Cryptocurrency p2p platform Hodl Hodl announced a new product called Predictions. Its launch is expected this spring, and according to representatives of the exchange, it can be a very useful tool for the Bitcoin ecosystem.
The essence of the new product is a creation of a special market where you can enter into a contract with another user, payment for which depends on the outcome of a particular event. The simplest example is the creation of a contract, where one user claims that by May 2019 the price of Bitcoin will rise above $ 5000, and the other does not agree with this. The terms of the contract state that each party sends to the escrow address of 1 BTC, and in May the winner of the dispute receives 2 BTC.
In this case, the role of the "oracle" is played by a third party, which decides on the outcome of the dispute and rewards the winner. However, as representatives of Hodl Hodl say, they offer a more interesting scheme. So, the parties send funds to multisig (2 of 3) escrow-address, and the oracle is distributed to a certain extent. As reported, in a perfect case, both parties agree on the outcome, because neither party is able to return the coins locked in escrow unilaterally and, thus, they have nothing to win whatsoever by denying the outcome in favor of the other party. In fact, they risk losing their reputation on Hodl Hodl and future prospects for creating contracts.
But even in case of a dispute, Hodl Hodl leaves a chance of interference with its third key, which can be used to sign the transaction in favor of the party, who guessed the outcome. Best part of it is that Hodl Hodl, as always, doesn’t have direct access to the funds and is not actually in possession of bitcoins at any moment. Thus, the prediction market implementation we came up with can be called “a peer-to-peer” prediction market.
Hodl Hodl Team
Contracts themselves are not limited to the price of Bitcoin and can be created for a variety of situations. For example, they may concern whether lenders will receive Mt. Gox your payouts in 2019. In this case, the lender who is awaiting compensation hedges the risks: even if he does not receive anything from Mt. Gox, he will win the argument.
Other examples of contracts may include election results, the price of oil or other assets, or even the weather forecast. The only condition that the exchange sets up and intends to moderate its observance is that the contracts do not contain anything illegal and cannot be interpreted in two ways.
Additionally, the exchange offers the possibility of creating contract coefficients and establishing minimum volumes. For example, in a contract with a ratio of 1 to 10, the contract creator sends 1 BTC to escrow, and the party that accepts it - 10 BTC. If the opposite party is not ready to send such an amount, and, for example, has only 5 BTC, then the contract creator sends 0.5 BTC.