Prophet won the DeFi and Payment category of the Neo APAC Hackathon grand finale with its prediction market platform. The dApp allows users to place wagers based on their beliefs about how an event will unfold. Prediction markets (also known as betting markets) are exchange-traded markets where individuals can bet on the outcome of various events with an unknown future or outcome. The most popular prediction market dApps today include Augur and Polymarket.
Prediction markets can be a viable alternative to how pundits and commentators speculate on the potential outcome of an event. Robert Hanson, an economics professor at George Mason University, advocates for prediction markets as they can provide crowdsourced information that might offer insights beyond those from people with a vested interest. He said, “Pundits are rewarded too much for telling good stories, and for supporting each other, rather than for being “right.” Instead, let us create betting markets on most controversial questions, and treat the current market odds as our best expert consensus. The real experts (maybe you), would then be rewarded for their contributions.”
The types of events whose outcomes platform participants can predict include things like the results of an election, the outcome of a sporting event, the price of digital or traditional assets, and much more. Prediction markets become increasingly more effective at scale – the more individuals participate, the more data there is, which leads to a more accurate aggregated prediction. For example, in a series of recent U.S. presidential elections, betting markets were more accurate than pre-election polls 74% of the time.
The Prophet team aims to deliver a platform that can offer new methods for forecasting, risk management, and research and analysis in the form of event derivatives. The team also believes that prediction markets can help decision-makers gain insights into probabilities and potential impacts of different options, helping them make more informed choices by leveraging social consciousness.
Ultimately, the developers were inspired to build prediction markets because the public’s collective intelligence can provide valuable insights, which can be applied in various decision-making processes in different fields.
Building on Neo
The Prophet prediction market platform is currently being built on Neo N3 TestNet by Mozes, H-Blues, and Sylvain Xu. Before building Prophet, the team collaborated on a project oriented around NFT stablecoins. However, they opted to work on another project as the NFT vertical of the blockchain space is currently experiencing a downturn in user activity.
The Prophet team first noticed the Neo ecosystem during the Neo Frontier Launchpad hackathon event in 2021. Neo was brought back to the front of their minds at the Hong Kong Web3 Festival in April of this year. In a conversation with NNT, the Prophet team noted other reasons for building on Neo N3:
Firstly, what attracts me the most about Neo N3 is its unique Oracle mechanism, which allows us to freely access external data. This facilitates the implementation of our project. Secondly, by virtue of our understanding of Neo N3, it’s convenient for us to deploy on N3. Of course, NeoEVM is also very powerful, and we hope to collaborate with the Neo team in the future to build our project on Neo EVM.
I think Neo’s Hackathon was very meaningful. It provided an opportunity for us to further understand Neo N3, which is completely different from the EVM ecosystem, and this interested us a lot. During the event, we met many like-minded developers, and learned a lot of new things. The event made a profound impact on our future development work.
Prophet is currently under development on the Neo N3 blockchain, but will also become a cross-chain platform when the NeoEVM sidechain launches. The development team will add support for the forthcoming sidechain to attract users familiar with EVM ecosystems.
Tiers of Risk
Prophet utilizes a three-color scheme to identify the level of risk associated with a prediction event – blue (low), yellow (medium), and red (high). These risk levels are determined in part by who created the bet – whether it was created by a Prophet team member or by an external organization or community member. Prophet also offers two types of prediction markets: data and event.
The blue risk markets can comprise a data prediction or an event prediction. The data prediction can include things like guessing what a token price or market index might be worth at a certain time in the future, whereas the event prediction could focus on the outcome of an election, for example. Both types of prediction markets are limited to data sources that the Neo Oracle can interact with – the less Oracle support for data sources, the more risky the prediction market.
Not every event submission requires an Oracle link, although it is recommended. Event prediction proposals can include a link to a non-Oracle results site, such as ESPN.com for results of sports games. However, data prediction events require an Oracle-enabled link to pull in data from or push data out to an external website for official results.
Blue risk level event predictions are initiated by the Prophet team, and the resolution source can be a well-known website. For example, whitehouse.gov can serve as the source to verify the winner of a prediction market based on the outcome of the next U.S. presidential campaign. Or, ESPN.com can serve as a data point for the outcome of an American football match.
Individuals, not the Prophet team, initiate yellow risk level event prediction markets. These proposals submitted by individuals also include relevant data fetching resources to access data that will verify the event’s outcome. However, the Prophet team will approve each individual’s proposal before pushing it live onto the platform to prevent any malicious submissions that could center around someone’s well-being or lack thereof. The team doesn’t want to establish betting markets around when a well-known person might die, for example.
Red risk level propositions are deemed the riskiest as they don’t rely on Neo Oracle for fetching results or any official data sources the Prophet team provides. Additionally, these proposals are created by individuals outside of the Prophet team. The event’s outcome will be determined by the proposal’s creator reviewing and verifying the results themselves.
Essentially, the level of risk depends on whether the Prophet team submits the proposal and the accessibility of resources to verify the outcome. The risk level and data sources are displayed on each proposal’s details page on the Prophet platform.
TRUE and FALSE Tokens
Each proposition put forth is a binary Yes or No vote. To participate, users must first acquire TRUE or FALSE tokens, and place their wager on a particular event. Users can deposit GAS tokens for an equivalent amount of TRUE and FALSE tokens. For example, users who deposit 100 GAS will receive 100 TRUE and 100 FALSE tokens. These tokens are then used to place predictions.
Once the GAS has been used to purchase voting tokens, users can also trade their TRUE and FALSE tokens in a manner that’s extremely similar to a non-custodial exchange like Flamingo Finance or Uniswap. The prices of the tokens will be defined by the automated market maker constant product formula, Token A Balance * Token B Balance = K. By this standard, K represents the consistent balance between the two assets in the liquidity pool, which also determines the prices of the pair of tokens. Liquidity pool providers will yield 0.06% on each swap that takes place within the LP.
If a user is very committed to their TRUE prediction, they can sell all their FALSE tokens to place their entire bet on a TRUE outcome. Or vice versa. When the user wins the prediction, they’ll receive a proportionate share of the opposite tokens in that pool that lost the prediction, which they can exchange for GAS.
If they choose the correct outcome, the user wins the tokens that were placed on the other side of the bet. While the platform is not live, the Prophet development team noted that the tokens won from a successful prediction event may offer future rewards. The team intimated that users should keep the winning tokens as souvenirs as there are potential merits they may bring in the future.
At the time of press, there’s no concrete launch date for the Prophet prediction market platform. However, the team’s next steps are to deploy on MainNet, explore more SocialFi possibilities, and establish a DAO that will allow users to vote on prediction markets that can or can’t be listed on the platform.
Visit the link below to test the Prophet dApp: