AMM Token Model
Last updated
Last updated
Currently, ERC20 tokens are used as proxies for predicting outcomes. We can see this happening with $MAGA / $KAMA tokens for the US Presidential Election. The moment Biden dropped out of the race, and he nominated Kamala on the 21st July 2024, $KAMA shot up significantly around that period to an all time high as seen below.
Meme coins like $KAMA have gained popularity, but they come with significant risks. For instance, while the market cap for $KAMA may hover around $6.5 million (at the time of writing), platforms like Polymarket show $80 million in liquidity for Kamala Harris winning (at the time of writing). The main issue with speculating on $KAMA is the uncertainty of payout, as it relies purely on speculation without any guaranteed outcome. In contrast, Polymarket ensures win/lose payouts are backed by the other side of the bet.
Memediction addresses the unpredictability of meme coins by allowing creators to formalize this speculative behavior through custom prediction markets. By launching their prediction markets via ERC20 outcome tokens powered by Uniswap, creators can combine the speculative nature of meme coins with the certainty of guaranteed payouts upon settlement, where the losing side pays out the winning side.
Uniswap v4 was chosen to power Memediction due to its tokenized prediction market model. In the past, developing customizable logic on Uniswap v2 or v3 pools was challenging, particularly for bootstrapping liquidity and handling settlement. However, Uniswap v4 introduces hooks that unlock new possibilities at each stage of the lifecycle.
Uniswap's Automated Market Maker (AMM) model is an ideal fit for tokenized prediction markets, as it eliminates the need for dedicated market makers—a common issue for niche prediction markets in Central Limit Order Book (CLOB) systems. Additionally, Memediction's contracts will utilize lifecycle hooks, such as beforeSwap and afterSwap, to manage liquidity bootstrapping, buying and selling, fee collection, and settlement seamlessly.
