Thread by @ZeMariaMacedo

Prediction markets are one of the OG crypto use cases that most excite people's imagination

And yet all attempts at building them so far have failed

Thread on why I think this is and why we're so pumped about @azuroprotocol's approach

https://twitter.com/azuroprotocol/status/1483742849573212162

2/ In terms of mech design, most PMs have used P2P architectures

In these designs, not only do LPs have to bootstrap each individual betting market but also the "yes" and "no" side of each market, effectively setting the odds and taking all the betting risk related to that mkt

3/ This means users' ability to bet on one side of a market is constrained by liquidity on the other side of that market

This has led to low liquidity, terrible odds and hardly any bet volume

4/ P2P architectures also have other flaws such as being inefficient for bets with more than two outcomes, not allowing accumulator style bets, poor UX (e.g. "invalid" settlements due to mis-specified bets), among many others

5/ In terms of product focus, existing PMs have also fragmented liquidity by going too broad

Users can create markets for almost anything, splitting attention and leading to so-called "Design Flaw attacks" (see section 3 "A Controversial Market")

research.binance.com/en/analysis/au…

6/ I put out a tweet a few months ago outlining a high-level design for a prediction market I believed could address these issues

Since then, I spoke to many teams in this space but none impressed me as much as @azuroprotocol

https://twitter.com/ZeMariaMacedo/status/1413449600329945088

7/ How does Azuro tackle the liquidity fragmentation issues outlined above?

a) Uses a single pool of liquidity that collateralises all markets

b) Focusing on a single niche (sportsbetting) and pulls in prices using an oracle

8/ This design means LPs don't have to manually create markets nor are they exposed to market-specific risk

Instead, they can passively provide liquidity and collect fees similar to what they would do in other DeFi apps

9/ It also means bettors benefit from:

🔹familiar UX with well-specified bets (including multiple outcomes & accumulators)
🔹accurate pricing pulled in from casinos & sportsbooks
🔹very strong liquidity & depth across markets

10/ The @azuroprotocol team combiens a ton of experience from the sportsbetting world with top web 3 builders & hackathon winners

@Delphi_Digital have invested and will also be helping design the Azuro token economics. Alpha leak: it's gonna break some new ground

11/ If you're interested in finding out more about @azuroprotocol, check out their introductory blog post below

Disclosure: Delphi Ventures is an investor in Azuro

azuroprotocol.medium.com/azuro-closes-3…