "shares." If your outcome wins, each share pays $1 at settlement.

Technical details

Shares are minted by integrating the inverse price signal along the curve:

\text{shares}_i = \int \frac{1}{P_0 + K \cdot C} \, dC

Closed form:

\text{shares}_i = \frac{1}{K} \times \ln\left(\frac{P_0 + K \cdot C_{after}}{P_0 + K \cdot C_{before}}\right)

5.5 Anti-whale cap

Early markets are most sensitive to manipulation. A hard cap per wallet keeps discovery credible by limiting concentration while the market is still bootstrapping.

Simple Terms

No single wallet can dominate Pre-Market.

Technical details

\text{maxPerUser} = 0.33 \times \text{minLiquidity}

This is a fixed dollar cap per market (predictable for users), not a % of current total.

6. Graduation Transition

This is the "bridge" that makes the design coherent.

6.1 What must be true at graduation

Graduation is the moment a market becomes a real-time trading venue. We lock in parameters so Live pricing starts sane and the protocol’s payout obligations stay bounded.

Simple Terms

We need Live trading to start from a sensible price, while guaranteeing the protocol can pay winners.

At graduation we must define:

starting prices for Live trading
how Pre-Market shares become Live claimable shares
the Live AMM state variables

6.2 How Pre-Market becomes Live

The key mapping is: users keep the shares they earned, and we initialize the Live AMM so its opening price matches the final Pre-Market probabilities.

Simple Terms

Users keep the shares they earned in Pre-Market (they are claimable at $1 if correct).
The Live AMM is initialized so the starting Live price matches the final Pre-Market probabilities.
Any "virtual initialization" used for pricing is not claimable by users and does not create payout liabilities.

Technical details

Let:

$S_i$ = total user claimable shares for outcome i minted during Pre-Market
$p_i^{pre}$ = final normalized Pre-Market probabilities at graduation
b = Live CS-LMSR liquidity parameter (defined next section)
$q_i$ = AMM pricing state (can include non-claimable inventory)
$L_i = S_i$ = liability shares (claimable by users)

We initialize AMM state with a gauge shift vector $g_i \geq 0$ so that:

Prices match at Live start:

p_i^{live}(0) = \frac{e^{(S_i + g_i)/b}}{\sum_j e^{(S_j + g_j)/b}} = p_i^{pre}

Solvency uses liabilities, not gauge inventory:

\text{marketCollateral} \geq \max_i(L_i)

where $L_i = S_i$ . This keeps pricing well-formed without inflating payout obligations.

7. Phase II: Live Trading (CS-LMSR)

Once a market graduates, trading is continuous and prices respond to buy/sell pressure. Predik uses a solvency-safe AMM (CS-LMSR) so there is always a quoted price without requiring an order book.

7.1 What users experience

Live trading feels like a normal market: you can enter or exit at any time, and the price updates instantly based on net demand.

Simple Terms

Once Live, there's always a price to buy or sell. Buy YES → YES price rises. Sell YES → YES price falls. You can enter/exit anytime.

7.2 Liquidity parameter

The liquidity parameter $b$ controls how sensitive prices are to trades. Higher collateral at graduation implies a larger $b$ and therefore smaller price movement per trade.

Simple Terms

Markets with more collateral are deeper (prices move less per trade).

Technical details

At graduation, with total collateral $C_{grad}$ and N outcomes:

b_{raw} = \frac{C_{grad}}{\ln(N)}

b = \text{clamp}(b_{raw}, B_{min}, B_{max})

7.3 Cost & price functions

LMSR markets are defined by a cost function. Trading moves the market from one state to another; the difference in cost is what the trader pays (or receives), and the implied price is derived from that state.

Technical details

Cost function:

C(q) = b \times \ln\left(\sum_i e^{q_i/b}\right)

Trade cost:

\Delta C = C(q') - C(q)

Instantaneous prices:

p_i = \frac{e^{q_i/b}}{\sum_j e^{q_j/b}}

Properties:

$\sum_i p_i = 1$
$0 < p_i < 1$

8. Gasless Execution & Trust Model

Live trading is fast because it happens off-chain in Yellow sessions. The chain remains the final source of truth for custody and recovery, so funds are always redeemable even if off-chain infrastructure fails.

8.1 Why gasless matters

Removing per-trade gas fees makes small positions and frequent adjustments viable. Users deposit and withdraw on-chain, but trading itself stays instant and free.

Simple Terms

Paying blockchain fees on every trade kills adoption. Predik trades off-chain and touches the chain only for deposit/withdraw.

8.2 User flow

Deposit (on-chain) → Trade (off-chain, gasless) → Withdraw (on-chain)

8.3 What is secured on-chain vs off-chain

On-chain (BNB Chain)

USDC custody
deposits/withdrawals
final settlement execution

Off-chain (Yellow sessions)

fast trade execution
frequent state updates
balance proofs for recoverability

8.4 Trust model (explicit)

This section spells out the trust boundaries: what Predik is allowed to do for UX, what it cannot do because custody is on-chain, and what users retain (the ability to exit/recover).

Simple Terms

Predik optimizes for a Web2-fast UX, but keeps an on-chain escape hatch.

What Predik controls: market orchestration, quoting, and submitting state updates in the Yellow session.
What Predik cannot do: withdraw your USDC from custody without the correct finalization path / proofs.
What users always retain: the ability to recover balances from custody using the correct recovery mechanism (challenge window / balance proofs).

Design choice: Safety over liveness. If there's doubt, the system pauses trading, not payouts.

9. Resolution & Disputes

Resolution is where value is realized: we determine the winning outcome, handle challenges, and then execute payouts from custody. Predik prioritizes correctness over speed.

9.1 Resolution flow

The protocol proposes an outcome using oracle data, gives the community time to challenge, and then finalizes once disputes (if any) are resolved.

Simple Terms

Oracles propose what happened. People can challenge. If challenged, a decentralized jury decides. Admin confirms the final action for safety.

Oracle proposes → Dispute window → (optional) Kleros → Admin confirms → Payouts

9.2 Oracle tiers

Tier	Source	Use case
Tier-1	DelphAI	objective feeds (price, sports scores, etc.)
Tier-2	Multiple APIs	cross-check / fallback
Tier-3	Admin manual	edge cases / subjective outcomes

9.3 Disputes (bonded)

Disputes are intentionally costly: the bond is an anti-spam mechanism that makes challenges credible while still keeping honest challengers economically protected.

Simple Terms

Challenging costs money to prevent spam. If you're right, you win.

Technical details

\text{bond} = \max(\text{BOND}_{min}, \alpha \times C_{market})

Bond is 2% of market collateral with a $25 minimum. No maximum cap—larger markets require proportionally larger bonds to challenge.

9.4 Why admin-gated settlement

Admin confirmation is a narrow safety step: it’s there to prevent obvious oracle/API mistakes and edge cases from triggering incorrect payouts, not to change outcomes.

Simple Terms

A 30–60 second human sanity check prevents catastrophic oracle/API mistakes.

Admin confirms the proposed outcome matches reality + no active disputes
Admin cannot override Kleros rulings
Emergency modes prevent indefinite stalling (see Security)

10. Security & Protections

These protections exist to keep the protocol solvent under stress and to guarantee users can always recover value from custody, even during incidents.

10.1 Solvency

Solvency is a hard invariant: the protocol must always have enough collateral to pay the maximum possible payout if the winning outcome is the one with the most claimable shares.

Simple Terms

Predik never accepts states that would make it unable to pay winners.

Solvency invariant

\text{marketCollateral}[m] \geq \max_i(L_i)

Where $L_i$ are claimable winning shares (user positions), not any virtual inventory used for pricing.

10.2 Built-in protections

Protection	What it prevents
Anti-whale cap	domination at discovery
Dispute bonds	spam challenges
Admin-gated settlement	oracle glitches / edge cases
WithdrawalOnly mode	incident containment
Balance proofs	user recoverability
Timeouts	indefinite limbo

10.3 Emergency mode (WithdrawalOnly)

Emergency mode is a circuit breaker. It stops new risk from entering the system while keeping exits available so users aren’t trapped.

Simple Terms

If something looks wrong, trading stops and exits remain open.

Guardian triggers WithdrawalOnly
No new trades
Users withdraw at defined rules (cost basis / safe unwind)
Timeout enforces progression to resolution path

11. Economics

Economics are designed to maximize graduation, sustain operations, and align creators with quality markets. Fees are low by default and only apply once Live trading begins.

11.1 Fees

Pre-Market is fee-free to encourage early participation. In Live, small fees fund infrastructure and share revenue with creators.

Simple Terms

Pre-Market is free to maximize graduation. Live trading charges a small fee to sustain the protocol and reward creators.

Phase	Fee
Pre-Market	0%
Live trading	1% (default; configurable)

Split: 70% treasury / 30% creator

11.2 Creator incentives

Creators earn when their market gets volume.

Example:

$10,000 Live volume → $100 total fees → $30 to creator, $70 to treasury (creator bond is non-refundable)

11.3 Sustainability (no subsidy requirement)

Predik is designed to sustain from usage:

fee revenue
dispute-bond penalties (for frivolous challenges)
operational discipline (no "must print tokens to survive" assumption)

Note: exact fee level can be tuned as the product learns; the principle stays: low fees, creator-aligned, sustainable.

12. Conclusion

Predik is a prediction market protocol optimized for LATAM adoption:

Self-bootstrapping markets → no treasury seeding required
Gasless execution → micro-trades become viable
Solvency-first design → can always pay winners
Dispute-capable resolution → correctness over speed

El futuro tiene precio.

Predik makes that price accessible.

13. Technical Appendix

13.1 Key parameters (v2.6)

Market

BOOTSTRAP_MIN = $100 (required)
MIN_COMMITTERS = 10 (required)
CONCENTRATION_CAP = 33% × minLiquidity
CREATOR_BOND = $1
PREMARKET_DEADLINE_DEFAULT = 7 days

Fees

PREMARKET_FEE_RATE = 0%
FEE_RATE = 1% (buys only, sells are free)
FEE_SPLIT = 70% treasury / 30% creator

Bonding curve

P0 = 1/N
P_CEILING = 0.70
PRICE_HARD_CAP = 0.999

CS-LMSR

B_MIN = 100
B_MAX = 10000
MIN_TRADE_SIZE = $1.00
EPSILON_FLOOR = 0.01

Resolution

DISPUTE_WINDOW_STANDARD = 48h
DISPUTE_WINDOW_FAST = 2h
DISPUTE_BOND_MIN = $25
DISPUTE_BOND_ALPHA = 2% (no cap)
RESOLUTION_TIMEOUT = 14 days

Yellow

CHALLENGE_PERIOD = 1 hour
(Session governance params per deployment)

13.2 Formula reference

Bonding curve score:

s_i(C_i) = P_0 + K \cdot C_i

Slope:

K = \frac{P_{ceiling} - P_0}{\text{minLiquidity}}

Normalized display price:

p_i = \frac{s_i}{\sum_j s_j}

Shares minted:

\text{shares}_i = \frac{1}{K} \times \ln\left(\frac{P_0 + K \cdot C_{after}}{P_0 + K \cdot C_{before}}\right)

Anti-whale cap:

\text{maxPerUser} = 0.33 \times \text{minLiquidity}

CS-LMSR liquidity:

b = \text{clamp}\left(\frac{C_{grad}}{\ln(N)}, B_{min}, B_{max}\right)

LMSR cost:

C(q) = b \times \ln\left(\sum_i e^{q_i/b}\right)

Prices:

p_i = \frac{e^{q_i/b}}{\sum_j e^{q_j/b}}

Dispute bond:

\text{bond} = \max(\text{BOND}_{min}, \alpha \times C_{market})

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Lightpaper

Table of Contents

1. Abstract

What this enables

2. The Problem

Why this matters in LATAM

Main barriers today

3. Predik in One Page

3.1 Two-Phase Market Lifecycle

3.2 What happens in each phase?

Phase I — Pre-Market (Discovery)

Graduation

Phase II — Live (Trading)

Resolution

4. Roles & Incentives

5. Phase I: Pre-Market Discovery

5.1 What users experience

5.2 Graduation criteria

5.3 Bonding curve (reader-level)

5.4 Shares minted for a commitment

5.5 Anti-whale cap

6. Graduation Transition

6.1 What must be true at graduation

6.2 How Pre-Market becomes Live

7. Phase II: Live Trading (CS-LMSR)

7.1 What users experience

7.2 Liquidity parameter

7.3 Cost & price functions

8. Gasless Execution & Trust Model

8.1 Why gasless matters

8.2 User flow

8.3 What is secured on-chain vs off-chain

On-chain (BNB Chain)

Off-chain (Yellow sessions)

8.4 Trust model (explicit)

9. Resolution & Disputes

9.1 Resolution flow

9.2 Oracle tiers

9.3 Disputes (bonded)

9.4 Why admin-gated settlement

10. Security & Protections

10.1 Solvency

10.2 Built-in protections

10.3 Emergency mode (WithdrawalOnly)

11. Economics

11.1 Fees

11.2 Creator incentives

11.3 Sustainability (no subsidy requirement)

12. Conclusion

13. Technical Appendix

13.1 Key parameters (v2.6)

Market

Fees

Bonding curve

CS-LMSR

Resolution

Yellow

13.2 Formula reference

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