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Now, let's see how that bidding phase is the genius step here in using game theory & how it helps initial market liquidity and equilibrium odds. I will explain with an example to show how odds can in your favor to explain how it work. I will take a non-binary example..
since by design, even @synthetix_io can be non-binary.
An example of racing will best demonstrate it. Let's take three runners: A, B, C.
Intuitively you know, based on your research
A is the favorite and bettors place 50% on her win.
B is good but less likely,so 40% on his win
An example of racing will best demonstrate it. Let's take three runners: A, B, C.
Intuitively you know, based on your research
A is the favorite and bettors place 50% on her win.
B is good but less likely,so 40% on his win
Finally, C is the inconsistent runner that may be an underdog, getting 10% bets placed
Now, when the bidding starts you provide initial liquidity to the market
By providing it you can actually change the odds and tip the scale to finalize the payout ratio (equilibrium odds)
Now, when the bidding starts you provide initial liquidity to the market
By providing it you can actually change the odds and tip the scale to finalize the payout ratio (equilibrium odds)
How does it work?
Let's say someone doesn't know that A is favorable to win, I can favor the odds for A so my payout is higher.
To do so, I provide a lot of liquidity to C initially, this would tilt the odds in favor of C winning.
Let's say someone doesn't know that A is favorable to win, I can favor the odds for A so my payout is higher.
To do so, I provide a lot of liquidity to C initially, this would tilt the odds in favor of C winning.
Now, anyone who doesn't know about the intricacies will think "C" is the safer bet as they go with market bias.
But here is the catch I pull out my capital from C once enough people invest in C, and provide that liquidity to A, as the end of the bidding phase is near.
But here is the catch I pull out my capital from C once enough people invest in C, and provide that liquidity to A, as the end of the bidding phase is near.
This way, with the bidding phase, will allow me to get the equilibrium odds in my favor. This is difficult and complex but probably works to decide a payout ratio much better
This would only work if people don't understand the intricacies of the market & believe the market odds
This would only work if people don't understand the intricacies of the market & believe the market odds
By the above example, I show the following benefits:
- Before trading starts, there is ample liquidity created now
- Markets decide the equilibrium odds before trading
- How game theory plays a role in reaching equilibrium odds
- Before trading starts, there is ample liquidity created now
- Markets decide the equilibrium odds before trading
- How game theory plays a role in reaching equilibrium odds
if you do not know about binary options and the bidding phase in @synthetix_io read here - https://twitter.com/sourcex44/status/1278296004228296705?s=20
this post really helped synthesis my thoughts on betting style used by snx https://sports.stackexchange.com/a/16560
