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FairWins Prediction Markets

Note (v3 P2P refactor): The core mechanic is now peer-to-peer wagers via the WagerRegistry contract — not LMSR market making. The rest of this page describes the legacy LMSR design and is preserved for historical context. For the current mechanic see How it Works, and for the role / tier / pricing structure see Roles and Tiers.

Before you purchase a tier, please read the Account Moderation Policy and the Operator powers section in security.md — the protocol can be paused by a Guardian role holder and individual accounts can be frozen by an Account Moderator role holder.

Overview

FairWins is an open prediction market platform built on the same infrastructure as ClearPath, but designed for general-purpose event predictions rather than DAO governance. While ClearPath uses futarchy for institutional decision-making, FairWins enables anyone to create and trade on prediction markets for any topic.

Key Characteristics

Aspect FairWins ClearPath
Purpose General predictions DAO governance
Market Creation Permissionless (anyone) Automated (per proposal)
Resolution Creator/Oracle defined Welfare metrics
Participants Open to everyone DAO members
Use Cases Events, sports, finance Treasury, protocol changes

How FairWins Works

FairWins follows a simple four-phase lifecycle:

Phase 1: Market Creation

Anyone can create a prediction market by:

  1. Define the Question: Clear, objective question with binary outcome
  2. Example: "Will ETH price reach $5000 by end of Q1 2025?"

  3. Must be verifiable and have clear resolution criteria

  4. Set Parameters:

  5. Trading Period: How long trading is open (7-21 days)
  6. Resolution Date: When the outcome is determined
  7. Initial Liquidity: Seed liquidity for LMSR market maker

  8. Collateral Token: ETH or ERC20 token

  9. Stake Creator Bond: Security deposit returned after proper resolution

  10. Provide Initial Liquidity: Minimum amount to bootstrap market

Example Market Creation: 

// Market creator stakes 50 ETH as initial liquidity
await marketFactory.createMarket(
  0,                           // proposalId = 0 (standalone market)
  ethers.ZeroAddress,          // collateral = ETH
  tradingEndTime,              // when trading closes
  1000,                        // liquidity parameter
  { value: ethers.parseEther("50") }
);

Phase 2: Trading

Once created, anyone can trade on the market:

  1. Buy YES Tokens: If you believe the event will occur
  2. Price reflects market's probability estimate

  3. Higher demand → higher price

  4. Buy NO Tokens: If you believe the event won't occur

  5. Inverse of YES token price

  6. Price adjusts automatically via LMSR

  7. Trade Freely: Buy/sell at any time during trading period

  8. No counterparty needed (LMSR provides liquidity)
  9. Prices update instantly based on demand

Market Mechanics: 

YES Price + NO Price = 1 ETH (always)

If YES = 0.65 ETH, then NO = 0.35 ETH
→ Market implies 65% probability of YES outcome

Example Trading: 

// Trader buys YES tokens with 20 ETH
await marketFactory.buyTokens(
  marketId,
  true,                        // true = YES, false = NO
  ethers.parseEther("20"),     // amount
  { value: ethers.parseEther("20") }
);

Phase 3: Resolution

When the resolution date arrives:

  1. Trading Closes: No more trades allowed after trading end time

  2. Outcome Determined:

  3. Creator Resolution: Market creator submits outcome
  4. Oracle Resolution: Designated oracle reports result

  5. Evidence Required: IPFS hash or data proving outcome

  6. Challenge Period: 3-day window for disputes

  7. Anyone can challenge with higher bond

  8. Escalates to UMA if disputed

  9. Finalization: After challenge period, outcome is final

Resolution Flow: 

Trading Ends → Report Submitted → Challenge Period → Finalized → Market Resolved
     ↓              ↓                    ↓               ↓             ↓
  Day 14         Day 14              Day 14-17        Day 17       Day 17

Phase 4: Settlement

After resolution, winners redeem tokens:

  1. Winners Redeem:
  2. YES holders redeem if outcome = YES
  3. NO holders redeem if outcome = NO

  4. Tokens redeemed for collateral (ETH)

  5. Payout Calculation: 

    If YES wins:
  YES token value = 1 ETH per token
  NO token value = 0 ETH per token

Trader Profit = (redemption_value - purchase_price) × tokens_held

  6. Losers:

  7. Losing side tokens worth 0
  8. No redemption value
  9. Loss = amount paid for tokens

Example Settlement: 

// Winner redeems YES tokens
await marketFactory.redeemTokens(marketId, true);
// Receives: token_amount × 1 ETH

Major Flows

Complete Market Lifecycle

graph TD
    A[Market Created] --> B[Trading Opens]
    B --> C[Participants Buy YES/NO Tokens]
    C --> D[Trading Period Ends]
    D --> E[Oracle Submits Outcome]
    E --> F[Challenge Period]
    F --> G{Challenged?}
    G -->|No| H[Market Resolves]
    G -->|Yes| I[UMA Escalation]
    I --> H
    H --> J[Winners Redeem Tokens]
    J --> K[Settlement Complete]

Trading Flow

graph LR
    A[Trader] --> B{Prediction}
    B -->|Bullish| C[Buy YES Tokens]
    B -->|Bearish| D[Buy NO Tokens]
    C --> E[Pay ETH]
    D --> E
    E --> F[Receive Tokens]
    F --> G[Hold Until Resolution]
    G --> H{Outcome}
    H -->|Correct| I[Redeem for Profit]
    H -->|Wrong| J[Tokens Worth 0]

Resolution Flow

graph TD
    A[Trading Ends] --> B[Oracle Reports Outcome]
    B --> C[Post Evidence]
    C --> D[3-Day Challenge Period]
    D --> E{Challenged?}
    E -->|No| F[Auto-Finalize]
    E -->|Yes| G[Review Evidence]
    G --> H{Valid Challenge?}
    H -->|Yes| I[Escalate to UMA]
    H -->|No| J[Slash Challenger Bond]
    I --> K[UMA Decision]
    K --> F
    J --> F
    F --> L[Market Resolved]

Use Cases

Financial Markets

Stock Price Predictions: - "Will AAPL close above $200 by end of Q2?" - "Will S&P 500 reach new all-time high in 2025?"

Crypto Price Predictions: - "Will BTC reach $100k by December 31?" - "Will ETH flip BTC in market cap this year?"

Sports & Entertainment

Sports Outcomes: - "Will Team A win the championship?" - "Will Player X score more than 25 points?"

Entertainment Events: - "Will Movie Y gross over $1B worldwide?" - "Will Album Z go platinum in first month?"

Political & Social

Election Results: - "Will Candidate A win the election?" - "Will voter turnout exceed 70%?"

Policy Outcomes: - "Will legislation pass by end of year?" - "Will approval rating exceed 50%?"

Technology & Science

Product Launches: - "Will Product X ship by Q3?" - "Will feature Y be announced at conference?"

Scientific Milestones: - "Will mission launch on schedule?" - "Will breakthrough be published this year?"

Privacy Features

Even though FairWins is open to everyone, privacy is still important:

Position Privacy

  • Encrypted Positions: Via PrivacyCoordinator
  • Zero-Knowledge Proofs: Positions validated without revealing details
  • Aggregate Data Only: Individual trades remain private

Anti-Manipulation

  • TWAP Pricing: Time-weighted prices prevent manipulation
  • Batch Processing: Trades processed in epochs
  • Privacy Prevents Front-Running: Can't see individual positions

Optional Privacy

Users can choose privacy level: - Public Trading: Faster, simpler (default for small amounts) - Private Trading: Enhanced privacy (recommended for large positions)

Market Discovery

FairWins includes features for finding markets:

Browse Markets

By Category: - Finance - Sports - Politics - Technology - Entertainment

By Status: - Active (trading open) - Closing Soon (< 24 hours) - Pending Resolution - Resolved

By Popularity: - Most Volume - Most Traders - Highest Liquidity

Search Markets

Search Criteria: - Keyword search in questions - Date range (resolution date) - Liquidity range - Creator address

Market Details

For each market, view: - Question and description - Current YES/NO prices - Total liquidity - Number of traders - Trading volume - Time remaining - Resolution criteria - Creator information

Economic Model

For Traders

Profit Opportunity: - Buy low when market undervalues outcome - Sell high or hold to redemption - Profit = knowledge advantage

Risk: - Lose amount paid for tokens if wrong - No leverage (can't lose more than paid) - Gas costs for transactions

For Market Creators

Revenue: - Keep portion of trading fees (optional) - Reputation building - Community engagement

Costs: - Initial liquidity provision - Creator bond (returned) - Gas costs

Creator Bond: - Posted when creating market - Ensures proper resolution - Returned after successful resolution - Slashed if creator resolves incorrectly

For the Protocol

Revenue Sources: - Small trading fees (optional, default 0.1%) - Failed bond slashing - Protocol treasury growth

Costs: - LMSR market maker bounded loss - Infrastructure and hosting - Oracle/dispute resolution

Security & Safety

Market Creator Accountability

  • Bond Requirements: Ensures good faith
  • Reputation System: Track creator accuracy
  • Community Review: Markets can be flagged

Oracle Accuracy

  • Bond Requirements: 100 ETH for reporters
  • Evidence Requirements: Must provide proof
  • Challenge Mechanism: Community can dispute
  • UMA Escalation: Final arbitration

Smart Contract Security

  • Audited Contracts: Professional security reviews
  • Bounded Loss: LMSR limits protocol risk
  • Emergency Pause: Guardian can halt if needed
  • Gradual Decentralization: Progressive control transfer

User Protection

  • Clear Resolution Criteria: Avoid ambiguity
  • Challenge Period: Time to dispute outcomes
  • Bond Slashing: Penalizes dishonest actors
  • Refunds: Markets can be cancelled if problematic

Testing Coverage

The FairWins platform has comprehensive integration tests covering the entire lifecycle:

Market Creation Tests

✅ Create Market with Custom Parameters - Verify trading period configuration - Validate liquidity parameter setup - Check initial liquidity provision

✅ Market Creation Requirements - Ensure minimum liquidity requirement - Validate trading period constraints (7-21 days) - Verify collateral token support

Trading Phase Tests

✅ Multiple Trader Participation - Multiple users can trade simultaneously - Verify liquidity pool updates correctly - Check price adjustments via LMSR

✅ Trading Period Enforcement - Trading allowed during active period - Trading blocked after period ends - Verify time-based restrictions

✅ Price Discovery - YES + NO prices always equal 1 - Prices reflect probability - LMSR provides consistent liquidity

Resolution Tests

✅ Oracle Resolution Process - Oracle submits outcome report - Evidence is recorded on-chain - Challenge period is enforced

✅ Resolution Timing - Cannot resolve before trading ends - Cannot resolve during challenge period - Must finalize after challenge period

✅ Outcome Scenarios - YES outcome resolution - NO outcome resolution - Both outcomes tested

Settlement Tests

✅ Redemption Process - Winners can redeem tokens - Losers receive no value - Verify payout calculations

✅ Redemption Restrictions - Cannot redeem before resolution - Cannot redeem twice - Must hold tokens to redeem

✅ Payout Accuracy - Winners receive correct amounts - Losers lose only their stake - Gas costs accounted for

End-to-End Tests

✅ Complete Lifecycle - Full flow from creation to settlement - All phases integrated correctly - State transitions validated

✅ Multiple Outcomes - YES outcome scenario - NO outcome scenario
- Both paths fully tested

What We Test For

Functional Correctness

  1. State Transitions: Markets progress through lifecycle correctly
  2. Access Control: Only authorized actions allowed at each phase
  3. Time Constraints: Trading periods and deadlines enforced
  4. Economic Integrity: Payouts calculated correctly

Security Properties

  1. No Double Spending: Tokens redeemed only once
  2. No Unauthorized Resolution: Only oracle can resolve
  3. Bond Protection: Bonds handled correctly
  4. Reentrancy Protection: No reentrancy attacks

Integration Points

  1. Oracle Integration: Oracle resolver works correctly
  2. Market Factory: Creates markets properly
  3. Privacy Coordinator: Optional privacy features work
  4. Token Handling: ERC20/ETH handled correctly

Edge Cases

  1. No Trades: Market with zero trades
  2. Single Trader: Only one participant
  3. Equal Distribution: 50/50 YES/NO split
  4. Maximum Liquidity: Large liquidity scenarios

Error Conditions

  1. Invalid Parameters: Reject bad inputs
  2. Insufficient Funds: Handle low balances
  3. Expired Markets: Block trading after deadline
  4. Unresolved Markets: Cannot redeem early

Comparison with ClearPath

Similarities

Both platforms share: - Same smart contract infrastructure - Conditional token framework (Gnosis CTF) - LMSR market making - Privacy mechanisms (optional) - Oracle resolution system - Challenge/dispute process

Differences

Feature FairWins ClearPath
Market Creation User-initiated Proposal-triggered
Participation Open/permissionless DAO members
Resolution Criteria Custom per market Welfare metrics
Governance Individual markets DAO-wide
Treasury Market-specific Shared DAO treasury
Ragequit Not applicable Available
Voting Trade-based Token-weighted

When to Use Each

Use FairWins when: - Predicting external events - Open participation needed - Custom resolution criteria - Individual market focus

Use ClearPath when: - DAO governance decisions - Treasury management - Protocol changes - Collective decision-making

Future Enhancements

Phase 1 (Current)

  • ✅ Basic market creation
  • ✅ Trading functionality
  • ✅ Oracle resolution
  • ✅ Settlement process

Phase 2 (Planned)

  • 📋 Market categories and tags
  • 📋 Advanced search and filtering
  • 📋 Reputation system for creators
  • 📋 Trading history and analytics

Phase 3 (Future)

  • 🔮 Automated market makers (AMM)
  • 🔮 Combinatorial markets (AND/OR)
  • 🔮 Continuous markets (no end date)
  • 🔮 Conditional markets (dependent outcomes)

Phase 4 (Research)

  • 🔬 Cross-chain markets
  • 🔬 AI-assisted market creation
  • 🔬 Social trading features
  • 🔬 Mobile app integration

Resources

Documentation

Technical References

External Resources

Getting Started

Ready to use FairWins? Check out:

  1. Setup Guide - Install and configure
  2. User Guide - Start trading
  3. Trading Guide - Learn to trade
  4. FAQ - Common questions

Community

  • Discord: Join discussions
  • Forum: Ask questions
  • GitHub: Contribute code
  • Twitter: Follow updates