Price Dynamics
Kairos operates on the principles of bonding curves to manage the price of shares in prediction markets. One key feature of betBTC is that users can withdraw their shares at the price they bought them without incurring any fees, which encourages active market participation and enhances trust.
Key Features
Fair withdrawal Without Fees: Users are guaranteed to withdraw their shares at the price they bought without any fees deducted, ensuring a fair and transparent trading environment.
Market Liquidity: The absence of withdrawal fees encourages active market participation and maintains liquidity, as users can freely adjust their positions without penalty.
Bonding Curve-Based Price Adjustments: Prices are determined by bonding curves that adjust in response to market supply and demand, ensuring real-time reflections of market sentiment.
A Market Example
In single-outcome markets, users bet on one of two possible outcomes (e.g., "Yes" or "No"). Here's how prices are managed using bonding curves:
Role of the Bonding Curve
Purpose: The bonding curve dynamically adjusts the price of shares based on the supply and demand for each outcome.
Price Adjustments: As more shares of a particular outcome are purchased, the price for those shares gradually increases. Conversely, the price for the opposite outcome decreases, reflecting a lower probability for that outcome.
Market Stability: The bonding curve prevents sharp price swings, ensuring a more stable and predictable market for users.
Trading Mechanics
Buying Shares:
Initial Share Pricing: When a market opens, both outcomes are usually priced equally, often starting at $0.50 for each (50% implied probability).
Action and Reaction: As users purchase shares of one outcome, the bonding curve raises the price of that outcome, while slightly lowering the price of the opposite outcome.
Withdrawing Shares:
Users can withdraw their shares at the exact price they bought them, regardless of how the market fluctuates. No fees are applied when withdrawing, ensuring a fair exit strategy for all participants.
Example Scenario: Betting on a Sports Game
Suppose a prediction market where users bet on whether Team X will win their next game.
Initial Pricing: Both "Yes" and "No" shares are priced at $0.50, reflecting equal 50% probabilities.
User Action: Suppose User A believes Team X will win and buys $100 worth of "Yes" shares.
Price Adjustment: After the purchase, the bonding curve adjusts the price of "Yes" shares to $0.60, implying a 60% chance of Team X winning, while the price of "No" shares drops to $0.40, reflecting a 40% chance of Team X losing.
Withdrawing Mechanism: If User A decides to withdraw their shares, they can do so at the original price of $0.50, with no fees deducted.
Last updated