Cricket Prediction Market

The contract allows users to participate in a decentralized prediction market by placing bets on the outcomes of cricket matches.

Market Mechanism (LMSR)

This prediction market uses the Logarithmic Market Scoring Rule (LMSR), a mathematical formula designed specifically for prediction markets. Here's how it works:

Core Formula

The market uses LMSR to determine prices and costs:

1. Cost Function:
   C = b · ln(e^(q_yes/b) + e^(q_no/b))

2. YES Share Price:
   P_yes = e^(q_yes/b) / (e^(q_yes/b) + e^(q_no/b))

3. NO Share Price:
   P_no = 1 - P_yes

Where:

• b = Liquidity parameter (controls price sensitivity)
• q_yes = Number of YES shares
• q_no = Number of NO shares

Example: "Will India win the 2025 Champions Trophy?"

Let's walk through a trading scenario:

Initial Market State:

b = 1000                # Liquidity parameter
q_yes = 100_000        # Initial YES shares
q_no = 100_000         # Initial NO shares

1. Initial Prices: P_yes = e^(100,000/1000) / (e^(100,000/1000) + e^(100,000/1000)) = e^100 / (e^100 + e^100) = 0.5 (50%)

   Both outcomes start at equal probability

2. Someone buys 50,000 YES shares:

   New q_yes = 150,000

   P_yes = e^(150,000/1000) / (e^(150,000/1000) + e^(100,000/1000)) = e^150 / (e^150 + e^100) ≈ 0.73 (73%)

   Market now shows 73% chance of India winning

3. Another trader buys 75,000 NO shares:

   New q_no = 175,000

   P_yes = e^150 / (e^150 + e^175) ≈ 0.31 (31%)

   Market now shows 31% chance of India winning

How It Works in Practice

1. Trading:

   • Buy YES tokens if you think India will win
   • Buy NO tokens if you think India won't win
   • Price automatically adjusts with each trade

2. Settlement:

   • When the event concludes, winning tokens are worth 1 USDC
   • Losing tokens are worth 0 USDC

3. Example Trade:

   • Current YES price: 0.5 USDC
   • Buy 1000 YES tokens
   • Cost = ~500 USDC (plus price impact)
   • If India wins: Receive 1000 USDC
   • If India loses: Receive 0 USDC