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pm-AMM: A Uniform AMM for Prediction Markets - Paradigm

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In this post, we introduce a new automated market maker (AMM) customized for prediction markets: the pm-AMM. AMMs and their predecessors, such as market scoring rules, were originally invented as a way to provide liquidity for prediction markets. They now dominate most decentralized exchange volume in crypto. But ironically, despite prediction market volumes taking off in crypto, most of it uses orderbooks, not AMMs. One possible reason is that existing automated market makers are a poor fit for outcome tokens (tokens that resolve to $1 if an event occurs and $0 if it does not occur). The volatility of outcome tokens is dependent on the current probability of the event and the time until the prediction market expires, meaning that the pool provides inconsistent liquidity. Liquidity providers (LPs) are also essentially guaranteed to lose all of their value once the prediction market expires. We present a new AMM optimized around these considerations. This required addressing a longstand

pm-AMM: A Uniform AMM for Prediction Markets - Paradigm Research pm-AMM: A Uniform AMM for Prediction Markets 11.05.2024 | Ciamac Moallemi Dan Robinson Outline 1. Introduction 2. Contributions 3. Background 1. Prediction markets 2. Loss-vs-rebalancing and uniformity 4. Prior work 5. Model 6. Uniform AMMs 7. Static pm-AMM 8. Dynamic pm-AMM 9. Conclusion 10. Acknowledgements Introduction In this post, we introduce a new automated market maker (AMM) customized for prediction markets: the pm-AMM. AMMs and their predecessors, such as market scoring rules, were originally invented as a way to provid

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