1. Exchange FAQ
1.1 What is the difference between a prediction market and a betting market?
Prediction markets are markets where contracts that are contingent on the occurrence of events in the future can be traded. Betting markets are straightforward exchanges based on predefined odds.
1.2 What is a prediction exchange?
An exchange offers a platform for traders to trade the outcome of uncertain events, whether that be sports, politics or current affairs. It differs from traditional sportsbooks by allowing traders to take positions against each other, rather than a bookmaker or against ‘the house’ .
Instead of being limited to the odds set by bookies, and only having the option to back a certain outcome, an exchange allows users to go head-to-head against each other by either buying or selling (sometimes referred to as “backing” or “laying”).
In many ways a prediction market operates just like an asset (stocks, crypto) exchange — except the underlying assets have a known positive payout if the speculator is correct and a zero payout if the speculator gets it wrong — these are sometimes referred to as “binary outcome markets”.
Another key difference of prediction exchanges as compared to bookmakers sites and many asset exchanges is that users can also ‘sell’ positions (sometimes referred to as ‘laying’ [link]). This allows the user to profit if they believe the outcome won’t occur.
While the payout at the point when the market resolves is binary (i.e. a payout or no payout) it is possible to buy and sell (or sell and buy) to close out a position before the market resolves — meaning it is possible to make a profit trading fluctuations in the market over time — just like on an asset exchange.
1.3 Using an exchange versus a bookmaker
When betting with a bookmaker you can only take a position on the odds they offer, which includes their margin — sometimes as high as 20% — meaning they price markets in their favor with unfair odds.
Unlike bookmakers, a prediction exchange offers more competitive implied odds, due to its nature as a peer-to-peer platform and the ability for all users to both buy and sell. The market is driven by supply and demand, which results in better and more competitive odds compared to those of a bookmaker.
When you deal with a bookmaker, they are the only seller, and they can artificially fix the prices uncompetitively with no other sellers in a position to step in on their closed platform. With an open prediction market, where users are permitted to both buy and sell, there will exist arbitrage opportunities (risk-free profits) to sell contracts when prices go even slightly above (or buy when prices go below) fair price. So the market effectively ‘rewards’ clever participants for keeping prices incredibly competitive.
This means you generally have a much higher expected value (EV) when trading on a prediction exchange, as compared to placing a comparable bet with a bookmaker.
Instead of being limited to these prices, and only having an option to back the result, the betting exchange facilitates users to go head-to-head against each other and setting their own price (implied odds) — one buying/backing and one selling/laying.
The prediction exchange gives bettors more freedom, better price/odds and won’t restrict your account just because you’re winning, unlike traditional bookmakers.
1.4 Common terminology.
Across the Aver platform you’ll encounter trading-specific language. Sometimes other users and information about Aver or other prediction markets might be used interchangeably. Here is a list of common terms we use (a more comprehensive dictionary can be found here).Users that have found their way here from a betting background, may be more familair with some betting terminology — we have tried to cater for both throughout.
Action — A wager of any kind.
Arbitrage — The simultaneous purchase and sale of the same position in different markets to profit from unequal prices.
Back (Bet) — Back betting means putting your money on something to happen. It is akin to ‘buying’ a prediction contract for a particular outcome to occur.
Bankroll/Balance — The available funds you have to trade with.
Bookmaker — A person who creates betting lines and takes wagers. Aver is not a bookmaker.
Edge — An individual’s advantage. This usually refers to an instance where you have a positive expected value.
Expected Value — The expected value (EV) is a probability-weighted anticipated to result from an action (a trade, an investment, a bet) at a point in the future.
Hedging — Placing an offsetting trade or bet on the opposing side(s) after you have already hold an exposure on one side. This can be used to either cut your losses, or lock-in and guarantee a profit.
Lay (Bet) — Laying betting means betting on something not to happen. It is akin to ‘selling’ a prediction contract — or trading on the expectation that a particular outcome will not occur.
Limit — In traditional sports betting, a limit is the maximum stake a book will take on a single event. In prediction markets, there may be a limit placed on overall volume traded in a given market.
Limit Order — (Not to be confused with ‘Limit’ above) This is a type of order where the user specifies the maximum (in the case of a buy order) or minimum (in the case of a sell order) price that they are willing to accept for their trade to be matched. This allows users to set their own terms, rather than simply ‘taking’ the price/odds offered.
Lines — Another term for the odds. This is generally used in North American sports betting, where many markets trade around a ‘line’ — i.e. under or over a particular spread, or score — though it can be used to refer to other types of odds more broadly.
Moneyline — In sports like baseball, soccer and hockey, there are so few runs/goals scored that it doesn’t make sense to only offer a spread. Instead, these sports offer a ‘moneyline’ in which you trade on whether or not a specific team is going to win straight-up.
Over/Under — Also known as the total, this refers to the total amounts of points/goals/runs that will be scored in the game. If both teams combine to score more than the total, the over wins. If they combine to score fewer, the under wins.
Wager — Any type of bet.
1.5 What markets and events are available?
Aver will grow the list of events and markets offered over time.
Initial markets we support are:
- Major sports leagues across the globe — for example, European Soccer, US Major Leagues, Cricket, and Tennis
- Popular current affairs and political markets;
- eSports and gaming;
- Crypto and web3 betting — for example, NFT and token price predictions
You can browse the list of active markets on the app.
If you are interested in suggesting markets not actively traded currently, you can submit a request at [link] or raise it within the Markets channel on our community discord.
1.6 How do odds work?
Probability —
This is the default odds type on Aver (though others can be used by adjusting your preferences [link]). In this scheme, a contract trades between 0 and 1 and where a unit of the contract represents $1 payout if correct. This is the inverse of decimal odds. For example, a coin flip may trade at approx 0.50 (Probability Odds) because it has a 1-in-2 chance of being correct. You could ‘buy’ a contract for $0.50 and if correct, the contract resolves to be worth $1 (or double your money) if you are correct.
Decimals —
Whenever you see odds displayed in numeric form i.e. 9.00, with a value greater than 1, this is a decimal odd. Decimal odds allow you to calculate how much money you will be returned should your position win. Simply multiply your stake by the decimal number shown and that is how much you will receive — including your stake.
In a coin toss example, an outcome might trade at approximately 2.0 (Decimal Odds) representing the multiple on the amount staked that would be returned if the outcome is correct. In this case, a winning outcome would result in $2.0 being paid for each $1.0 staked.
You can calculate the implied probability of a decimal odd by dividing 1 by it. For example, a decimal odd of 5.0 implies a probability of 20% (=1/5.0).
American Style–
American odds are centred around winning or wagering $100 on a given bet, though you don’t need to actually wager $100. It scales up and down depending on your position amount.
If you’re backing/buying a favourite: The odds for favourites will have a minus (-) sign in front, and indicate the money you need to risk to win $100.
So if you’re buying the Yankees to win at -130, you need to risk $130 and will win $100 if they win the game (plus your original $130 back).
If you’re buying an underdog to win: The odds for underdogs will have a plus (+) sign in front, and indicate the money you’ll win for every $100 risked.
So if you’re betting the Red Sox at +120, you’ll risk $100 and will win $120 if they win the game (plus your original $100 back).
1.7 What does the term “Lay” mean and why would I place a “Lay” trade?
To lay is to trade or speculate that something won’t happen. For example, to lay Manchester United to win their match is to bet that they will not win. In effect, hoping to profit from either the other team winning OR a draw occuring.
There are all sorts of reasons why people lay — some people find it easier to pick an outcome that won’t happen than one that will, while some lay because they think the price is too short.
1.8 Different types of orders, explained.
Aver currently supports limit orders.
Limit Orders —
A limit order is an order to buy or sell at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. If there aren’t sufficient existing orders on the book to match your desired trades, your order will sit on the orderbook until other participants come along and are willing to trade at that price.
Support for more complex order types, including Market Order, ‘Fill-or-Kill’ (Immediate-or-Cancel) and Post-Only order types is coming very soon.
Market Order —
A market order is an order to buy or sell immediately. This type of order guarantees that the order will be executed (up to the amount currently available on the orderbook), but does not guarantee the final price. (i.e. depending on the size of the order, you may be forced to pay a much less competitive price to obtain sufficient counterparties to the trade)
1.9 What is a market maker?
The term market maker refers to a firm or individual who actively quotes two-sided markets in a particular security, providing bids and asks (offers to buy and sell) along with the market size of each.
Market makers provide the market with liquidity and depth while profiting from the difference in the bid-ask spread. They are generally willing to be both buyers and sellers of any given outcome in the market, for the right price.
Market making is a crucial function for a platform of exchange to operate, and it can be a very lucrative activity — if carried out correctly. However, it is not risk-free, as market makers are exposed to the risk of holding assets/positions that move against them seeing a decline in the value of a position after it has been purchased from a seller and before it’s sold to a buyer.
1.10 What is a matched versus unmatched position?
For an order to be struck, it must be matched with another user who has an opposing opinion. If your position has been matched that means it has been successfully placed and accepted by another user — at a price which both parties are happy to trade.
As bets are matched against other users, once a trade has been matched, it cannot be ‘cancelled’ — although you could exit the position by trading in the opposing direction with another user. For example, if you ‘bought’ a position, you could ‘cash out’ by subsequently ‘selingl’ it on to another user in the future to close out this position if you no longer desired to keep it.
If your order is has not yet been matched, (i.e. it remains an open order) then you will have a few options:
- Keep the order to see if someone is going to match your offer
- Cancel the order, the stake will be returned and you can try again with a more competitive price
1.11 What are important considerations around placing orders and interacting with markets?
When using Aver, please have the following in mind:
- One winner from 2 and 3 outcome markets will be most common
- Markets can be voided for certain reasons, eg. a date is moved by more than two weeks, an event is cancelled,there has been an unanticipated change to the outcomes listed, etc.
- Pay attention to the result you’re betting on — is it the winner of a matchup, the score difference, etc.
- Events are resolved using multiple third parties through our “Oracle”. Ultimately what is being traded is the consensus value that is achieved by the pre-specified oracle-feeds, and not the underlying event itself.
1.12 What is your dispute process?
Aver is currently in development, and positions opened on devnet do not carry any real value. Users are invited to use the platform at no risk. We will have a clear dispute process in place with the launch of our Mainnet.
2. What are the different stages of a market?
Active —
The market is open and it is possible to open new orders or cancel open orders.
Halted/Suspended —
If there is particularly suspicious activity observed on the exchange, or if there was some sort of technical issue that needed to be resolved before trading could resume. While the market is halted, it is not possible to place new orders, though it is possible to cancel open orders.
In-play —
In-play is not currently supported, but will be available in the future.
‘In-play’ is generally considered a distinct category of trading on events because trading tends to be much more volatile while the event is unfolding live. There are additional technical complexities when trading in-play due to the potential for information asymmetry between participants (for example, if someone were sitting in the stadium vs. streaming it on a slow internet connection).
Ceased trading —
A market is no longer open for trading, and is waiting for final resolution.
The time period between trading ceasing and market resolving will typically be short, but in certain cases may take time. For example, trading may cease on the day of an election but the results may not be known with certainty for some time. In others, the resolution consensus mechanism may mean that it takes more time for this to be worked through.
Resolved —
A market outcome has been determined. At this stage it is possible for any winnings or market proceeds to be collected or paid-out.
Voided —
A market is no longer valid. Reasons for this can include:
- Some information about the market or event has changed significantly such that users who had previously traded and hold positions are unfairly advantaged or disadvantaged.
- The event has been cancelled or postponed beyond a specified period of time..
- One or more of the listed outcomes in the event are explicitly no longer a possible outcome (i.e. a runner removed from a race) or have been substituted in a way not anticipated or allowed for in the rules of the market.
- Information comes to light which means the outcomes specified are no longer Complete and mutually exclusive — i.e. ‘Other’ wasn’t specified as an option and a new, unanticipated contender has appeared.
- There has been a technical issue with how the market was specified leading to possible errors in resolution or how users would be paid out.
- For some reason, it has not been possible for the oracle network to achieve consensus on the result of the market despite all attempts and within a reasonable period of time.
3.6 Signing transactions and how non-custodial contracts work
Your wallet is your on-chain, digital identity — it has a public key (which everyone can see) and a secret (“signing”) key that only you have.
When an action is taken, and information (such as token balances, Aver market exposures, etc) are due to be updated — the owner of any wallets who would be reducing their balance as a result of the action will need to authorise it to go ahead in a process called “signing”.
For example, it would be possible for a user’s token balances to increase without them signing a transaction, but it would not be possible for them to decrease. Similarly for a user to place or cancel an order which might impact on their balances, the transaction would be required to be “signed” by the wallet to which the transaction relates.
