Resolution
Settlement
In prediction markets such as Polymarket, an oracle such as UMA is responsible for constructing the payouts (depending on who won). Once UMA sets the outcome for the market, the winning outcome outcome token can claim the underlying USDC at the expense of the losing outcome token.
Here at Memediction, we stand on the shoulders of giants, to build on top of this idea. The basic idea is still the same, where the losing side will transfer reserves to the winning side. However it differs as follows:
When the market resolves, the pools will be locked to prevent dumping / slippage. Then the reserves in the losing pool are transferred to the winning pool. The winning outcome tokens are converted to a receipt token, they can be claim to an equal share of the underlying pool reserves. The losing outcome tokens are now worth zero, since they are not backed by any underlying reserve assets.
On top of this, there are trading fees (LP fees) collected from both winning & losing pools. These LP fees transferred to the winning pool side to minimise downside, while punishing wash trading to pump prices artificially. LP fees will be fixed, but there are plans to make it variable in the future depending on volatility and other factors.
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