Crypto Notebook

Polymarket OP
Polymarket OP

🤔What is Polymarket?

Polymarket is an information market platform built on Polygon for users to bet (through buying shares on result) on the result of future events (e.g. Will ETH surpass $3000 next week？) based on their own insight. Market prices reflect what traders on Polymarket think are the odds of future events, turning trading activity into actionable insights.

An information market is where people buy and sell shares on how a future event will resolve. Prices change in response to trading activity. You can buy, trade, or sell shares in future outcomes.

As of April 15 2021, more than $100M in trading volume. In order to start trading, you need to deposit USDC (only acceptable currency) onto Polymarket. Transaction on Polymarket doesn’t have network fee but whenever you deposit or withdraw USDC, you need to pay gas fee; you also need to pay a fee whenever you buy/sell shares before market resolution. First-time users of Metamask on Polymarket will also pay a one-time fee to authorize USDC on Polymarket.

How are network fee calculated?

The network fee is comprised of 1) the Ethereum gas fee and 2) the relayer fee. The Ethereum gas fee is a systematic fee that is required to send funds from one wallet address to another. This fee is traditionally paid in ETH and is an additional cost. Our deposit method takes a USDC fee from the existing deposit amount, saving you time and getting rid of the need to pay in an entirely separate currency.

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Direct USDC deposits are fully decentralized, meaning that any person can decide to help Polymarket provide this service. People are incentivized to help through a relayer fee. The relayer fee will be either (1) $3 + the network fee or (2) 0.3%, depending on which is higher. If the gas fee is 10 USDC, that means that the relayer fee will default to 3 USDC unless the deposit is greater than 4,333.33 USDC (4,333 * 0.3% = 10 + 3).

🚰Liquidity

An AMM is put in place to facilitate liquidity pool. Each LP share (i.e. 1 LP share = 1 LP token) that is owned will mint a set of 1 token for each outcome. If there is a question with outcomes YES and NO, each LP share mints 1 YES and 1 NO.

Note that depositing $1 USDC doesn’t always give you 1 LP share. The number of LP shares you receive depends on the price of the outcomes. The more one-sided a market is, the fewer LP shares you will receive per dollar (see diagram below). If market is not perfectly even, instead of receiving 1:1 LP shares, you will get compensated in outcome tokens of the most probable event.

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Let’s explain the previous highlighted sentence with an example:

Kato provides $100 USDC liquidity when YES, NO price was $0.9, $0.1

This price ratio (9:1) means Kato will receive 10LP tokens ($100 * 0.1 = 10LP) and $90 worth of YES

Note:

Should YES, NO price was $0.1, $0.9, Kato will still receive 10 LP tokens but $90 worth of NO

As you can see, providing liquidity faces a major risk of price volatility of most favored outcome token.

Liquidity adders earn a percentage of each trade, proportionate to their ownership of the liquidity pool. This fee varies and can be seen in the buy/sell widget. For example, Alice owns $1,000 of liquidity in a $10,000 pool with a 2% LP fee. Bob buys $5,000 worth of tokens, which means Alice would earn $10 = $5,000 * 2% * ($1,000 / $10,000) TLDR: proportional reward system for LPs

As of Feb 17, 2022, Polymarket began an experiment around liquidity incentive and alternative LP fees parameter, aiming at further decentralize governance. All methodology atm are tentative so I am not including here. If you are curious see

https://docs.polymarket.com/liquidity-mining-and-trading-rewards⁠

🎮Market (ways to play) & Resolution

The prices of shares in each market reflect the probabilities of the outcomes. Shares are valued between $0.00 and $1.00 and prices change depending on traders’ collective beliefs on the likelihood of the market resolving in either direction. For instance, if the price for a “Yes” share is $0.75, then the market believes the probability that the event will occur is 75%. If you actually think the probability is higher than 75%, this is a good time to buy YES. if you think it is lower than 75%, you should buy NO.

Currently, there are 3 types of markets that exist:

Binary - A market with two options that will resolve either $1 or $0. (ex: Will GalahadMai have over 100k Twitter followers by 12/31/2025? YES/NO)

Categorical - A market with multiple options that will resolve either $1 or $0. (ex: What ice cream will have the most sales in 2025? Chocolate/Vanilla/Strawberry/Other)

Scalar - A market that resolves to where the final value sits between a lower and upper bound.

What will the population of Spain be in their upcoming census (47M-55M)? Long/Short)

If the population is 50M, the outcomes will resolve to: Long = $0.375 & Short = $0.625

Discord community can always propose new market.

You can buy and sell shares at any time before the market resolves. If you have shares that have risen in value since you bought them, you can cash them out for a profit. If you wait until the market resolves, "Yes" shares will be worth $1 if the event occurs and "No" shares will be worth $0. The opposite is true if the event does not occur. Redeeming shares does not incur the liquidity fee. You can own “Yes” shares and “No” shares simultaneously in a market.

📭Community

Social Media

Discord -

https://discord.gg/8QhzCqEbV4⁠

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Totlal number - 1.8k

Online number - 400

Twitter -

https://twitter.com/PolymarketHQ⁠

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Followers - 19.1K

Tweet Frequency - 1-2 tweets a day

Average replies per tweet - 2-4

Average likes per tweet - 18 - 32

Web Traffic

Similar Web

Google Trend

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Bib

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https://docs.polymarket.com/⁠

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https://polymarket.com/⁠

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